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Having laid out an ambitious plan to roll-out its same-day delivery and store pickup services across the US this year, we review Target’s progress to date.

Four key services being expanded

As part of its strategic focus on being ‘America’s easiest place to shop’, Target is rolling-out four grocery ecommerce related services this year. These include same-day delivery via Shipt, Drive Up, Restock and from-store delivery in selected cities. Having made significant progress over the first six months of the year, these services are being extended across the Midwest and Southeast; Chicago will be the first city to offer all four of the retailer’s delivery and pickup options.

Shipt on track to hit 65% US households

Target acquired Shipt, the on-demand, membership-based delivery platform, last year. Available in more than 135 markets, it is currently focusing on the same-day delivery of groceries, essentials, home, and electronics. It remains on-track to offer the service across the US in time for the holidays, reaching 65% of households. By the end of 2019, Target expects to offer all major product categories through the service.

1,000 stores to offer Drive Up service

Drive Up is currently available in more than 600 stores across 20 states. This service allows customers to place orders via the Target app, then have their items brought out to their cars. Orders arrive within two minutes of when a customer pulls into the store car park. Almost 1,000 Target stores will offer the service by the holiday season.

Stores in 60 markets fulfilling Target Restock orders

Target also continues to push ahead with the national expansion of Target Restock. This is a next-day delivery service of household essential products which enables shoppers to fill a box (up to 45 pounds) for $2.99 per box. The service is currently available to around 75% of US households, with shipments coming from Target stores in more than 60 markets.

Delivery from store expanded to additional cities

Target has also expanded its delivery from store service to additional markets having initially launched it in New York. The service is currently available in almost 60 stores across New York, Boston, Chicago, San Francisco and Washington D.C. Customers using this service can choose to have their purchases delivered the same-day during a two-hour for a flat fee of $7.

Stores as distribution hubs

The launch and roll-out of these services complement Target’s existing free two-day shipping program for most items on Target.com. Providing customers with more flexible and convenient options has been a key part of the retailer’s focus this year. This has seen Target reposition its stores as distribution hubs, with around two-thirds of online orders fulfilled by store-level inventory. However, this has required Target to reengineer its supply chain to flow products to stores in single items, cases and pallets. Having put new processes in place at a distribution centre in the north east, the retailer plans to equip additional sites with this capability.

Target: using supply chain to create growth

Target is in the midst of a $7bn investment programme for its stores and supply chain. In this case study, we look at the retailer’s supply chain investments and how they’re driving growth for the business.

Following its third quarter results, we look at Costco’s ecommerce highlights.

Strengthening performance across the business

Costco’s third quarter revenue increased by 12.1% to $32.4bn, with net income up 7.1% to $750m. Comparable store sales, excluding fuel and currency impacts, increased by 10.2%. This was almost twice as strong as its performance in Q2. The retailer’s ecommerce sales were up 36.8%, accelerating from an increase of 27.3% in the previous quarter.

Grocery delivery services growing

Ecommerce continues to be a highlight for Costco. In addition to benefitting to the improvements it has made to search and checkout functionality, the retailer is seeing a strong response to improvements to its ranges and its email marketing campaigns. Personalising and tailoring offers is resonating with members. Its two-day grocery delivery service and its same-day fresh delivery partnership with Instacart also continue to grow, following their launch last October.

Benefitting from new ecommerce programs

The retailer has also started a store pickup service for high-ticket items, including jewellery, laptops and handbags. It has been pleased with this service, with around half of the customers picking up items, also shopping in the club at the same time. It has also seen a major benefit from being able to carry items online throughout the year, compared to eight to 10 weeks previously. In furniture, it has seen its incremental business grow by several hundred million dollars. Given its improved ecommerce capabilities, Costco is also putting new initiatives in place within its clubs to raise awareness of its various digital programs.

Chris Tyas is the Global Head of Supply Chain for Nestlé, an influential senior leader in our industry who travels extensively to gather and spread best practices. We were fortunate to secure some of his time on the phone recently.

He outlined his thoughts on today’s supply chain challenges for Nestlé and the industry more widely, as well as sharing some successful initiatives from the world’s largest food and beverage company.

Source: Nestlé SA

We’ll publish the full interview on IGD Supply Chain Analysis soon. But to whet your appetite, here are some snippets from the conversation:

On digital automation:

“The area with most challenge is analytics and cognitive computing. I think that provides us with the biggest opportunities going forward. … The best examples we have are coming out of China particularly our collaborations with JD.com and Alibaba.”

On collaboration:

“Basically, nothing will replace true collaboration.”

“Things like blockchain for example will not develop unless we collaborate. They will never be able to gain a foothold unless we collaborate.”

On the end-to-end value chain:

“We’ve still got waste in all value chains at different points because we don't necessarily look at it from the shoppers’ angle.”

“The power of value chain mapping is still very underestimated.”

On sustainability:

“The two big issues which go together are sustainability and consumer trust. People today want to know much more about not just what's in my food or even what's in the healthcare product that I put on my skin.”

On the evolution of supply chain:

“It will evolve at an even faster pace. It will change from a supply chain to a supply network. We will have to respond to requests for information or requests for customisation from lots and lots of different channels which is why it becomes much more of a network rather than a chain.”

On his proudest achievement:

“It has to be about training and developing people from diverse cultures and bringing an organisation together of a multiplicity of different cultures and backgrounds.”

Alistair Balderson

Alistair Balderson

Head of Supply Chain Insight

13 November, London

With the theme of SUPPLY CHAINS FOR GROWTH, the interactive programme will allow you to create a day that will give you everything you need to enhance your food and grocery supply chain.

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Presentations

06/06/2018
Target is in the midst of a $7bn investment programme for its stores and supply chain. In this case study, we look at the retailer’s supply chain investments and how they’re driving growth for the business.
06/06/2018
Interested in reducing inventory and improving service? Demand-driven supply chain management challenges traditional thinking. The concept is taking off as an alternative to traditional materials requirements planning (MRP).
10/05/2018
Following months of speculation, Walmart has agreed to invest US$16 billion in India’s leading ecommerce retailer, Flipkart, giving it a 77% stake in the business. This report looks in more detail at Flipkart, its supply chain operations and why Walmart has chosen to invest.

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