One of America’s largest retail chains is betting hard on omnichannel selling as the future of brick-and-mortar retail. Target’s CEO says the retailer will expand its number of locations serving as online fulfillment centers.
Currently, 460 of Target’s 1,800 U.S. stores are equipped to handle online fulfillment. CEO Brian Cornell plans to increase that number, according to Internet Retailer, although he hasn’t specified how many stores will immediately be outfitted to handle this commerce.
By using existing retail locations to service both in-store shopping and online-to-offline sales, Target can deliver a critical new experience without having to invest into additional store space or distribution centers.
“I’ve got 1,800 mini-warehouses across the country,” Cornell said, referring to each of Target’s retail locations. “We’ve converted 460 locations into stores where we pack orders … and UPS or FedEx delivers packages the last mile.
“We have the advantage of using our existing asset base, and we don’t have to build new, expensive (omnichannel infrastructure).”
In 2015, Target’s 460 stores supporting online order fulfillment handled 30 percent of the company’s total online sales last year. In Q4 alone, those stores handled 50 percent of all sales, which includes the holiday shopping season.
“We were focused for too long on low prices at the expense of new experiences,” Cornell said, referring to Target’s long-time strategy to compete with online retailers like Amazon.
Indeed, competitive pricing was long seen as online retail’s advantage against physical stores — and, consequently, a critical focus for brick-and-mortar sellers. But time has brought wisdom, and greater understanding of consumer motivations. While price has a role, it turns out that other variables of retail shopping have greater implications in regards to consumer behavior.
Cornell realizes this — he understands Target’s need to build a better branded experience. And so the company is focused on strategies that answer customer pain points while leveraging the retailer’s assets in comparison to online competition. Target’s 1,800 physical locations are an asset that can be used to drive O2O sales, and using stores to fulfill online orders provides greater financial incentive for keeping those stores open.
Meanwhile, brick-and-mortar stores will be able to increase foot traffic coming through their doors, thanks in large part to an improved customer experience.
Some Target stores are getting smaller and more urban in terms of their location, in an effort to increase their role as fulfillment centers for online order pick-up. But for the most part, Target is doubling-down on its national physical presence and aiming to satisfy customer hearts, not their wallets.
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