Jamie Spencer
Target plans to accelerate growth by expanding its third-party marketplace, media network, and same-day delivery services, aiming to drive more than $15 billion in revenue growth over the next five years, the company announced Tuesday at an investor meeting in New York City.
Target’s Strategy Amid Competitive Challenges
As Target struggles to regain momentum against rivals like Walmart and Amazon, it is focusing on new strategies to enhance sales and revitalize its brand. The company’s stock fell more than 5% on Tuesday after it reported a “meaningful” drop in expected profits for the current quarter due to soft February sales. Target shares are down nearly 11% this year.
In an effort to reclaim its appeal, Target is enhancing store experiences, launching new products, and improving its supply chain efficiency.
Growing Target’s Third-Party Marketplace
CEO Brian Cornell highlighted plans to expand the company’s third-party marketplace, following Walmart’s strategy of leveraging third-party sellers to drive revenue. Target aims to grow digital marketplace sales from $1 billion in 2024 to over $5 billion by 2030.
Unlike Walmart and Amazon, Target is taking a selective approach to third-party sellers, emphasizing well-known brands rather than a broad reseller model. “Rather than opening the doors to any seller, we’re focused on building relevance and trust by working with partners that complement our assortment,” said Chief Commercial Officer Rick Gomez.
Household brands such as Peloton, Daily Harvest, and Honest Baby Clothing have already joined Target’s marketplace, reinforcing the company’s focus on quality over quantity.
Expanding Target’s Media Business
Target is also doubling the size of its in-house media company, Roundel, by 2030. Last year, Roundel generated over $2 billion in value. This strategy mirrors Walmart’s push into advertising with its Walmart Connect platform, a growing revenue source for the retailer.
Improving Core Retail Operations
Beyond new business ventures, Target is refocusing on retail fundamentals, including fresher products, store renovations, and better inventory management.
“There are some forever truths in retail. One of them is, retail is about product, and the best product at the best value wins,” said Chief Operating Officer Michael Fiddelke. “And when you can find that fantastic combination of newness, style, and value at Target, we win.”
Target is expanding its product selection in high-margin categories like gaming, sports, and home goods. Additionally, the retailer is boosting its private-label brands, launching 600 new food and beverage items under Good & Gather and Favorite Day, and revamping its pet supplies line, Boots & Barkey.
Investments in Supply Chain and Technology
Target is investing $4 billion to $5 billion in stores, supply chain upgrades, and technology improvements to reduce out-of-stock issues and speed up delivery. The company is modernizing its inventory management system with AI-powered technology solutions to enhance efficiency.
“We know there’s no Tarzhay magic if you can’t find the item you were looking for because we were out of stock or we didn’t delight you in-store,” said Fiddelke.
Target is also optimizing its apparel supply chain to shorten design and production cycles, helping it better compete with fast-fashion e-tailers like Shein and Temu.
Store Expansion and Remodels
Target plans to open 20 new stores, with a focus on large-format locations, and invest in remodeling existing stores to enhance the shopping experience.
A Multi-Faceted Growth Plan
With a comprehensive strategy encompassing marketplace expansion, digital advertising, retail innovation, and supply chain improvements, Target aims to reposition itself for long-term success. Whether these efforts will be enough to counteract declining discretionary sales remains to be seen, but the retailer is making significant moves to regain its competitive edge.
