In a competitive move against rivals Amazon and Walmart, CEO Brian Cornell announced at a media event on Tuesday that the mass merchant will roll out free two-day shipping with no minimum purchase or membership required between Nov. 1 through Dec. 22. The service will be available for hundreds of thousands of items that make up the vast majority of the assortment. In order to make that process work efficiently, Cornell said the company will ship those items from stores, which are a key competitive advantage for the holiday season overall.
In previous holiday seasons, Target has offered free standard shipping, but this move is an extension of an initiative that launched in March to offer free two-day shipping to REDcard holders or those who spend at least $35. The company does not have plans to continue the service for all customers after the holiday season.
Walmart, which currently offers free two-day shipping on orders over $35, on Monday expanded that service to “millions of additional items” sold by third-party sellers on Walmart.com. While Amazon does not have a minimum basket size for two-day shipping, customers must pay the annual $119 Prime membership fee to access the service.
Since acquiring same-day delivery startup Shipt last December for $550 million, Target has rapidly expanded its same-day delivery operations. Shipt (which is priced at $99 annually) is now available in 46 states and in hundreds of markets.
Shipt is only one piece of several fulfillment investments new to Target this year. The company will also expand its curbside pickup program Drive Up to nearly 1,000 stores. Cornell said Drive Up has been the company’s highest rated service and that orders are delivered to customer’s cars on average in less than two minutes. While not new, customers can also take advantage of delivery from store, one-hour order pickup and its Restock essentials delivery service. A marketing campaign, Run and Done, will highlight the nuances of these delivery options to customers.
A separate campaign will introduce holiday merchandise and promotions. Among those initiatives, Target will offer thousands of new and exclusive gifts under $15, as well as an expanded, exclusive toy assortment and its more than 20 private label brands, like Wild Fable and Prologue. Cornell said Tuesday that the women’s apparel brand A New Day, which launched last July, has delivered over $1 billion in total sales, a milestone also hit by the company’s popular Cat & Jack children’s brand.
Cornell said the combination of investments in stores, fulfillment and private label brands has spurred its traffic and sales growth over the last several quarters. Target in August boosted its guidance after announcing records in traffic and sales, laying out expectations to spark sales growth in line with the 4.8% comps growth the company delivered in the first half of the year. Digital sales also increased by 41%.
It’s no surprise that Target’s some 1,800 stores are at the center of its overall growth strategy, considering 50% of digital orders are fulfilled in stores. Last March, Cornell announced a $7 billion investment in stores and digital operations. This includes the remodeling of 600 stores by the end of 2018 and 1,000 by the end of 2020. Target will open roughly 30 new small format stores by the end of this year, Cornell said, adding that after just a year its New York City Herald Square store has become the number one store for sales per square foot and a leader in many categories.
“I have never felt better about our position, our readiness to deliver this holiday season,” Cornell said. “As a company we’re in a unique spot and so much is driven by investments in our stores.”
As the holidays move in, Cornell said the company’s plan to hire 120,000 seasonal team members is “off to a great start” and that the company has collected over 100,000 applications, with a particular surge in distribution center applications (up 40%). Among efforts to invest in employees (including a commitment to raise its hourly wage to $15 by 2020) the company introduced a $2 million appreciation program that recognizes team members from every store with a $500 Target gift card as well as the opportunity to donate $500 to a local charity of their choice.
When it comes to holiday merchandising this year, Target is leaning in to its “cheap chic” aesthetic. The assortment strategy touts gifting options for 1,400 items merchandised by price point and category on new, permanent fixtures that will be decorated according to the season at all stores. Those featured for the holidays will take on a European holiday market theme and modern colors. Merchandising will roll out in two waves, with the first coming in early November and the second at the end of that month.
Over 80 stores and Target.com will also offer its Wondershop personalized gifting service, which for no fee can customize gifts with names, for instance. Customers will be able to curate their own gift baskets by purchasing items as well as the packaging materials. The company will also boost its offering of food and beverage gifts.
Toys will also be front and center at Target this holiday season as the company expands square footage in stores for interactive children’s activities. New to its merchandising mix will be bulkier toys like dollhouses, playsets and plush toys. In the wake of the Toys R Us fallout from the market, Target is taking a “long-term perspective to toys” for the holiday season and beyond, Cornell said.