Will same-day delivery flexibility give Target an edge over Amazon and Walmart?

Discussion
Photo: Target
Jun 13, 2019
George Anderson

Target wants to give its customers more financial flexibility when it comes to receiving same-day delivery of items purchased online.

The retailer has announced that customers at 1,500 stores in 47 states served by its Shipt division can now choose same-day delivery on 65,000 items from target.com and have orders delivered in as little as an hour for $9.99. Until now, Target customers would need to pay Shipt’s annual $99 annual subscription fee or $14 monthly membership to get same-day deliveries.

Those holding Target’s REDCard will continue to get a five percent discount on items they order when paying with the card. Target expects to add the same-day delivery option to its mobile app in time for the Christmas holiday season. Customers can currently access it from their desktop computers or mobile web browsers.

“With same-day delivery now available directly within the Target.com experience, we’ve made it even easier for our guests to shop at Target — while still getting the great value, curated product assortment and helpful guest service they’ve come to expect,” said Dawn Block, the retailer’s senior vice president of digital operations, in a statement.

In addition to its Shipt service, Target also offers same-day pickup of online orders in all its 1,850 stores. Same-day curbside pickup is available at 1,400 locations. Target has seen a significant increase in its online sales, up 25 percent or more for five straight years.

The retailer has also sought to distinguish itself from other online competitors with Target +, an online marketplace that emphasizes a curated selection of products from third-party sellers that complement the goods it sells. The chain has focused its efforts on recruiting sellers in key categories, including consumer electronics, home goods and toys.

DISCUSSION QUESTIONS: How do you assess Target’s overall digital sales progress compared with competitors such as Amazon.com and Walmart? Will Target’s new same-day delivery convert more customers to Shipt’s monthly or annual subscription options?

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Braintrust
"The delivery wars will continue, however, this latest move by Target is more a tactical versus strategic move."
"The “must have now” hype of retail is getting way overdone IMHO."
"Every time we find a way to keep the customer out of the store, we lose traffic..."

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21 Comments on "Will same-day delivery flexibility give Target an edge over Amazon and Walmart?"


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Ken Lonyai
BrainTrust

I fail to see the big deal here. There’s a huge difference between free same day shipping (even with a minimum purchase threshold) and $9.99 same day shipping. Very few people who shop Target are going to take advantage of this program. In those instances where there is some item they absolutely need right away and can’t get to the store, they’ll go for it. Otherwise, they’ll accept the regular shipping options or choose BOPIS where same-day availability for in-store items is the industry standard.

So unless anything on target.com will be available same-day in-store, this seems like little more than a lesson learned from Amazon on how to spin relatively nothing into press hype.

Zach Zalowitz
BrainTrust

Agreed, well-said.

Art Suriano
BrainTrust
I think Target is smart in how they have developed their same-day delivery program. There are significant costs, and having the customer share in those costs is wise. I’ve said it before, and I’ll repeat it. There are not as many customers as retailers think that feel same-day delivery is that important. There are those “I have to have it ASAP” items now and then and for those situations same-day delivery makes sense. However, too many retailers are investing in fast delivery concepts when too often the product arrives sooner than the customer has a chance to open the package, which typically sits a few days until the customer can get to it. Here, Target is addressing that population that does desire same day delivery, but they are charging for it, and that makes perfect sense. Every time we find a way to keep the customer out of the store, we lose traffic and most importantly, impulse buying opportunities so having the customer share in the cost for delivery and the potential loss of business… Read more »
Georganne Bender
BrainTrust

“Every time we find a way to keep the customer out of the store, we lose traffic and most importantly, impulse buying opportunities…” My thoughts exactly, Art!

Art Suriano
BrainTrust

If only more retailers would agree with us….

Verlin Youd
BrainTrust

The challenge is that some retailers (customers not to be named) are experiencing sales growth when not requiring the shopper to go into the store, specifically for curbside pick-up when it is executed well.

Zach Zalowitz
BrainTrust

Nailed it Art — Their strength is the impulse buy in stores. My girlfriend has a “I can’t be trusted in Target” coffee mug at home. Well earned.

Michael La Kier
BrainTrust

Lost in the “Battle of Titans” between Amazon and Walmart, Target is making the right moves to bolster digital sales. Target’s purchase of Shipt in December 2017 gives them a logistics and delivery arm that provides great flexibility. Taking a page from Burger King, (with this move) Target allows shoppers to “Have it Your Way” with multiple delivery options. Offering flexibility for one-time, same-day delivery versus an annual commitment will generate new trial of the service and likely lead to even more subscriptions.

Anne Howe
BrainTrust

What, besides medicine, is so crucial to the Target guest that it warrants an extra $9.99 for same day delivery? The “must have now” hype of retail is getting way overdone IMHO.

