Target chases Amazon and Walmart with same-day delivery, but can it compete?

Same-day shipping: Is Target piling on or punching above its weight?

Delivery Wars: Consumers may not have asked for two-day, one-day, same-day, or even two-hour deliveries, but it looks like they’re going to get them. Regardless of demand, however, the largest online retailers are going all out for delivery speed bragging rights. Target, another high profile retailer (but one with a mere fraction of Amazon’s or Walmart web sales), just made its own foray in the shipping skirmish.

Target announced Tuesday a new option on Target.com: same-day delivery via Shipt, the delivery service Target purchased two years ago. According to a news release on Target’s corporate site, “guests” (TargetSpeak for shoppers) can get 65,000 items delivered in as little as one hour when they place orders on Target’s site.

Target customers can sign up for a free four-week trial of Shipt deliveries and then pay $99 for an annual membership or pay $14 monthly. As an alternative to membership fees altogether (which Target and Walmart both love to mention because it contrasts with Amazon Prime’s $119 annual fee), Target shoppers can pay $9.95 for shipping per order of eligible same-day items.

Also, Target shoppers who use a REDcard loyalty credit card to pay for their orders will receive a 5% discount on their purchases, which could cover the shipping fee if the order is $200 or more.

“With same-day delivery now available directly within the Target.com experience, we’ve made it even easier for our guests to shop at Target—while still getting the great value, curated product assortment and helpful guest service they’ve come to expect,” said Dawn Block, Target senior vice president, digital.

But can Target compete in Amazon and Walmart’s battle for the fastest delivery service crown?

Is it an even battleground?

Let’s look first at the size of the respective player’s online business. Amazon and Walmart, the two top U.S. online retailers had estimated 2018 web sales of $120 billion and $17 billion, respectively.

Target reported strong sales growth for 2018 with e-commerce showing the highest growth rate, according to GeekWire. Target’s 2018 in-store sales grew 3.2% over 2017, but digital sales jumped by 36%. So those are interesting and impressive numbers, but only 7% of Target’s $23 billion in 2018 revenue came from online sales. That’s $1.61 billion, a bit less than 9.5% of Walmart’s estimated e-commerce revenue and just 1.34% of Amazon’s sales.

Amazon takes to the skies and walks up your driveway

Amazon recently ramped up its investment in delivery services, announcing an $800 million allocation for a 100-plane Prime Air shipping hub in Cincinnati that will boost one-day Prime deliveries for most items when it opens in 2021. Today, according to Amazon, the company has free one-day delivery for 10 million items. Amazon’s Prime Now is a two-hour delivery service, with availability in about 100 metropolitan areas. Only Prime members who pay $119 a year for membership (or $13 a month) can use Prime Now.

When FedEx announced last week that it would not renew the Amazon express delivery contract for domestic orders, no one at Amazon or FedEx seemed overly concerned. Amazon’s ongoing investment in cargo planes, long and short haul trucking, and last-mile delivery programs may not make it invulnerable to changes and challenges in the rest of the shipping world today, but the day may come soon when Amazon handles all or nearly all shipping in-house.

Walmart has been fighting this battle for eight years

Last month Walmart announced NextDay, free one-day delivery service with no membership fee (take that, Amazon!) for orders of $35 or more for 220,000 frequently purchased items. NextDay rolled out first in Phoenix and Las Vegas with Southern California next. By year’s end, Walmart aims to reach 75% of the U.S. population with the NextDay program.

Walmart started offering free two-day shipping with no membership fee in 2011. Walmart currently offers same-day Grocery Pickup and same-day Grocery Delivery services. According to the May announcement, 3,100 stores will have Grocery Pickup and 1,600 stores will have same-day Grocery Delivery by the end of the year.

Target: Piling on or punching above its weight?

As Amazon and Walmart continue to raise the bar for shorter delivery times, Target’s same-day delivery fits right in. The Target announcement didn’t mention any geographical limitations for the service, but with several anecdotal inquires on the Same Day Delivery page, zip codes close to even moderate-sized U.S. cities were eligible for the service. If your zip code is eligible, the application presents you with a top-level menu for household essentials, groceries, pets, babies, beauty, personal care, health, and seven more product categories.

Just because Target’s online sales revenues are much lower than Amazon and Walmart, that doesn’t mean the company can’t compete for business. No newcomer to travails of retailing, Target opened its first store in 1962 and reached the 50th state in 2018. Today Target’s brand name has cachet among its loyal shoppers who hold the discount retailer in relatively high esteem.

The bottom line for shoppers, customers, and even “guests” is that in the foreseeable future, we all benefit from big companies battling over shipping speed and fees. In the end, most of us still buy based on price and convenience. Shipping is a convenience item, so we win.

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