Target is investing $100M in next-day delivery

Target on Wednesday announced a $100 million investment in next-day delivery, with plans to add at least six sorting facilities to its nine existing centers around the U.S.

Target’s sortation centers, first introduced in 2020, have been key to its next-day delivery strategy. The facilities take the process of sorting orders out of the backrooms of Target stores and allow the retailer to handle process many more orders each day.

Since the first sortation center opened, Target has reported a 150% increase in the number of orders delivered to shoppers the next day. This year, Target expects to deliver 50 million packages from sortation centers, double the number in 2022.

“Now more than ever, our guests rely on us to deliver their everyday essentials and Target favorites when they want and need them most,” Gretchen McCarthy, Target’s chief global supply chain and logistics officer, said in a statement. “Through our sortation centers and Target Last Mile Delivery capabilities, we’re able to move faster and with more precision—while controlling costs and expanding our network capacity—for years to come.”

Target currently has sortation centers in Minnesota, Texas, Colorado, Illinois, Georgia and Pennsylvania. The Minneapolis-based retailer did not say where it intends to build the new facilities. 

News of the major investment in additional facilities is not exactly a surprise: Last summer, Target declared it was “not stopping at nine sortation centers” as it focused on building a “modern, flexible supply chain.”

Target has followed a stores-as-hubs model for many years, believing that its local stores can serve both brick-and-mortar shoppers and online ones. As Target’s digital sales exploded during the pandemic, increasing nearly $13 billion from 2019 to 2021, however, handling all of those orders in a Target backroom became too cumbersome, the retailer has said.

Under the sortation center model, each facility retrieves packages from 30 to 40 local Target stores daily. They are then sorted, batched and routed for delivery to local neighborhoods by a third-party carrier or by Target-owned Shipt, depending on the lowest-cost option, Target said.

“We learned that we had to operate differently,” Doire Perot, operations director for Target’s Minneapolis sortation center, said in a statement. “This type of building, the type of next-day delivery capabilities that we can offer to our guests and team, it was going to take a different operating model across every team involved.”