Gene Detroyer
BrainTrust

It is an offer without value.

Verlin Youd
BrainTrust

Not meaning to over-generalize here and totally anecdotal … I know quite a few shoppers, predominantly millennial but also Gen Xers, who regularly order for same day delivery. They seem to have taken Just-In-Time to a new level….

Chris Petersen, PhD.
BrainTrust

Delivery is not “free.” Never has been and will increasingly cost retailers more as they up the ante for speed. Not every customer needs same-day delivery for every order. Target’s approach seems to be an emerging hybrid model where the customer pays some of the cost when they deem same-day to be important. The sane part of this model is that the cost charged to the customer can be adjusted based upon demand.

The other critical aspect of this story is “one thing” or “same-day” will not win the war. The whole is greater than the sum of the parts. Target is going a good job of diversifying choices of delivery, click and collect, as well as curating third party products that help differentiate Target’s brand and experience.

David Dorf
BrainTrust

It’s always good to give customers more choices, and by offering same day delivery (even if it costs $9.99) Target is expanding the options so customers can do what makes sense for them. Not sure it will significantly impact sales or increase subscriptions, but each change like this makes an incremental improvement in the overall brand promise.

Gene Detroyer
BrainTrust

Music please… “Anything Target can do, Amazon can do better.”

Richard J. George, Ph.D.
BrainTrust

There is no doubt that Target and Walmart are responding to every new delivery concept introduced by Amazon. However, this fast follower approach with individualized tweaks seem to add little in the way of differential advantage. If a shopper is someone who needs it now, the $99 annual subscription or $14 per month subscription (pays for itself in less than two Deliveries), would be the preferred subscription options. The delivery wars will continue, however, this latest move by Target is more a tactical versus strategic move.

Neil Saunders
BrainTrust

When it comes to digital, Target is currently on a roll and its various services such as Drive Up are proving a hit with shoppers. I expect the new same-day service to help boost digital still further.

However, what must not be forgotten is that most of Target’s success is because it has products that people want to buy. A lot of effort has been expended to develop new brands and labels to engineer this. Ultimately, retailers can have all the delivery services in the world, but if they don’t have good ranges it won’t make a jot of difference.

Lee Peterson
BrainTrust

Target’s new efforts feels to me like they’re chasing vs leading. I’m not so sure same day is a huge driver anyway. It’s a “nice to have,” but I’ll take AMZN’s “anything store” over Target’s limited opportunities any day.

A different topic for another day, but Target feels behind to me in general and is living off their cache as a brand more than anything. Whereas Walmart and AMZN are constantly coming up with a higher and higher bar to get over. Feels like Target is searching for a big win, but hasn’t quite figured out what that is or even how to get it if they did. They are trying though, so perhaps something soon, before all that real estate catches up with them.

Harley Feldman
BrainTrust

Target has done very well with its digital sales from providing good information on its website about the product, reviews from purchasers and showing where the item is located in the store. The Target information is as good as Walmart and Amazon.

The real distinguishing Target feature is the ability to pay by the time, month or year for Shipt delivery. Customers can try Shipt once without a commitment and decide if they want to continue with a subscription service. Also, since Target owns Shipt, they have a lot of leverage in the shipping business. This is a competitive advantage for Target.

Zach Zalowitz
BrainTrust

I’ve had a number of these conversations with a few clients who are leading market retailers over the last 6 months, and what I’m hearing is that same-day isn’t really being asked for by their customers … yet. It will take Target being out-front on this for a while before the rest of the market catches up, and I think the market will shift expectations based on what I assume is Target’s next move which is to offer free same-day shipping based on order threshold (just like DTC order).

I personally do no less than 4 drive-up/BOPIS orders *at Target* a month, and I’m not ready to pay $9.99 to get it shipped same day, so to the question, this isn’t going to move the needle quite yet for Target in converting to same-day.

Shep Hyken
BrainTrust

I like that customers have a choice with Target’s shipping. It’s a good program. As for competing with Amazon, it is important to note that the Prime membership is more than a shipping program. That’s one of the things that Amazon CEO, Jeff B., commented on … that the membership had to offer so much value that shipping was a bonus. So, not sure this will have much impact on Amazon, if anything.

Verlin Youd
BrainTrust

I think it’s a smart move, but seems like a tactic to stay relevant in the current e-commerce arms race. It would really be news if they were offering free shipping for same day delivery, even if just offered to REDCard holders in addition to the 5% discount. The shipping arms race will continue and I expect Amazon, Walmart, and Target to continue to set the pace for others.

wpDiscuz
Braintrust
"The delivery wars will continue, however, this latest move by Target is more a tactical versus strategic move."
"The “must have now” hype of retail is getting way overdone IMHO."
"Every time we find a way to keep the customer out of the store, we lose traffic..."

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