Photo: Target
Target plans to invest $100 million by the end of 2026 to open six new sortation centers as it seeks to increase the number of next-day orders it fulfills while simultaneously lowering its costs.
The retailer, which fulfills over 95 percent of its online orders from stores, currently has nine sortation centers operating in Colorado, Georgia, Illinois, Minnesota, Pennsylvania and Texas. It opened its first center in 2020 in its home market of Minneapolis.
Rebecca Swartz, director – global supply chain & logistics for Target, in a video explaining the process, said that stores without a sortation center receive orders and then a “team member picks the item, packs it in a box and then sorts that package into separate areas for each individual carrier. In the sortation center process, we can cut out that sortation step. So the store just focuses on the picking and the packing. Then we’re able to have a Target-controlled truck going to multiple different stores multiple times per day and bring them to the sortation center.”
Packages arriving at the sortation center are carried by a conveyor belt where they are separated by zip code. Boxes are loaded into vans from there for delivery to customers’ homes. In the end, said Ms. Swartz, Target gets packages to its customers faster, with all their orders arriving simultaneously.
Target is working with its Shipt delivery business to improve its system. The retailer offers expanded routes through the sortation centers so drivers can use “larger-capacity vehicles that can hold up to eight times more packages per route,” according to the company. Target is testing this system in two sortation center markets and plans to roll it out to all its markets going forward.
Target’s investment in the sortation centers is notable after the retailer cut its forecast for the fourth quarter in November and said it planned to cut up to $3 billion in costs over the next three years.
The chain reported that sales slowed at the end of October (its third quarter) as customers tightened their belts in the face of inflation.
The chain said its same-store sales increased 2.7 percent in the third quarter, following a 12.7 percent jump in the same period in 2021. Customer traffic was up 1.4 percent for the quarter.
Target is expected to report its fourth-quarter earnings on Feb. 28 before the bell rings.
- We’re Expanding Next-Day Delivery Capabilities, Bringing Speedier Delivery to Even More Guests – Target
- How Target’s Sortation Centers Deliver Joy for Guests and Efficiencies for Our Business – Target
- Target warns of soft holiday quarter as profit tumbles and sales slow – CNBC
- Will Target’s ‘stores-as-hubs’ strategy get turbocharged by sortation centers? – RetailWire