Aim is resorting to buy to add new and trendier branding to your website.
Starting Monday, the Minneapolis-based discounter said businesses that work with Shopify can apply to join Target Plus, its third-party marketplace. Some of Shopify's customers are smaller or up-and-coming brands that use the e-commerce platform to build and operate a website.
Target and Shopify did not disclose the financial terms or duration of the agreement.
In an interview with CNBC, Cara Sylvester, Target's director of guest experience, said Shopify will help the retailer discover popular items and quickly make them available to Target's online shoppers. She said Target plans to put some popular items discovered through the Shopify deal on store shelves.
Target's marketplace creates a “halo” and is “an accelerator for the total business,” he said. Sylvester added that as the company expands its online assortment and adds eye-catching products, customers tend to visit its website more frequently and buy from both marketplace sellers and Target's own brands.
The big-box retailer is trying to return to sales growth as consumers buy less discretionary merchandise, with discounting lagging behind grocery competitors like Walmart. Target has posted four consecutive quarters of declining comparable sales, and its overall sales have fallen in three of the last four quarters.
The company has also struggled to grow its e-commerce business. Target's digital sales grew 1.4% in the first quarter, the first such increase in more than a year.
Company leaders said in May that the retailer is on track to return to sales growth in the second quarter, but that is partly due to its weak year-over-year performance. For the full year, Target said it expects comparable sales to range from flat to up 2%, with adjusted earnings per share of $8.60 to $9.60.
Target stock has underperformed the broader stock market. As of Friday's close, the company's shares were up about 2% compared to the S&P 500's nearly 15% gain. Its stock price of $146.13 is also well below the highs it reached during the years of the Covid pandemic, when it exceeded $260.
Shopify could also use a boost. The stock plunged after its earnings report in May and is down about 17% so far this year.
Target Plus has only a small fraction of the revenue and sellers of other third-party marketplaces. Unlike Amazon, Walmart, eBay and others, Target allows brands to join by invitation only. It has more than 1,200 sellers, according to Target. Amazon has about 2 million sellers and Walmart has about 135,000 sellers, according to estimates from Marketplace Pulse, an e-commerce research tracker.
Through the marketplace, Target's website has offered items like UnBrush, a detangling brush that went viral on TikTok, and premium products like sunglasses from Ray-Ban and Coach. Offers more than 2 million products from brands including crocodiles, Ruggable and Timberland. The assortment spans many categories including clothing, sporting goods and home décor.
Target said its market has gained momentum. It said its number of sellers and products has more than doubled over the past calendar year.
The retailer does not split the revenue earned through its third-party marketplace. Instead, he groups them on his financial statements with “other income,” such as money earned from profit-sharing on credit cards and his advertising business, Roundel. That other revenue totaled $388 million, representing less than 2% of the $24.53 billion in revenue it reported in its most recent quarter, which ended May 4.
However, Sylvester said Target Plus is “one of the fastest growing parts of Target's business.”
Brands that join Target Plus also become potential Roundel customers. The advertising business grew more than 20% in the last quarter. Sylvester did not say how much of that came from ads purchased by Target Plus sellers.
Third-party marketplaces have become a hot area in retail because they tend to generate higher profits. Instead of purchasing products from suppliers, retailers rely on sellers who typically store and own the inventory. Those sellers also take on the financial risks if customers don't want items or if products must be marked down.
Retailers typically take a cut of sales from sellers. Additionally, they may charge for services, such as fulfilling a brand's online orders or selling ads, such as sponsored search results, for sellers' products.
Target does not offer fulfillment services, instead relying on Target Plus sellers to store, package, and ship their own products.
Walmart, in particular, has stepped up its efforts in the marketplace as it attempts to close the wide gap with Amazon and its dominant e-commerce platform. It has been recruiting sellers and offering new services, such as the ability to ship bulky items like patio furniture or canoes. Sellers in Walmart's U.S. marketplace grew 36% in the first quarter and now has more than 420 million unique items, CEO Doug McMillon said on the company's earnings conference call in mid-May.
Other marketplaces, such as TikTok Shop and Temu, are also growing rapidly.
