As Amazon continues to take over the world and recently completing its acquisition of the nation of Canada, retailers are scratching their heads as to how they could compete with a company that offers lower prices, more options, and the product gets delivered straight to your door. The answer? Do the same thing.
Target, like Walmart, has begun expanding its e-commerce services by establishing its first delivery hub in the company’s hometown of Minneapolis. The delivery hub will utilize employees’ personal vehicles to deliver packages to a consumer’s front door and is looking to quickly expand to other parts of the country such as Chicago and Denver.
Since testing began back in 2020, e-commerce shopping has grown to generate 20% of Target’s total sales with 50% of those sales coming from home deliveries.
Products are packed and delivered to what Target calls “sortation centers” and are then loaded into vehicles owned by the delivery start-up, Shipt, and are then brought to nearby neighborhoods. Target has seen some challenges with the new e-commerce strategy such as rising gas prices as well as an abundance of packages forcing the company to convert some backroom storage into mini shipping centers within stores.
The question for Target is whether they be able to make this venture profitable by minimizing the cost of packing and shipping. So far, the company has stated that they have reduced the cost of delivering any given item by 50% but would like to continue to reduce the cost by establishing cheaper methods of travel and more sortation centers across the country.
whether Source: CNBC