CNBC writes about how three different acquisitions by Target are forming the backbone of a strategy that will allow the retailer to not just depend on outside shipping companies, but rather use its own resources "to get online purchases to customers’ doors even faster."
According to the story, the systemic change "begins with employees picking and packing orders at stores. Items are transferred from the store’s backroom to a sortation center multiple times each day. Then, it will use technology it acquired from two companies, Grand Junction and Deliv, to group packages for the most efficient routes to neighborhoods. Finally, contract workers for Shipt, a same-day delivery service that Target bought in 2017, will deliver packages to customers who live in the same parts of town in addition to traditional carriers."
"Shipping is the majority of the cost for getting a product to a guest. Shipping is the big number," Target COO John Mulligan tells CNBC. "We continue to work on picking better and optimizing our pick and optimizing the batches [of packages] for the team - all of that is really important - but the key to the whole game from our perspective is to improve that ship cost.”
Mulligan tells CNBC that the new model will allow Target "to better handle the rising number of packages that pile up in its stores throughout the day. He said it will also give the company more control over the customer experience and make e-commerce orders more profitable."
In the end, the story says, this new strategy should help Target "compete with larger and sometimes faster e-commerce rivals like Amazon and Walmart. It is an answer to customers’ expectations for speed, as they use on-demand services from Uber to DoorDash. And it is an alternative to relying solely on carriers like United Parcel Service and FedEx, which have dealt with a spike in demand during the coronavirus pandemic and responded in some cases by hiking fees or limiting parcels."
- KC's View:
Not everybody can do what Target is doing, but the broader lesson is an important one - that owning the process as opposed to outsourcing it is the best long-term approach to satisfying shoppers and burnishing the brand. And that means owning every part of the customer experience, to the greatest degree possible.
If you don't do that, there may be some short-term advantages, but in the long run I firmly believe that it will be the companies that embrace the challenge, not run from it or outsource solutions, that will end up being best connecting to their customers.