The biggest news that merged with Amazon.com (NASDAQ: AMZN) was the Thursday e-commerce giant's plan for shipping the standard for the Amazon Prime subscription service , Unlimited two-day shipping has been Prime's staple since its launch in 2005, but is not as distinctive as it used to be. For example, both Walmart and Target (NYSE: TGT) offer free two-day shipping for online orders over $ 35 without requiring a membership fee.
by With the conversion to a day shipping Amazon certainly sets the bar higher. The idea that this move will leave other retailers in the dust ignores the advances that Amazon's competition has made. Target Restock, the Home Essentials delivery service from Target, offers free shipping the next day to a large clientele.
Target Restock has a minimum order value of $ 35 and a small selection compared to Amazon Prime, but proves that Target is fully capable of delivering orders quickly, without membership fees or an Amazon distribution network. Amazon's one-day shipping push will force Target and other retailers to become more aggressive, but it's not the end of the world.
It's all about business
The basics of Target Restock, which the retailer revised last year:
- Tens of thousands of household utensils and non-perishable food items are available.
- Minimum order: 35 USD.
- Orders until 7 o'clock On a day of the week will be delivered the next day.
- There are no delivery fees for orders received by Target's REDcard or members of the target loyalty program Target Circle, Target Circle. Otherwise, a fee of $ 2.99 will be charged.
Target Restock offers a much smaller selection than the millions of items available through Amazon Prime. It is certainly not a substitute for Prime. The fact that Target is able to offer a free next-day delivery without the extensive distribution system that Amazon has built and perfected for decades, and without fueling the bottom line, shows that the retailer has come a long way.
The key to free shipping the next day from Target is the base of more than 1,800 stores. All Target Restock orders and many standard online orders are executed directly on the shop shelf. That may seem inefficient, but it saves a boatload of money. The company was able to forego spending about $ 3 billion on new warehouses by using its order processing businesses, and orders shipped from stores cost the company on average 40% less than warehouse orders ,
The end result: Target has already built the infrastructure needed for next day's free shipping. It is currently limited to Restock orders, but it would not be surprising if Target would extend its efforts to a wider range of goods in the future, especially now that Amazon is shipping its day.
A Small Success Margin
Target has no major impact on the bottom line from its fast, free shipping initiatives, but it's a small donation. In the fourth quarter of 2018, Target's gross margin decreased 0.4 percentage points year-on-year to 25.7%, reflecting higher costs for digital fulfillment and supply chains. The company was able to maintain its operating margin at 4.9%, but this was mainly due to the strong sales in the stores. [Margins] Target's margins will certainly come under pressure as the company continues to drive online revenue, especially when it comes to the performance of its stores starting to cool off. The retailer, however, has proven with Restock that he can offer Amazon-level comfort without the Amazon membership fees.
One-day shipping from Amazon sounds like a catastrophe to Target, but it's not. The goal is good.