Target Plays Catch-Up with Next-Day Delivery Test

Physical retailers in a bind when it comes to driving store visits

Author: Andria Cheng

May 8, 2017

More than three years after Amazon unveiled Amazon Prime Pantry, Target is getting in on the act, testing a service it calls Target Restock to allow its REDcard loyalty program members to buy household items to be delivered to shoppers the next day.

While the items, for now involving household items and dry groceries, will be packaged at a nearby Target store for delivery, potentially giving it some competitive advantage against pure-play online retailers like Amazon when it comes to shipping costs, it also suggests physical retailers like Target are in a delicate balancing act: on one end of spectrum, making it easy for loyal shoppers to order household items for next-day delivery meets the growing trend of shoppers buying grocery and other household essentials online.

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On the other hand, that also means shoppers may not have the same need to visit stores as often for those weekday fill-in trips to pick up the toilet paper and coffee, and as a result, potentially less likely to make impulse purchases of Target private-label or exclusive clothes and other non-essential items, things that tend to be more profitable for retailers than a commodity grocery item.

But consumer behavior is surely changing and online delivery of consumable items is growing. In a telling sign, Market Force Information’s March survey of nearly 13,000 US consumers showed that 8% of respondents have ordered groceries online for delivery to home or office in the past 90 days, up from 5% last year. That percentage outweighs that of either online ordering for in-store or drive-through pickup and for ordering at a physical store kiosk for in-store pickup.

Grocery delivery also beats curb-side or in-store pickup across all age groups. For instance, among 25-34-year-old millennial shoppers, 10.5% said they’ve ordered groceries for home or office delivery the past three months, outpacing the 7.8% who used drive-through pickup and the 5.5% who said they picked up ordered items inside stores.

In all, 18% of consumers surveyed by Market Force said they’ve used grocery delivery service to their homes or business at least once, double the 8.9% who said they’ve used click and collect service. Grocery delivery also has a higher percentage of repeat users, at 64%, compared with 58% of repeat users for click and collect service.