On the hunt for an electric guitar, golf clubs or a high-end camera for a gift this holiday?
Target probably isn't the first retailer that comes to mind for those items. However, it now sells an expanded selection of those products online through a third-party marketplace it launched earlier this year called Target Plus.
While still quite small compared with the much larger marketplaces of Amazon and Walmart, Target Plus has signed up nearly 100 sellers that are hawking more than 250,000 products on Target.com.
"Although it is relatively new, Target Plus is an important initiative in our journey to profitably grow our dot.com business," said Rick Gomez, Target's chief marketing and digital officer. "We will continue to build out Target Plus, but we're going to do it in a really thoughtful, disciplined way."
Sellers on Target Plus include athletic brand Mizuno; an online subsidiary of Guitar Center, and Kaplan Early Learning Co., maker of educational toys. Items sold by Microsoft, Sonos and Christmas Central, some of which ran Cyber Monday promotions on Target.com, have been particularly popular during the holidays, the company said. It declined to break out marketplace sales.
But Gomez said Target isn't looking to become a place to buy everything, instead continuing to build a brand that stands for curation. With Target Plus, the retailer has picked product categories that complement its own million-plus assortment online and that customers have been searching for on Target.com. Of course, sporting goods, musical instruments and toys also happen to be categories where national retailers of those products have been floundering or gone out of business, including Sports Authority and Toys 'R' Us, leaving a void in the market.
While retailers have generally found it challenging to make online sales profitable, some have latched onto online marketplaces as a more lucrative way to grow online. Third-party sellers cover most of the costs such as holding the inventory in their own warehouses and shipping items to customers, while the host site typically takes a 5% to 15% commission on the sale. In the process, retailers in effect turn their websites into an expanded online shopping mall. Target, like Amazon, also offers advertising products for an extra fee.
"This is part of a broader industrywide movement toward establishing ecosystems very much modeled after what's happening in China," said Toopan Bagchi, a former Target executive who is now a senior adviser at Minneapolis-based Navio Group, nodding to the likes of online giant Alibaba. "Everybody is looking at how to become a service provider as much as a retailer, with multiple brands or retailers on their platform."