Target (TGT) is looking to get its deliveries to customers even faster as it competes with retail rivals Amazon and Walmart. To do so, the company is adding three sortation centers over the next year that it is betting will speed up its customer deliveries and expand its e-commerce operatons.
Two of the three sortation centers will be located in the Greater Chicago area, the company announced, with the third being built in the Denver metro region. At these centers, orders will be sorted for local deliveries after arriving packed from nearby stores.
The Target plan aims to lower costs and create efficiencies to ensure a speedier delivery. Instead of having its store employees pack and sort packages in the backrooms of each location, the new centers will handle the sorting process, so more orders can be filled and sent to customers faster.
Target said it is making the move toward sortation centers as part of the next phase of its stores-as-hubs strategy, especially since it has seen its online sales grow by nearly $13 billion from 2019 to 2021.
Target tested its first sortation center in its hometown of Minneapolis in late 2020, which the retailer said now handles nearly two-thirds of its digital orders in the area. The addition of the sortation center in Minneapolis allowed Target to ramp up its deliveries from 600 packages a day to 50,000, CNBC reported.
The company also acquired shipping service Shipt in 2017 to have more than 2,000 drivers to get orders to customers. Target also continues to use other carrier partners like FedEx to handle its increasing volume.
Previously, Shipt drivers used personal vehicles to deliver packages. However, Target said many will now use large-capacity delivery vehicles, which can carry up to eight times more packages per route, at its Minneapolis center.
The expansion of sortation centers also offers scalability. Target will soon have nine sortation centers with new additions and said it is not stopping there as it remains focused on “building a modern, flexible supply chain that supports our stores, all in service of our guests.”
Target also has sortation centers near Atlanta, Philadelphia, Dallas, Austin, Texas, and Houston. Together, in the first quarter of 2022, those centers handled 4.5 million packages, CNBC said.
As of Monday at 10:23 a.m. ET, shares of Target were trading at $157.38, down 36 cents, or 0.23%.