Target Corp. is expanding next-day delivery to 20 additional metropolitan areas, bringing to more than 50 the total number of cities where consumers can quickly receive online orders.
The nation’s eighth-largest retailer by revenue announced Tuesday during its fourth-quarter earnings call that it will roll out next-day delivery to more locations in the spring as it continues to retrofit stores into mini-fulfillment centers. Expanded footprint will bring next-day delivery to 60% of the US population.
Faster delivery service is coming to places like Birmingham, Alabama; Santa Barbara, California; Fort Myers, Florida; and Honolulu, according to a Target fact sheet. Currently, Target delivers next day in about 35 large markets. The expansion is part of $2 billion in incremental investments through 2026 for stores and operations.
Target (NYSE: TGT) says two-thirds of digital sales are made the same day, via drive-thru pickup, in-store pickup or same-day delivery for Target Circle 360 members.
“Our same-day services generated more than $14 billion in sales last year, representing two-thirds of our total digital sales. And we’re investing to make those services even faster and more efficient,” said CFO James Lee. “We’re already fast. We’re cost competitive, we continue to become more efficient, and we own all the core elements of our digital fulfillment,” which is reflected in the bottom line.
Target also reported more than 30% growth for Target Plus, its third-party marketplace.
Next-day delivery is free for orders over $35 or with no minimum order amount if a person is a Target Circle 360 member or uses a Target credit card for purchases. Most shipping-eligible items are eligible for next-day delivery, including 85% of products sold in brick-and-mortar stores.
Under Target’s logistics model, stores serve as fulfillment centers, which the company says increases efficiency and reduces costs. Depending on location, Target retrieves packages from local stores and takes them to one of 11 sortation centers to be sorted, grouped and routed for delivery to local neighborhoods by Shipt, its delivery subsidiary, or third-party carriers. Depending on the market, between 30 and 40 local stores feed each sorting center. Orders are assigned to stores based on inventory, staffing levels, backroom size, and cost to serve.
Target says eliminating the sorting and packing process from certain store backrooms saves valuable time and space for store teams to fulfill additional orders and serve customers. Additionally, because the sorting center technology pre-sorts and organizes packages for easy pickup, it reduces processing time for delivery partners.