US Markets
Monday, June 24th, 2024 3:20 pm EDT
Key Points
- Target has partnered with Shopify to expand its online marketplace, Target Plus, allowing Shopify’s smaller and emerging brands to join. This collaboration aims to enhance Target’s product assortment with new and trendy items, potentially boosting online traffic and sales.
- Target Plus, although smaller compared to competitors like Amazon and Walmart, has seen significant growth, doubling its seller and product count over the past year. The marketplace features a diverse range of products including viral items like the UnBrush and premium brands such as Ray-Ban and Coach, spanning categories like apparel, sporting goods, and home decor.
- The partnership is part of Target’s strategy to improve its e-commerce performance amid challenges in sales growth. Despite recent digital sales growth of 1.4% in the first quarter, Target has experienced declining overall sales. The retailer aims to leverage third-party marketplaces like Target Plus to drive profitability without holding inventory, similar to industry trends where marketplaces are increasingly popular for their profit-driving potential.
Target has partnered with Shopify to enhance its online marketplace, Target Plus, by incorporating new and trendier brands. This collaboration allows Shopify’s smaller and emerging brands to apply to join Target Plus, broadening the range of items available to Target’s online shoppers. Target aims to use this partnership to quickly identify popular products and potentially feature them in physical stores. The initiative is part of Target’s strategy to boost sales and online traffic, especially as the company has experienced declining sales in recent quarters. Target’s Chief Guest Experience Officer, Cara Sylvester, emphasized that expanding the online assortment with appealing merchandise attracts more customers, benefiting both marketplace sellers and Target’s own brands.
Target has faced challenges in growing its e-commerce business, with only a 1.4% increase in digital sales in the first quarter. The retailer anticipates a return to sales growth in the second quarter, although this is partly due to the previous year’s weak performance. Target’s overall sales outlook for the year remains modest, with expected comparable sales ranging from flat to a 2% increase. Despite efforts to enhance its marketplace, Target Plus remains relatively small compared to competitors like Amazon and Walmart, hosting around 1,200 sellers. However, the marketplace has shown growth, with the number of sellers and products more than doubling over the past year.
Shopify also stands to benefit from this partnership, as its shares have declined significantly this year. For Target, the addition of Shopify’s brands could drive higher profits without the need to purchase goods from suppliers, as third-party sellers take on the inventory risks. Target’s marketplace has featured viral and premium products, contributing to its momentum. Although Target does not break down revenue specifically from Target Plus, it is part of the company’s “other revenue” category, which includes advertising and credit card profit-sharing and totaled $388 million in the last quarter.
The partnership with Shopify aligns with broader trends in retail where third-party marketplaces are increasingly popular due to their profitability and lower financial risks for retailers. Competitors like Walmart have been aggressively expanding their marketplaces, offering new services and recruiting more sellers. Other platforms, such as TikTok Shop and Temu, are also rapidly growing, reflecting the competitive landscape of e-commerce. Target’s collaboration with Shopify is a strategic move to stay competitive and cater to changing consumer preferences by providing a diverse and dynamic product range.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/24/target-taps-shopify-to-add-sellers-to-its-third-party-marketplace.html
