A Target store in New York, USA, on Monday, March 4, 2024.
Shelby Knowles | Bloomberg | fake images
Aim on Tuesday it said it will launch a paid membership program next month, copying its rivals' playbook. Amazon and Walmart.
The subscription-based program, Target Circle 360, will launch in early April and cost $99 a year. Target will offer a discounted rate of $49 per year as part of a promotion from launch through May 18. then continue offering the lowest price to your credit card holders after that. The program will include unlimited free same-day delivery on orders over $35 in as little as one hour with no delivery fees and free two-day shipping, along with other benefits.
Target is tapping into the new revenue stream as it tries to boost weaker sales. Its fiscal fourth-quarter earnings and revenue reported Tuesday beat Wall Street expectations, but its comparable sales have declined three straight quarters.
With this move, the company also follows in the footsteps of retailers who have turned membership fees into a source of income and a sales driver. It's unclear how many people could sign up for the paid tier. The free Target Circle has more than 100 million members, according to the company.
In an interview with CNBC, CEO Brian Cornell said the paid membership program will encourage customers to place more online orders with Target. He said the company's market research has shown that customers value delivery to their homes, even when they use curbside pickup more frequently.
“There is a guest who is looking for the ease and convenience of having something delivered directly to their home (in some cases, within an hour) and we simply want to raise awareness that we can do that,” he said.
Home deliveries will be powered by Shipt, a membership-based company that Target acquired in 2017 for $550 million. Like other sharing economy companies like DoorDash, the business relies on independent contractors who retrieve purchases and deliver them to customers' doors.
By eliminating shipping fees, Target could use the membership program to accelerate its e-commerce business. Digital sales have declined every quarter over the past year and fell 0.7% year over year in the fiscal fourth quarter.
In addition to launching the paid membership program, Target is taking other steps to keep shoppers coming back. It is relaunching its free Target Circle credit card and loyalty program, Sylvester said. Target Circle, which debuted in 2019, will be easier to use and more personalized. For example, members who belong to the free program will automatically have discounts applied to them instead of having to search for deals in the app, he said.
Target's Circle Card offers an additional 5% off customers' purchases, includes free two-day shipping, and allows additional time for returns. The card was previously known as the Target RedCard.
Sylvester said the company is looking at a wide range of potential benefits to improve the membership offering and increase subscriber numbers.
Target is turning to its competitors' playbook for a reason: Memberships have boosted business for retailers like Amazon.
Amazon launched its Prime program in 2005, with perks like free two-day delivery and streaming of popular movies and original TV shows. It costs $139 per year or $14.99 per month, with the video-only membership option at $8.99 per month.
Amazon doesn't frequently share Prime membership totals. The company had more than 200 million Prime members worldwide as of early 2021, according to a final letter to shareholders written by former CEO Jeff Bezos.
Walmart launched its program, called Walmart+, in 2020. It costs $98 per year or $12.95 per month, with perks like free shipping, free grocery delivery on orders of at least $35, and discounts on gas.
Walmart hasn't said how many people subscribe to Walmart+, but its chief financial officer, John David Rainey, said on the company's February earnings call that its membership continues to grow by double-digit percentages.
Walmart CEO Doug McMillon told investors on the company's February earnings call that Walmart+ members spend nearly twice as much as non-members and buy more over the course of a year.
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