Amazon and Walmart have turned delivery from a service into a product, offering shipping solutions such as Fulfillment by Amazon and Walmart GoLocal to other brands. But while those two continue to lead the way, another major U.S. retailer is on their heels.
Shipt, the same-day shopping and delivery subsidiary of Target (NYSE: TGT), on Thursday announced a partnership with home goods retailer Big Lots. Target will use Shipt to support same-day delivery from 1,000 Big Lots stores, adding to Shipt’s catalog of over 160 retail partners.
Big Lots will leverage Shipt for deliveries of small- and midsize home goods, grocery and home decor orders. That includes items such as toys, paper products and small furnishings like chairs. The service will complement Big Lots’ existing same-day delivery offerings for bulkier items like large patio furniture.
“This partnership expands our ability to provide exceptional deals on top brands, surprising finds and best-in-class service to a new community of customers via same-day delivery,” said Bruce Thorn, president and CEO of Big Lots.
Target acquired Shipt in 2017 for $550 million in a bid to compete with Walmart and Amazon. Since then, it has become one of the fastest-rising companies in terms of retail e-commerce growth, raising sales by 12.5% in 2021. That puts it in the company of brands like Apple, Costco, surprise winner Chewy and, yes, Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN).
“We often say we bring the store to your door, and we’re taking that even further with the addition of Big Lots’ robust assortment of home goods, groceries, apparel, beauty products, everyday essentials and even small furniture to Shipt’s marketplace,” said Rina Hurst, chief business officer of Shipt. “This partnership builds upon our efforts to make Shipt a one-stop shop for all the shopping needs of our customers.”
With Shipt, Target covers more than 5,000 cities, reaching around 4 in 5 households nationwide. It employs a network of over 300,000 couriers, delivering orders for companies such as Bed Bath & Beyond, Costco, CVS and Office Depot. That has helped it become a respected delivery provider, even earning a spot on FreightWaves’ inaugural Shipper of Choice list.
It has also benefited Target’s own delivery services. According to Arthur L. Valdez Jr., the company’s chief supply chain and logistics officer, a staggering 95% of the company’s online orders are now fulfilled through stores.
But it’s not done quite yet.
In March, Target revealed plans for a logistics overhaul in 2022. The retailer announced it would be investing $5 billion to scale its logistics operations with four additional distribution centers, 10 sortation centers and about 30 new retail locations. It also plans to renovate 200 existing stores with same-day online fulfillment, order pickup and returns capabilities.
Watch: What is going on with Target?
Unfortunately, that hasn’t relieved the company’s short-term headaches. Like other big e-commerce retailers, Target is contending with a mountain of surplus inventory, even going so far as to slash expectations around profit margins just weeks after its weak first quarter 2022 earnings report. In order to “right-size” inventories, the retailer is marking down items it overordered last year, like televisions and appliances.
The e-commerce slowdown has also impacted Target’s competitors. Amazon, for example, told investors that after spending billions doubling its fulfillment footprint during the pandemic, it would be pulling back on warehouse production. At least 16 planned Amazon facilities have seen their openings delayed or canceled so far in 2022.
Walmart also has experienced a rocky start to the year. The retailer’s Q1 2022 fiscal results came in very light, with unexpected supply chain hiccups driving a cost spike. E-commerce revenue rose just 1% year over year (y/y) as customers shifted away from online shopping and back to stores.