With Same-Day Shipping, Target Is Entering a Crowded Field

But, even so, it stands to gain

Woman grocery shopping at Target for story on same-day delivery
The company follows Amazon and Walmart in announcing more expedited shipping options. Target
Headshot of Lisa Lacy

Target is the latest ecommerce player to push expedited delivery, but, right out of the gate, it has some fierce competition from well-entrenched rivals and may have a tough time winning over consumers—or at least those who aren’t die-hard Target fans.

The retailer offers 65,000 items in as little as an hour for customers who subscribe to its last-mile delivery subsidiary, Shipt, for $99 a year or $14 a month. (There’s also an option to pay $9.99 per delivery without membership.)

But that’s a far cry from Amazon, whose Prime membership is $119 annually or $12.99 a month. What’s more, Amazon has more than four years of experience in one-hour delivery already and more recently supplemented Prime with free one-day delivery with no minimum on more than 10 million products.

Walmart, meanwhile, has also announced free next-day delivery in Phoenix, Las Vegas and Southern California on 220,000 items on orders of $35 or more—and said it plans to expand to 75% of the U.S., including 40 of the top 50 metro areas, this year.

When asked about how its service compares to these offerings, a Target spokesperson said customers have made it clear they want same-day service when speed matters.

“It’s why we’ve scaled same-day offerings like delivery from Shipt, Order Pickup and Drive Up across the country,” she said. “And in Q1, same-day services drove more than 25% of our total Q1 comparable sales increase.”

What’s more, she said customers use next-day and two-day shipping options when they don’t care as much about speed—and Target is shipping about 50% of its two-day orders in the U.S. in one day, which is free to its credit card holders and for orders over $35.

Nevertheless, Manolo Almagro, managing partner at tech consulting firm Q Division, said consumers consistently gravitate toward the lowest cost for delivery, so this will be a hard sell unless someone really wants one of Target’s private-label brands.

Indeed, Gary Nix, founder and chief strategist at consulting firm the Brandarchist, said it seems pretty clear Target is testing the I-need-it-now attitude of U.S. consumers.

He said he’d also wager Target is going after urban markets where going to the store can be a hassle.

“Is the $9.99 a better deal than the cost of gas to go to a store, deal with crowds and stand in lines?” Nix asked. “Perceived value is being tested here for sure.”

But that’s not to say the effort is entirely superfluous.

Delivery and buy-online-pick-up-in-store options are about removing pain points, said Shaun Brown, svp of shopper marketing growth and innovation at brand experience agency Momentum.

“What this means is that retailers both online and with physical stores have to provide all types of solutions that feel more relevant to shoppers,” he added. “Providing options that fit their personal needs drives more loyalty and purchases.”

Even though it has much smaller inventory, Target has some national brands with equity that are more front-facing than on Amazon, which could give it an edge, Nix said.

“We’ve always focused on providing our guests a curated assortment that offers high quality and great value, as well as unique items that they only can find at Target,” the spokesperson said. “With each of our pickup and delivery services, we offer items that guests love the most and we continuously evaluate ways to evolve our assortment.”

Target also stands to gain new Shipt members, said Bill Duffy, director in research firm Gartner’s marketing practice. But he also noted unlimited grocery delivery service Instacart Express is really Target’s closest competitor here, as it, too, offers comparable fulfillment options for $99 a year.

“These membership models are highly valuable for retailers from both a revenue and loyalty perspective,” said Duffy, “but the elephant in the room is Amazon Prime, which offers similar fulfillment as well as Video and a wealth of other services for just $119, or about $10 per month.

“What is notable,” Duffy added, “is that while Instacart offers limited features compared to Amazon, its app far outstrips Prime Now in monthly active users on iOS, showing that there is room in the market for niche grocery delivery services.”

And, Brown said, home delivery helps aggregate even more data about shoppers—particularly those who aren’t in a retailer’s loyalty platform.

@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.
Publish date: June 13, 2019 https://stage.adweek.com/retail/with-same-day-shipping-target-is-entering-a-crowded-field/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT