What Target Gains From Rolling Out Same-Day Delivery

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Target Corp. (NYSE: TGT) continues to demonstrate that it does not intend to get steamrolled by rivals Walmart Inc. (NYSE: WMT) or Amazon.com Inc. (NASDAQ: AMZN). The company announced Thursday morning that it is rolling out a same-day delivery service from 1,500 stores in 47 states for some 65,000 items available at the store’s website.

The service comes in two flavors: a per-delivery charge of $9.99 or an annual subscription fee of $99 (following a free, four-week trial) on orders of $35 or more. Deliveries will be handled by Shipt, the company that Target paid $550 million for back in 2017.

Both Walmart and Amazon recently added next-day delivery plans, and Amazon Prime’s $119 annual subscription already includes free same-day delivery in limited areas for more than 3 million items on orders of $35 or more. Non-Prime members can receive same-day service for $9.98 per order. Walmart expects to have same-day delivery available at 1,600 U.S. stores by the end of this year.

Last week, Amazon one-upped Walmart’s free next-day delivery service for some 200,000 products in a limited number of cities. Amazon said Prime members could choose from among 10 million items for free next-day delivery, although Amazon, too, offers the service only in limited areas.

The arms race in delivery services is all about keeping up with the competition. If Target, Walmart and Amazon are all offering the same (or nearly the same) delivery options, that gives customers one less reason to flee to a competitor. It’s all about loyalty.

Walmart promises low prices. Amazon offers virtually every product under the sun. Target offers its Redcard loyalty program with discounts and other promotions for cardholders. Each retailer’s customers choose to shop at the store that offers what they value most. Only if they can’t get it at their first-choice store will they look elsewhere.

Target’s same-day delivery service raises the bar a little higher. Amazon does not yet have 1,500 warehouses from which the company could ship goods the same day. Walmart will have an equivalent service by the end of the year, but already-thin margins will be further strained by threatened tariffs on Chinese imports and pressure on Walmart to raise its prices.

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