Target’s booming stock price before and especially during COVID is no luck. While retailers the world over shuttered in 2020, Target grew strength to strength. The company’s success is tied in big part to its supply chain strategy.
1. One base for inventory
Target does not have different supply of inventory for different channels. Stores not only function as the inventory house for in-store shoppers but also for e-com purchases and same-day delivery orders. This strategy puts additional and positive pressure on on-time delivery to stores. Importantly, one version and one base for inventory streamlines operations and improves profits.
2. Small format stores
Beyond reducing costs, speed to customer is of utmost important. Further to the store being the hub for inventory, Target has experimented with smaller format stores in certain cities. The inventory in these stores is limited and stocked based on studies of what the local population may need. The stock in these stores is hence carefully planned, but in exchange the local customer gets a Target around the corner and their pick-up/delivery time is that much faster.
3. Private label brands
Over 30% of Target’s revenue comes from private label sales. Target has over 10 billion-dollar brands. Investing and growing its private label sales has allowed Target to wield greater control on design, sustainability, costing, and on speed to store and to customer. This has helped reduce cost of goods sold and increase customer satisfaction.
4. Technology acquisitions in last mile
Amazon offers next day delivery, but Target does one better with its same day delivery service, Shipt. A $99 per year payment allows same day delivery for all customers. Target has made huge investments in inhouse next-generation supply chain technology, but it has also in parallel made investments in next-gen technology companies. Beyond Shipt, Target also acquired the technology for the same day delivery startup Deliv.