Photo: Target
Will Target Restock undercut Amazon’s Prime Pantry?
The Target Restock program, whereby shoppers can order a wide variety of consumer and store brand staples including baby food, household cleaners, laundry detergent, paper towels and peanut butter and receive them the next day, just became a better deal for the 75 percent of the population within reach of the service across the U.S.
Yesterday, Target announced that REDcard holders would now have their Restock boxes delivered the next day for free. For everyone else, the price of delivery dropped to $2.99 from $4.99.
“Target Restock is another way we’re making life easier for our busy, budget-conscious guests,” said Dawn Block, senior vice president of digital at the retailer. “Our guests love the speed and convenience of the service. And now that Target Restock is an even better value, we think the service will become increasingly popular.”
Restock is Target’s answer to Amazon.com’s Prime Pantry program. The Amazon program, which was launched in 2014, recently switched from charging $5.99 for up to 45 pounds of eligible items inside each box to a $5 monthly subscription with no delivery fee added. Members have no limit on the number of eligible orders they can place each month.
Target’s Restock program may be looking to attract the individuals (number unknown) who chose to opt out of Amazon’s program when it announced the monthly subscription requirement. Amazon customers who are not subscribers to Prime Pantry pay $8 per box for shipping.
Each Target Restock box also holds up to 45 pounds. The retailer is offering $5 off an order of $50 to first-time users as an added incentive to test the service. Customers who place their online order by 7:00 p.m. Monday through Friday receive delivery from a nearby store the next day. The service is also voice-enabled using Google Home or a mobile device with the Google Assistant app.
- Target Restock
- Target Restock Next-Day Essentials Delivery Now Available Nationwide for $2.99 – and Free With REDCard – Target
- Amazon shifts to a subscription model for Prime Pantry – RetailWire
- Target sees stores as key to meeting its distribution challenges – RetailWire
- Target to make same-day delivery push with Shipt acquisition – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Does Target Restock along with the other steps the chain has taken — raising associate pay, rolling out new store brands, opening small stores, remodeling big boxes, acquiring Shipt, expanding Drive Up, et al — make the retailer more competitive with Amazon, Walmart and other rivals? What are the biggest challenges that Target needs to address?
Poll
BrainTrust
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Ken Cassar
Principal, Cassarco Strategy & Analytic Consultants
This helps Target keep up with everyone else. I don’t see this as a game changer.
I would love to see Target incorporate their unique pop-up philosophy in their boxes. That would help them distinguish themselves from both Amazon and Walmart. At some point, Target needs to find economical ways to surprise and delight the customer. With dollar stores stepping up to the game, that space is awfully crowded.
Restock is a big step for Target. It will be interesting to see if they can sustain the program given the costs to deliver these packages. Target has been taking many steps to become more competitive with Amazon and Walmart. Since many of these actions are relatively new, time will tell if Target will sustain, modify or drop them. The biggest challenges that Target faces are convincing consumers that they should consider Target for groceries, out-of-stocks and the fact that Amazon has such a huge head start in each of these areas.
It’s Amazon’s world and Target is just living in it. Restock will be a win if Target executes well (and prices commodities competitively) but it feels like a defensive tactic to protect market share — not necessarily a game-changer.
Obviously, these single hits will make a difference when taken collectively. The question remains, does Target have a strategy that results in a home run? Actions in the online area will allow it to stay in the game with Amazon. Unfortunately, none will be a game-changer. However, if Target can achieve parity in these areas it will buy the retailer time to redesign its brick-and-mortar strategy. Target, like many other retailers, now realizes that it’s not an online versus physical store battle. Instead, it is now a war that needs to be waged on several fronts. If Target can figure out the stores, it may provide itself with a needed competitive advantage.
I’ve always seen Prime Pantry and competitors’ responses to it as a solution to brand problems, not a solution for consumers. It will never make sense to have a single bottle of Lysol shipped to consumers, but consumers only need a single bottle at a time. Prime Pantry (and Target Restock) are creating an opportunity for consumers to fill a box with these sorts of items that makes economic sense. But as a consumer, I’ve never thought, “Jeez, Ken, I’d really like to have a box filled with shelf-stable CPG items tomorrow.”
