Target Ramps Up Next-Day Delivery to Challenge E-commerce Giants
NEW YORK (AP) — Target is making a significant stride in the competitive e-commerce landscape, dramatically expanding its next-day parcel delivery service. This year, the retail giant will push into 22 new metropolitan areas, extending its coverage to 35 of the nation’s top 60 markets. This aggressive expansion, largely set to conclude by the end of next month, is a strategic move aimed at narrowing the gap with formidable online competitors like Amazon and Walmart.
Reaching More Customers Faster
With this latest expansion, Target’s next-day delivery capabilities will now reach 54% of the U.S. population, a substantial increase from its previous 20% coverage. Key cities joining this faster delivery network include San Diego, California, and Florida’s bustling hubs of Orlando and Tampa. Looking ahead, Target has ambitious plans to further extend this service to an additional 20 cities by next year, signaling a sustained commitment to quicker fulfillment and enhanced customer convenience.
Competing in a Rapidly Evolving Retail Landscape
This push for expedited parcel delivery complements Target’s existing same-day delivery service, which is already available to over 80% of the U.S. population through its Shipt subscription service, acquired in 2017. However, the retail industry demands constant innovation. Amazon, a dominant force in online retail, significantly expanded its same-day delivery sites by more than 60% in 2024 for its Prime members, now serving over 140 metropolitan areas. Walmart, another major competitor, reported delivering 7.1 billion units via same-day or next-day services over the past 12 months, reaching 95% of the U.S. population with its next-day or two-day shipping options. Walmart also recently expanded this service to include its third-party marketplace items in major cities such as Los Angeles, Chicago, Houston, and Atlanta.
A Strategic Shift: From National to Market-Based Fulfillment
According to Gretchen McCarthy, Target’s chief supply chain and logistics officer, this strategic pivot involves transitioning from a “national fulfillment model” to a more nuanced “market-based approach.” This new strategy focuses on optimizing how Target leverages its more than 1,900 stores and dedicated fulfillment centers based on their specific locations and sizes. The company will continue to rely on its 11 sortation centers, which efficiently batch orders packed from stores for subsequent delivery via Shipt or third-party carriers. Additionally, Target is expanding its partnerships with national carriers and strengthening its Shipt driver network.
Addressing Past Challenges and Future Leadership
This revamping of its delivery infrastructure comes at a critical time for Target. The company has recently faced a sales slowdown, partly attributed to operational challenges where its earlier strategy of transforming physical stores into shipping hubs in 2017 inadvertently impacted the in-person shopping experience. During the surge in online orders driven by the pandemic, store workers were often diverted to fulfill e-commerce requests, which affected in-store service. The company also announced in August that Chief Operating Officer Michael Fiddelke would succeed CEO Brian Cornell on February 1, marking a period of significant strategic adjustment and renewed focus.
Lessons from Chicago: A Blueprint for Success
The blueprint for this widespread expansion was first successfully tested in the Chicago market, where Target operates nearly 80 stores, two fulfillment centers, and two sortation centers. In this pilot, Target refined its logistics by concentrating a higher percentage of local shipping demand into just six stores, significantly increasing the volume processed by its fulfillment centers, and reallocating shipping responsibilities away from 18 other stores. This focused strategy in Chicago yielded impressive results: an increase in shipping speed coupled with a reduction in the delivery cost per item. Target is now rolling out key elements of this successful Chicago strategy to 30 to 40 additional markets, with some specifically designated for this bolstered next-day delivery service, as it seeks to redefine convenience for its millions of customers.
