Target experiments with same-day delivery

  • Article by: KAVITA KUMAR , Star Tribune
  • Updated: June 14, 2014 - 6:14 AM
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The Target store near Target headquarters on Nicollet Mall, Minneapolis, on December 19, 2013

Photo: Glen Stubbe, Star Tribune

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In the not-so-distant past, same-day delivery might have been something Target introduced only after it smoothed out all the kinks, especially amid questions about the consumer’s appetite for it.

But the Minneapolis-based retailer is on a mission these days to take bigger risks, so it is jumping into the same-day delivery fray along with a growing number of competitors.

Target is rolling out a new “rush delivery” service in three major markets — the Twin Cities, Miami and Boston. For a $10 fee, orders placed at Target.com by 1:30 p.m. will be delivered to people’s homes via a courier service that same evening between 6 and 9 p.m.

About 30,000 items, or about a third of an average Target store, will be available for rush delivery. The company began a soft launch this week and will have the service at full speed by Tuesday.

“I certainly think same-day delivery is part of the future — the open question is how big,” said Jason Goldberger, senior vice president of Target.com and mobile. “My hope is that it will be very successful, and we’ll then want to expand it to more markets.”

Retailers are still trying to make same-day services cost-effective. One of the biggest challenges, Goldberger said, is anticipating customer demand. “Is it a handful of orders of guests per day or hundreds of orders per day?”

After some failed experiments with same-day delivery in the early 2000s, more retailers are trying again. Amazon.com, the e-commerce giant, began rolling out same-day delivery to some markets in 2009 and has since expanded it. It is also reportedly testing using its own fleet of trucks to make deliveries.

Brick-and-mortar retailers have taken notice.

“If you’re a retailer and your product competes with Amazon, you better be testing a lot of things,” said Brian Yarbrough, an analyst with Edward Jones. “The test may fail and they may decide not to go forward with it, but they can’t just sit still.”

Walmart launched a same-day delivery service called “To Go” in five markets, including Minneapolis, in 2012. Google and eBay have been testing their own courier services in partnership with retailers in a handful of cities on the coasts. A host of start-ups have begun to make inroads, too.

But many of these services are still in the beta phase, and there have already been challenges. A Walmart spokesman confirmed that its same-day service has been temporarily suspended in Minneapolis. After rumors circulated earlier this week that eBay was shutting down its eBay Now service, the company said it is sticking with the program in four cities but won’t expand as originally planned.

Do consumers want it?

While the public may not be clamoring for same-day delivery, retailers want to be prepared as expectations begin to change. “We want to be ahead of the curve,” Target’s Goldberger said.

Matt Nemer, an analyst with Wells Fargo Securities, said same-day delivery introduces a new paradigm to retail.

“I think this is something that consumers don’t know they want yet, but will — much like a tablet,” he said.

Earlier this year, Best Buy turned all of its stores into shipping centers. By doing so, CEO Hubert Joly said the company is better positioned to not only speed up delivery, but also roll out services such as next-day and same-day delivery.

“The next generation wants it now,” Joly said in a recent interview. “Even from an Internet player, two-day delivery is not now. Now is now.”

Nearly half of Best Buy’s online orders use its buy-online, pick-up-in-store service.

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