Photo by Daniel ODonnell on Unsplash
June 26, 2024
Can Shopify Help Target Compete with Amazon and Walmart?
Target has announced a strategic partnership with Shopify to invigorate its third-party marketplace, Target Plus, by adding new and trendy brands to its online offerings. This move is expected to attract more online traffic and rejuvenate Target’s e-commerce growth, which has been lagging in recent quarters.
Target’s stock has underperformed relative to the broader market, rising about 2% this year compared to the S&P 500’s nearly 15% increase. Currently priced at $146.13, Target’s shares are well below their pandemic-era highs of over $260.
Target’s marketplace, while still in its nascent stages compared to giants like Amazon and Walmart, has shown significant potential. Unlike its competitors, Target Plus operates on an invitation-only basis, ensuring a curated selection of over 1,200 sellers. This model contrasts sharply with Amazon’s approximately 2 million sellers and Walmart’s 135,000, as estimated by Marketplace Pulse.
The Minneapolis-based retailer, known for its wide range of consumer goods, will now allow companies using Shopify’s e-commerce platform to apply to join Target Plus. Shopify’s client base includes numerous smaller and up-and-coming brands, providing Target with an opportunity to feature unique and popular products that appeal to a diverse customer base.
Target Plus is known for its carefully selected range of over 2 million products from more than 1,200 brands, including well-known names like Ruggable, Crocs, Maui Jim, and Timberland. This marketplace prides itself on offering a curated collection of products that have been vetted by Target’s in-house team, ensuring quality and value for consumers.
For Shopify, the partnership offers a much-needed boost. Shopify’s shares have tumbled since their earnings report in May, and the stock is down about 17% for the year. Aligning with Target could help Shopify showcase its brands to a broader audience and increase sales through a prominent retail partner.
This collaboration also aims to integrate a curated selection of Shopify brands into both Target’s online marketplace and its physical stores, enhancing the shopping experience for Target’s customers and expanding opportunities for Shopify merchants. By teaming up with Shopify, Target aims to differentiate itself through a unique and thoughtfully curated product offering. This initiative will see a hand-picked assortment of brands that utilize Shopify’s e-commerce services being added to Target’s five-year-old marketplace, Target Plus.
In the coming months, Target will also begin featuring some of these Shopify brands in its brick-and-mortar stores, providing a seamless omnichannel shopping experience. This move is part of Target’s broader strategy to integrate digital and physical retail, catering to the evolving preferences of modern consumers who seek convenience and variety.
Shopify merchants in the U.S. can leverage the Marketplace Connect app to apply for inclusion in Target Plus. This integration allows high-growth brands like Caden Lane and True Classic to reach millions of new customers, potentially taking their businesses to new heights.
According to Prat Vemana, Target’s chief digital and product officer, digital marketplaces are poised to account for over 30 percent of all e-commerce growth in the next three years. Vemana emphasizes the transformative nature of these marketplaces, which offer retailers the ability to provide a vast array of choices to consumers without the need for extensive physical storage. However, he also notes the importance of maintaining quality and value, distinguishing Target’s marketplace from others that may prioritize volume over customer satisfaction.
Discussion Questions
How might the Target-Shopify partnership reshape digital marketplaces and impact the retail industry’s competitive landscape?
Given Target’s curated, invitation-only marketplace and Shopify’s diverse brands, how might this influence consumer trust and brand loyalty compared to platforms like Amazon and Walmart?
How can Target and Shopify leverage their partnership to innovate the omnichannel shopping experience, and what future trends might this integration influence in consumer behavior?
Poll
Loading …BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Lisa Goller
B2B Content Strategist
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I don’t think this is a bad thing for Target. But neither do I think it’s as revolutionary as the amount of coverage it has generated suggests. Target’s marketplace is incredibly small and has a very limited number of sellers and products; it is way behind Amazon, Walmart and even Kroger. I think this is because Target has internal doubts about the marketplace model and has kind of fudged it from the get-go. The Shopify deal may expand the number of items available to a degree, but it will still not put Target in the same league as other marketplaces. And that means they can’t take full advantage of the ancillary benefits such as advertising revenue. It also amused me that Target talked of this new arrangement helping them find hot selling products and potentially bringing them into stores. Isn’t this what merchants and buyers should be doing anyway?
Based on the numbers – Target being a grain of sand compared to the beaches that are Amazon and WalMart – “compete” has to be carefully defined (even more so, perhaps, than the overall company sales numbers) But I doubt going head-to-head is really the goal; as noted, the platform is highly selective…so Target is doing, more-or-less, what it does in store…offering a higher quality experience. I don’t really see a downside to the partnership; how much of an upside we’ll have to wait and see.
I agree with this. It seems more like a “me too” move, but it’s success (or not) is still to be seen.
All four companies mentioned in the title have attracted their own retail ecosystem. It’s rewarding to see several ecosystems collaborating to pull the industry forward, elevate standards, drive growth and delight customers.
Shopify’s partnership with Walmart has already proven it has the deep technical expertise to modernize and scale a retail giant’s e-commerce efforts.
Compared to Amazon and Walmart, this Target-Shopify partnership lets stellar small brands gain access to a retail giant and sell anywhere – in stores, online and across social media. Discerning, customer-centric curation could also differentiate Target with hyper-localized assortment strategies across all channels.
Improving Target’s e-commerce efforts will make its retail media network even more attractive to brand advertisers to drive B2B growth.