Target is working overtime to keep its place in retail and in the hearts of its core consumer base. Restock may not seem like rocket science, but getting this service right is magical and will be highly valued by those who align with Target. Being “us too” in service offerings is OK when, as is the case with Target, the retailer has physical locations, product mix and value, live associates, seasonal offerings and other elements working in favor of a well-served customer base.
I find it interesting that the pundits observing the industry are constantly touting the need to change, the need to innovate and the need to test and learn. And when companies like Target continue to introduce new services, we say it’s not enough or it’s not a game-changer. I don’t see one initiative or process that is going to truly change the game at this point. I see it as an iterative series of initiatives that will either better internal processes or enhance the customer experience that will win in the end. Maybe Target won’t be pursuing the “beehive” drone fulfillment center Amazon has patented but they are pushing to improve their business and I applaud them for it.
Amazon and now Target are using their muscle to try and gain share in the huge food home delivery market. Only massive operations like these two can carry the added cost and risk of offering a service of this nature. In Target’s case this is probably defensive, in Amazon’s it is offering a level of service that most competitors will not be able to live with — the cost of delivering grocery products for $5 per month no matter how many orders you place would be commercial suicide for most grocery retailers. Is this just a part of Amazon buying the market to then increase the price of the monthly fee in the future once they have control of the market? Most likely, as it is difficult to see how this could be maintained at the current pricing level. Target’s response of free delivery takes us one step closer to the bottom, their supply chain costs must rise sharply if this is taken up by many of their customers. If this does not generate increased or new customers their profitability will fall just as sharply. Where do they go from here? The retailer paying customers to take deliveries?
I see Restock and the other recent changes Target has undertaken as attempts to meet the retail industry’s current standards. They are what is needed to play the retail game today but not what is needed to win. Will they help? Yes, but will they make a huge impact on Target’s relative position versus Walmart and Amazon? No.
I love this move by Target. My only recommendation is that I continue to believe Target should acquire Boxed Wholesale (something I recommended to Kroger last year), or explore an acquisition of BJs Wholesale in order to expand into warehouse club/bulk sales.
Target has made some great moves over the last year. Let’s not forget their acquisition of Shipt.
Target is trying to make their model work against Amazon’s, and it cannot. The numbers do not add up. Amazon still has a Prime surcharge to help offset their expenses. This is a tremendous advantage from a cost perspective. It’s also a data management tracker and a market differentiator. Target has to either do the same with its model or define a fee that will offset their increased costs, including freight.
Target is trying many things to be competitive in the retail market. Target Restock is intended to compete and beat Amazon and Walmart. Target rolling our unique brands, opening smaller stores and acquiring Shipt will all help Target reman competitive. These are not game changing ideas — they are expected by today’s consumers. In order to grow, Target needs to provide better service in their stores and continue to add unique items to its SKU mix.
Combing all of these steps is a great move to stay competitive while also testing and learning. They will need to keep this pace moving forward to stay competitive and continue to use their biggest advantages (retail locations and people) to battle.
The biggest challenge to Target is that they are held to an entirely different standard than Amazon. They need to show profits, growth and same store sales while Amazon has zero expectations of anything aside from growth. Target actually has to make a profit in retail as they don’t have massive profit generating other businesses of AWS, and advertising.
While we all love to compare big retailers like Target and Walmart to Amazon, the reality is that they are different businesses. Amazon can explore much wilder, innovative approaches as their profit engine, AWS, fuels the business. Target, meanwhile, takes a more systematic approach adding capabilities like Shipt, remodeling existing stores, opening small stores, and improving their Restock program. While individually these tactics may not seem as innovative as what Amazon can do with in-home and in-car delivery, these are still quite important changes for Target customers. This reflects how Target is taking a more customer-centric view of their business.
Are any one of these a game changer? Probably not but taken together, we’re starting to see a well thought through plan from Target to deliver enhanced customer experiences. Well done!
Restock offers Target a way to get into the subscription business … albeit a little late to the party as Amazon and others have been doing this for awhile. This helps get them to parity.