Target plans to invest $100 million into e-commerce hubs
The Yahoo Finance Live team discusses Target's plans to develop e-commerce hubs around the country over the next several years.
Video Transcript
[AUDIO LOGO]
SEANA SMITH: It's time for a Triple Play, three stocks and we're watching in the final 30 minutes of trading. We've got Target, Warner Brothers-Discovery, and Wingstop. Kicking it off with Target, the big box retailer saying that it is investing more in its e-commerce business to speed up delivery time.
So the retail giant spending $100 million to build a larger network of supply chain hubs. They're calling them sortation centers here after testing the concept in a couple of cities. Now it currently has nine of these centers with plans to open more and also create hundreds of jobs over the next several years.
Now, the centers could potentially help Target boost its online sales, which have slowed in recent quarters, by ensuring faster delivery for its customers. E-commerce sales increased by less than 1% in its third quarter. That's the most recent results.
We're getting earnings from Target next week. But that's actually down from 29% growth at the prior year. Allie, the competition is very stiff in the retail sector overall. Obviously, among the big box retailers, they're going up in many situations against Walmart, against Amazon, which you could, I think, make a pretty strong argument that they have much shorter delivery times.
ALEXANDRA CANAL: Right. And at the end of the day, what do consumers want? They want to get their delivery as fast as possible. And they don't want to pay high delivery fees. So that seems to be what these-- this sortation center project is going to focus on.
And I mean, let's admit it. Amazon is a behemoth in this space. So why not try and beat them at their own game? Of course, Target has been going through a bit of a rough patch. They cut their outlook for the holiday quarter. They said they were looking to $3 billion worth of cost over the next three years.
We'll see what those earnings results-- what story that tells next week. But I think what's interesting is I've noticed on TikTok and social media, people have branded Target as this luxury experience. You go in. You take your Starbucks.
DAVE BRIGGS: Do tell.
ALEXANDRA CANAL: Yes, I've noticed that trend--
SEANA SMITH: I like it.
ALEXANDRA CANAL: --on social media.
SEANA SMITH: When I go to Target, it's nice.
ALEXANDRA CANAL: That's what people say. You go in for one thing, you leave with 50. And I wonder--
DAVE BRIGGS: Well, that I know, but the luxurious part of that--
ALEXANDRA CANAL: Oh, yeah, if you see a TikTok
SEANA SMITH: They have higher-end things than, I think, some of its competitors. I would definitely--
ALEXANDRA CANAL: "Tarjay," I mean, come on. So I wonder if there's a play there for Target moving forward, maybe partnering with some TikTok or social media influencers. I don't know.
DAVE BRIGGS: I don't spend a lot of time on TikTok.
ALEXANDRA CANAL: I could be the CMO.
DAVE BRIGGS: --to learn. Oh, I think it's interesting. E-commerce sales, we learned a lot with Walmart. They were a 12% increase there at Walmart, far exceeding same-store sales. Sam's Club up 21% in e-commerce.
And something Seana and I talked about earlier, Allie, which is surprising, is you talk about their competitors, Walmart and Amazon. Well, they do subscription services. And Target has stayed out of that.
Well, they did have one. It started in 2014, and they canceled it in 2020. That's the game that you can't help but wonder if they want a Mulligan there and to get back in. That's where everyone's going is to a subscription service with free shopping-- free shipping and some deals also.
SEANA SMITH: And then you also get that recurring revenue. It's so much easier for shoppers. And given that tough competitive landscape, you would think-- I think Target should definitely do that. That would be my--
DAVE BRIGGS: Seems to be limited downside in getting in that game.
ALEXANDRA CANAL: Yeah, potential value play there potentially too.