Target’s partnership with Shopify will allow Target to tap into Shopify’s vast network of small and medium-sized businesses, giving Target access to a wider range of products and attracting new customers.
This expansion in product offerings and customer base will not directly impact Walmart or Amazon’s market share, as Target will still primarily cater to a different demographic and offer a unique shopping experience.
While Walmart and Amazon have a broader customer base that includes a wide range of demographics, Target has successfully carved out its niche by appealing to a more discerning and design-conscious consumer. Target’s partnership with Shopify will further enhance its appeal to this demographic, offering unique and curated products that set it apart from its competitors. -Db
As stated, (one of) Target’s strengths has been interesting assortment. This partnership can help but unless it’s at scale it will do little to move the needle.
Good point, Patricia. Scalability is a notable concern, especially given the commonality of stock outages among Shopify sellers.
Target can leverage the Spotify partnership to further expand its assortment – that’s table stakes. Ideally they can do so while also enhancing their digital shopping experience and maintaining high customer service – both of which could be a differentiation, and further influence brand trust and loyalty. As they further delve into this arrangement, the Target merchandising and planning teams should be able to analyze trends and opportunities for both digital and in-store assortment growth.
Could Target be so far behind the online leaders that we are really talking “table stakes” rather than reshaping anything?
Target took a different path in creating it’s marketplace by offering a highly curated and relatively narrow mix of products compared to the others. Now it’s playing catch-up and it has a lot of ground to make up. The collaboration with Shopify will give it immediate access to a much wider range of products, not only for their marketplace, but potentially for in-store also. The collaboration is also good for Shopify and the brands using its platform by further extending reach and generating sales opportunities. And while this is a good move for both Target and Shopify, it’s hardly transformational.
Target’s partnership with Shopify is a win-win for both companies and the sellers on Shopify. However, it is not enough to make a significant difference in Target’s online revenues and won’t steal marketshare from Amazon or Walmart marketplaces. It is a good move, but not a bold move.
I rarely disagree with Neil, but this time I must. Compared to some of Target’s other recent moves (most recently increasing grocery again, which will boost traffic and yield little margin), this is so much closer to Target’s brand identity and will draw people like me, who generally am weary of marketplaces everywhere I look, to look around.
The key is definitely curation. Good curation will make for a great story. We just hope these smaller brands can scale, when suddenly their orders triple. So, I guess the “watch out” for me is that Target needs to be prepared to provide manufacturing and inbound logistics assistance to those emerging brands. Because if it’s done right, this will blow up!
The problem is that if this isn’t a proper marketplace – which it isn’t – it will probably just cannibalize sales from Target’s own offer. The further issue I have with it is that Target should be working harder to improve its own assortment. In apparel and home, there is nowhere near enough newness and hasn’t been for a couple of years. I don’t think this is a bad thing, I just don’t think it’s all that revolutionary.
No argument with your last point about their assortment. I was just ruing the decision to go more heavily into grocery, which tells me their traffic is down. Trouble is, grocery is not gonna move the earnings needle
Agreed. They’ve never had a very coherent grocery strategy. They don’t really know what they want to be in grocery…
Worth underlining your point about the curated selection, @paula. If the effort is truly merchant-led, it could indeed deliver plus-business for Target. For the vendors – many of whom could not possibly deliver sufficient volume to stock their items across the chain – this could be the leg-up they need. To your point however, for some small suppliers signing up might be like putting their mouths on a firehose.
I think we are talking about two differnet leagues here. Amazon and Walmart are in the Premier League, and Target is in the Champion League. Shopify is a nice add-on, but it will not propel Target’s online business to compete with the leaders regularly.
Gee, If I wanted Caden Lane and True Classic, I could successfully go to Amazon.
This sounds like a very studied, thoughtful approach by Target. Yes, they are playing catch-up, but sometimes there are advantages to letting others be the pioneer, and then giving yourself permission to be a fast second, or even a slow second. This won’t be a significant market share grab for Target, but they can keep pace with the competition and customer expectations without over investing in an expensive pioneering effort. Prioritizing profit can slow growth. Prioritizing growth can slow profit. Hopefully this scenario is Target being a slow second and not a lazy third.
Keeping the marketplace on the smaller side is smart in that it doesn’t overwhelm consumers with endless lists of products and keeps things simpler for the retailer as well. This is a more indirect way of competing with Amazon, which demonstrates a level of self-awareness and understanding of the landscape.
Curation is the secret sauce in Target’s approach. Other marketplaces continue to disappoint shoppers from poor execution by partners. Damaged goods shipped, used goods shipped, Challenges returning goods that have to also go back to the marketplace partner.
Target has never been about being all things to all people. This is on brand, overdue and the curation, which I hope includes each companies satisfaction levels, is overdue for any retailer’s marketplace offering.
The Target-Shopify partnership aims to reshape digital marketplaces by leveraging Shopify’s diverse brands to enhance Target Plus. Unlike Amazon and Walmart, Target’s invitation-only model prioritizes quality over quantity. Integrating Shopify brands across online and physical stores can innovate omnichannel experiences, offering unique products seamlessly. This move could lead consumers to prefer specialized, curated platforms over generic ones, setting a trend away from mass volume platforms.
It’s not about direct competition with Amazon and Walmart. Their selective platform focuses on quality assortment.
The Shopify partnership helps them, but it needs to scale to make a big impact. Therefore, I believe it won’t significantly increase Target’s online revenues. A good, but modest step IMO.