Target plans to invest about $4 billion annually over the next several years to accelerate new store openings, store remodels, enhance fulfillment services and strengthen its supply chain. The plan calls for opening up to 40 stores a year and remodeling other stores, but in addition, the investments will support the opening of four new distribution centers and five “sortation centers,” described as a new type of facility that will collect online orders from local stores multiple times a day and sort the orders into efficient routes for carrier delivery, reports Chain Store Age.
Target is coming off a record year during which its sales grew more than $15 billion, greater than its total sales growth during the prior 11 years, says CSA. The planned investments include:
New Store Openings & Remodels
Following 30 store openings in 2020, including 29 new small-format locations, Target plans to accelerate the pace and open up to 40 new stores annually to meet community needs in urban centers, college campuses and dense suburban cities across the country. The openings will include more small-format stores in urban centers such as New York City, Los Angeles and Portland, along with mid-size stores in dense suburban areas surrounding cities such as Denver or Brooklyn.
In addition, Target will open small-format stores across college campuses, including the University of Georgia and University of Michigan.
The discounter plans to remodel more than 200 stores a year beginning in 2022. Target said its future store design will focus on safety and ease, with additional contactless features and updates that facilitate same-day fulfillment and more room for social distancing.
Last-Mile and Replenishment Capabilities
To add capacity to its fulfillment operation and further scale its stores-as-hubs model, Target is testing a new type of facility — called a sortation center — in Minneapolis. It expects to open five more of the centers in 2021.
“With this new last-mile capability, the sortation center collects online orders from local stores multiple times a day and sorts them into efficient routes for carrier delivery,” Target stated. “This pulls the sorting activity out of store backrooms so it can be consolidated more efficiently at one facility, giving store teams more time and space to fulfill additional orders, while reducing the load on external carriers. This process increases store fulfillment capacity, reduces last-mile fulfillment costs and speeds delivery to guests.”
Target is also making investments in its supply chain replenishment capacity to support stores' continued growth well into the future. It expects to open two distribution centers this year, one in Delaware and one in Chicago. Two more are planned in 2022 to support the East and West Coastal areas.
Enhancing Fulfillment Services and Store Experience
Citing the “enthusiastic response” to last year's addition of fresh, refrigerated and frozen food items to its drive up and order pickup services nationwide, Target will increase the total fresh and frozen food pickup assortment. Additionally, following a successful initial trial in hundreds of stores, adult beverage pickup will be offered in 800 more stores in the next few months.
Technology improvements will also provide drive-up customers a more personalized experience in the Target app. This includes informing employees where to place the order in their vehicle or authorizing a different customer, such as a family member, to pick up the order.
Target ended 2020 with 10 owned brands generating $1 billion or more in annual sales each, four of which surpassed $2 billion. The chain will continue to bring brand partnerships to life in stores and online with the opening of approximately 100 Ulta Beauty at Target shop-in-shops in 2021, with plans to add hundreds more. It also is expanding its 15-year relationship with Apple, by opening mini-Apple shops in 17 stores, with an extended assortment, expanded footprint and service enhancements. More locations are scheduled to roll out this fall.
"2020 was a record-breaking year thanks to the work of our team and their commitment to serving our guests amidst unprecedented demand,” said Michael Fiddelke, CFO, Target. As we head into 2021, we are building on the aspects of our differentiated model that make Target the preferred one-stop-shop for millions of guests.”
Fiddelke continued that the “bold investments planned for the next few years will scale key capabilities across stores, fulfillment, and supply chain to drive deeper engagement with new and loyal guests, continued market share gains, and long-term, profitable growth."