Target turning Shopping Add new and more fashionable brands to their website.
Starting Monday, the Minneapolis-based discounter said companies that work with Shopify can apply to join its third-party marketplace Target Plus. Some of Shopify’s customers are small or emerging brands that use the e-commerce platform to build and operate websites.
Target and Shopify did not disclose financial terms or the length of the deal.
Cara Sylvester, Target’s chief customer experience officer, said in an interview with CNBC that Shopify will help retailers discover popular products and quickly provide them to Target’s online shoppers. Target plans to put some of the popular items discovered through Shopify transactions on store shelves, she said.
Target’s marketplace creates an “aura” and is “an accelerator for the entire business,” she said. Sylvester added that as the company expands its online assortment and adds eye-catching merchandise, customers tend to visit its website more frequently and buy from marketplace sellers and Target private brands.
The big-box retailer is trying to return to sales growth as consumers buy fewer discretionary items, with discounters lagging behind grocery rivals such as Walmart. Target has posted four consecutive quarters of declining comparable sales, and its overall sales have declined in three of the last four quarters.
The company is also working to grow its e-commerce business. Target’s digital sales rose 1.4% in the first quarter, the first growth in more than a year.
Company leaders said in May that the retailer expected to return to sales growth in the second quarter, but that was partly due to its weak year-over-year performance. Target said it expects full-year comparable sales to be flat to grow 2%, with adjusted earnings per share of $8.60 to $9.60.
Target Corp.’s stock underperformed the broader market. The company’s shares were up about 2% as of Friday’s close, while the S&P 500 was up nearly 15%. At $146.13, its shares are also well below the highs set during the coronavirus pandemic, when the stock topped $260.
Shopify can also improve. The company’s shares tumbled after the earnings report in May, and are down about 17% so far this year.
Target Plus’ revenue and sellers represent a fraction of other third-party marketplaces. Unlike Amazon, Walmart, eBay and others, Target only allows brands to join by invitation. According to Target, the company has more than 1,200 sellers. Amazon has about 2 million sellers and Walmart has about 135,000 sellers, according to estimates from e-commerce research tracker Marketplace Pulse.
Through the marketplace, Target’s website sells merchandise such as the UnBrush, a detangling hair brush that went viral on TikTok, as well as high-end products such as Ray-Ban and Coach sunglasses. It offers over 2 million products, with brands including Crocs, Ruggable and Timberland. This category covers categories such as apparel, sporting goods, and home décor.
Target said its market has strong momentum. The company said its number of sellers and products more than doubled last year.
The retailer does not distribute revenue generated through its third-party marketplace. Instead, it lumps it in its financial statements with “other revenue,” such as revenue from credit card profit sharing and its advertising business, Roundel. Other revenue totaled $388 million, accounting for less than 2% of the company’s $24.53 billion in revenue in the most recent quarter ended May 4.
Yet Sylvester said Target Plus is “one of the fastest-growing parts of Target’s business.”
Brands that have joined Target Plus have also become potential customers of Roundel. Advertising business grew by more than 20% in the most recent quarter. Sylvester wouldn’t say how much of that comes from ads purchased by Target Plus sellers.
Third-party marketplaces have become a popular area in retail because they tend to lead to higher profits. Retailers do not buy goods from suppliers but rely on sellers who usually store and own inventory. These sellers also bear financial risk if customers don’t want the item or if the product has to be reduced in price.
Retailers typically take a cut of the seller’s sales. Additionally, they can charge for services such as fulfilling a brand’s online orders or selling advertising, such as sponsored search results for a seller’s products.
Target does not offer delivery, instead relying on Target Plus sellers to store, package and ship its own merchandise.
Walmart, in particular, has stepped up its market efforts in an attempt to close the huge gap with Amazon and its dominant e-commerce platform. It has been recruiting sellers and offering new services, such as the ability to ship large items like patio furniture or canoes. Walmart CEO Doug McMillon said on the company’s earnings call in mid-May that the number of sellers in Walmart’s U.S. market grew 36% in the first quarter and currently has more than 420 million unique items.
Other marketplaces such as TikTok Shop and Temu are also growing rapidly.
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