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Target expands its next-day delivery service to eight new cities (TGT)
BI Intelligence
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Target announced last Thursday that it would make its next-day delivery service, Target Restock, available in eight more cities, bringing the total to 10, according to Retail Dive.
This expansion will make it available to about 70 million US shoppers. Additionally, the company plans to launch Target Restock in the Bay Area in October, extending its reach to almost one-fifth of the US population. Target says the most frequently ordered items through the program are beverages, on-the-go snacks, cereal, macaroni and cheese, and paper towels.
While most consumers prefer free-shipping, fast delivery can also be a huge draw. In a survey by Walker Sands of 1,400 US consumers, 69% said one-day shipping would make them more likely to shop online, meaning many might trade in-store shopping for online portals if they can quickly get the products they need. Moreover, for time-pressed consumers, free shipping may be less of a priority, especially when it comes to replenishing household goods. Target also charges a flat fee of $5 for Restock orders, which undercuts Amazon’s Prime Pantry delivery fee of $5.99. This move, in tandem with the company's recent decision to lower prices on consumables — the category shoppers use Restock most for — may boost its revenue, helping it to better fend off the threat from Amazon.
Brick-and-mortar retailers are caught on the wrong side of the digital shift in retail, with many stuck in a dangerous cycle of falling foot traffic, declining comparable-store sales, and increasing store closures. Over 8,600 retail stores could close this year in the US — more than the previous two years combined, brokerage firm Credit Suisse said in a recent report. Meanwhile, e-commerce pureplays are riding the rise of digital commerce to success — none more so than Amazon, which accounted for 53% of online sales growth in the US last year, according to Slice Intelligence.
In response, many brick-and-mortar retailers have started to use omnichannel fulfillment methods that leverage their store locations and in-store inventory in order to better compete in e-commerce. These omnichannel services, including ship-from-store and click-and-collect, can help retailers manage the transition to digital by:
Increasing online sales by offering cheaper, more convenient delivery options for online shoppers.
Limiting the growth of shipping costs as online sales volumes increase by leveraging store networks for delivery.
Keeping stores relevant by turning them into fulfillment centers that pull customers in to pick up online orders.
However, few retailers have mastered these new fulfillment services. While these companies have spent years optimizing their supply chain and logistics networks for delivering goods to their stores or directly to customers’ doorsteps, most have yet to figure out how to profitably bring their store locations into the e-commerce delivery process.
Jonathan Camhi, research analyst for BI Intelligence, Business Insider's premium research service, has laid out the case for why retailers must transition to an omnichannel fulfillment model, and the challenges complicating that transition for most companies. This omnichannel fulfillment report also detail the benefits and difficulties involved with specific omnichannel fulfillment services like click-and-collect, ship-to-store, and ship-from-store, providing examples of retailers that have experienced success and struggles with these methods. Lastly, it walks through the steps retailers need to take to optimize omnichannel fulfillment for lower costs and faster delivery times.
Here are some of the key takeaways from the report:
Brick-and-mortar retailers must cut delivery times and costs to meet online shoppers’ expectations of free and fast shipping.
Omnichannel fulfillment services can help retailers achieve that goal while also keeping their stores relevant.
However, few retailers have mastered these services, which has led to increasing shipping costs eating into their profit margins.
In order to optimize costs and realize the full benefits of these omnichannel services, retailers must undertake costly and time-consuming transformations of their logistics, inventory, and store systems and operations.
In full, the report:
Details the benefits of omnichannel services like click-and-collect and ship-from-store, including lowering delivery times and costs, and driving in-store traffic and sales.
Provides examples of the successes and struggles various retailers have experienced with omnichannel delivery.
Explains why retailers are having trouble managing costs with their omnichannel fulfillment efforts, which are eating into their profits.
Lays out what steps retailers need to take to optimize costs for their omnichannel operations by placing inventory where it best meets customer demand.
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