Target Corp. is preparing to let shoppers use food stamps to pay for online orders, following in the footsteps of Walmart Inc. and Amazon.com, in a move that could help the Minneapolis-based retailer gain market share among lower-income shoppers.
Roughly 21.7 million U.S. households use food stamps, which are mostly restricted payments to cold food items, non-alcoholic beverages and seeds and plants.
Target disclosed to Reuters last week that it will begin to accept payment online with food stamps, tentatively starting later this month, through a service offered by Shipt, its delivery arm. A Target spokesman said that it hadn't "shared any official launch date" for the service, which also will include drive-up and pick-up orders.
Offering food-stamp payment for online orders could help Target fill a long-time gap in its e-commerce strategy and reach households that might otherwise purchase groceries at so-called "dollar store" chains, or at Walmart.
Walmart and Amazon already accept purchases with food stamps on their websites since 2019 as part of a program with the U.S. Department of Agriculture, which distributes food stamps. Grocery-delivery service Instacart also offers the option.
Still, even though Target has lost the early mover advantage, investors and industry watchers were positive on the move. Accepting food-stamp payments online could build customer loyalty and help it sell other products, said David Klink, senior equity analyst at Huntington Private Bank, which holds over $30 million in Target shares.
"Target is kind of taking the long view, saying you can use your food stamps now," he said. "But maybe at some point you won't depend on food stamps and you'll remember that Target was there for your various shopping needs."
Grocery is a big part of Target's operations. In 2020, it accounted for 20% of its overall sales of $92.4 billion, putting it in competition with the 10 largest U.S. grocers.
