Thinking big: Target stumps up $100 million for sortation centres to boost online delivery times

Yesterday, Target announced that it is investing $100 million into supply chain hubs to speed up e-commerce deliveries, projecting to deliver around 50 million packages this year, nearly double the amount in 2022.

This, according to Brittain Ladd, a supply chain consultant and former Amazon exec, is a good example of Target entering into what he refers to as Target 2.0, whereby the retailer pivots in ways most analysts and consumers aren't expecting.

In a LInkedIn post, Ladd notes: “Target has used its stores to act as mini shipping warehouses for years. The majority of products for its orders are sent from its stores.”

Sortation centres organise orders shipped from stores into shorter distance deliveries, for drivers who work at Target owned grocery delivery company Shipt, and longer ones that other carrier partners will deliver.

At night, the Shipt orders further organise into neighbourhood specific delivery routes.

Shipt drivers later arrive at the facility in rounds to load their own vehicles and make the deliveries. Up to 40% of Target's last mile delivery orders with Shipt arrive at customers' doorsteps the next day after the order is placed.

Ladd comments: “Target 2.0 could potentially include the company acquiring FedEx. Why? Because many retailers are faced with the same problems as Target. Instead of Target only shipping its products to consumers, it can scale the company to receive, ship, and deliver products for other retailers.”

“Additionally, and this is an example of thinking big, Target can acquire FedEx and integrate Shipt into the FedEx ecosystem.”

“For example, creating a new last mile delivery model using Shipt drivers operating 'FedEx Target' delivery vans. Target can run FedEx as a separate company or Target can sell off pieces of FedEx and only retain the Ground and Express divisions if it so chooses.”

Instacart is also a possibility.

He adds: “Target sells groceries, but Target isn't a grocery retailer. Acquiring Instacart would not cause current Instacart grocery customers to abandon the platform. Instead, I believe grocery retailers would embrace Target owning Instacart.”

“What I like most about this option is that Target can still partner with other retailers to ship its products via Shipt. Target can also become the largest online grocery delivery company in the US via Instacart.”

He concludes: “Another example of thinking big is this: In 2015, Target sold its pharmacy business to CVS Health for $1.9 billion.”

“It can sell its grocery division for billions. My vote is that Amazon would buy the grocery business and open Whole Foods Markets inside Target’s stores. H-E-B is my second choice. I hope Target explores this.”