Will Target’s ‘stores-as-hubs’ strategy get turbocharged by sortation centers?
Target wants to speed up its fulfillment of online orders using local stores to get the job done. The retailer yesterday said it is adding three new sortation centers over the next year to the six it currently operates with the goal of getting products to customers even faster and cutting costs in the process.
Sortation centers take control of orders packed in nearby Target stores and sort them for local deliveries. The dual goals of faster delivery times and cost reduction is critical to the retailer’s strategy that has contributed to exponential online business growth in recent years. The chain’s stores fulfilled more than 95 percent of its online orders in 2021.
The sortation centers are intended to take a function away from stores to free up time for associates and open more backroom space. Target claims that store associates are able to fulfill a larger number of orders in the process and the sortation centers are able to consolidate and batch deliveries to “add ease” for its carriers.
The retailer’s first sortation center in its Minneapolis backyard is an example of what Target hopes to accomplish with its three new facilities scheduled to be opened in the Chicago (two) and Denver markets. The Minneapolis sortation center handles nearly two-thirds of the company’s deliveries in the market, according to a Target blog post.
“We started out delivering several hundred packages per day, and now can deliver tens of thousands on our busiest days with the help of more than 2,000 Shipt drivers, who deliver packages in their personal vehicles. Packages are picked up from our 43 Twin Cities stores twice daily and sorted at the center for pickup by Shipt drivers and our other carrier partners, who then deliver them to guests’ doors.”
Target is currently running a pilot with Shipt in Minneapolis that makes use of “large-capacity” vehicles to deliver online orders to customers in the area. The new trucks ”can hold up to eight times more packages per route, adding more flexibility to deliver even faster and make room for growing order sizes.”
The retailer said it plans to use its learnings from the pilot to make improvements and scale the program in future years.
- We’re Adding Three New Sortation Centers in Denver and Chicago to Deliver *Even Faster* for Guests – Target
DISCUSSION QUESTIONS: Where do you think Target is heading operationally with its “stores-as-hubs” strategy? What do you make of its use of large capacity trucks using Shipt in Minneapolis?