Target to Spend $100M to Speed Up Deliveries
Target operates nine sortation centers today. Courtesy of Target Corp.

Target to Spend $100M to Speed Up Deliveries

The Minneapolis-based retailer says it hopes to open at least six new “sortation centers” by 2026.

Target Corp. is plotting to take a bite out of Amazon’s hold on door-to-door deliveries.

On Wednesday, Minneapolis-based Target said it plans to invest $100 million to grow its network of sortation centers. By 2026, the retailer hopes to operate more than 15 sortation centers in total. Today, the company operates nine, which are spread throughout Minnesota, Illinois, Texas, Colorado, Georgia, and Pennsylvania.

As with many prior Target initiatives, regular stores still play a key role. Sortation centers essentially collect and sort digital orders that originate within regular stores. In-store workers grab items for a customer’s digital order and place them on a pallet, which eventually goes to the centers. From there, orders are then delivered to customers’ doorsteps. The ultimate goal is to reduce transit time and costs.

Target hasn’t specified where in the country it plans to open the new centers, but the retailer expects to hire “hundreds” of new workers to staff them.

“We’ll provide more details on exact sortation center locations once they’re confirmed but do not have any other news to share at this time,” a Target spokesperson said in an email. “We continue to evaluate the need for sortation centers in major metro areas across U.S. markets to achieve the biggest impact for our guests and deliver a best-in-class guest experience.”

The retailer’s latest investment comes as its customers are ordering less goods online. In the company’s most recent quarter, digital sales nudged up less than 1%, but they jumped nearly 30% in the same quarter in 2021.

But Target execs are nonetheless bullish on the new sortation centers. “Now more than ever, our guests rely on us to deliver their everyday essentials and Target favorites when they want and need them most,” said chief global supply chain and logistics officer Gretchen McCarthy in a press release.

Opening the new centers, she said, would speed up deliveries and control costs “for years to come.”

To be sure, Target competitors have been angling for a bigger chunk of the e-commerce market for years. Walmart, which has a much larger store footprint than Target, on Tuesday said that its e-commerce sales leapt by 17% in its most recent quarter. Amazon, meanwhile, aims to maintain its market dominance in the space, even though its e-commerce sales fell about 2% in its most recent quarter. Plus, Amazon isn’t exclusively a digital retailer these days; the company now operates its own line of grocery stores and convenience shops, in addition to Whole Foods markets.

But is Target betting too heavily on e-commerce and deliveries? Edward Yruma, a Piper Sandler managing director who watches the retailer, thinks not. “We think there’s clearly the longer term secular trend toward greater e-commerce penetration,” he said in a Thursday interview. “It’s helping meet customers where they want to be met.”

The recent investment in sortation centers only reinforces Target’s “focus on the stores as the center of e-commerce strategy, which is different from what some other players have done,” Yruma added.

“I think [Target] is really trying to leverage the store footprint that they have,” he said.