the goal has changed to Shopify Add new and trendy brands to your website.
The Minneapolis-based discount store said that starting Monday, businesses that partner with Shopify can apply to join Target Plus, the company’s third-party marketplace. Shopify’s customers include small or emerging brands that use the e-commerce platform to build and run their websites.
Target and Shopify did not disclose financial terms or the length of the agreement.
In an interview with CNBC, Target’s chief customer experience officer, Carla Sylvester, said Shopify helps retailers discover popular products and quickly deliver them to Target’s online shoppers. She said Target plans to bring some of the popular products discovered through its Shopify deals to its stores.
Target’s Marketplace has “glowed” and become “a catalyst for the whole business,” Mr. Sylvester said. As the company expands its online assortment and adds eye-catching products, customers are visiting the company’s website more frequently and are inclined to buy from both Marketplace merchants and Target’s own brands, he added.
Big box stores are trying to regain sales growth as consumers cut back on discretionary purchases, and discounters are falling behind their grocery store rivals. WalmartTarget has seen its same-store sales decline for four consecutive quarters and its total sales decline in three of the past four quarters.
The company has also struggled to grow its e-commerce business: Target’s digital sales rose 1.4% in the first quarter, the first increase in more than a year.
Company executives said in May that sales growth is expected to return in the second quarter, but that’s due in part to weaker performance compared to 2018. For the full year, the company expects same-store sales to be flat to up 2% and adjusted earnings per share to be $8.60 to $9.60.
Target’s stock has underperformed the broader stock market. As of Friday’s close, the company’s shares were up about 2% while the S&P 500 index was up about 15%. The stock price of $146.13 remains well below the high of $260 it hit during the pandemic.
Shopify might also need a boost: The company’s shares plummeted after its earnings report in May and are down about 17% so far this year.
Target Plus’s revenue and number of sellers are a fraction of other third-party marketplaces. Unlike Amazon, Walmart, eBay and others, Target only allows brands to join by invitation. Target says it has more than 1,200 sellers. E-commerce research tracker Marketplace Pulse estimates that Amazon has about 2 million sellers and Walmart has about 135,000.
Through Marketplace, Target’s website sells luxury items like the UnBrush hairbrush that went viral on TikTok, as well as sunglasses from Ray-Ban and Coach. The company offers more than 2 million products from the following brands: CrocsRuggable, Timberland, etc. The assortment spans many categories including apparel, sporting goods, home decor, and more.
Target said its Marketplace is gaining momentum: The company said the number of merchants and products has more than doubled over the past year.
The company doesn’t separate out the revenue it makes through its third-party marketplace, instead lumping it in with “other revenue” in its financial reports, along with credit card profit sharing and revenue from its advertising business, Roundel. This other revenue totaled $388 million, less than 2% of the $24.53 billion in revenue it generated in the most recent quarter ended May 4.
But Sylvester said Target Plus is “one of the fastest growing parts of Target’s business.”
Brands that join Target Plus also become potential customers for Roundell, whose advertising business grew more than 20 percent in the most recent quarter, though Sylvester declined to say how much of that came from ads purchased by Target Plus merchants.
Third-party marketplaces have become a hot area of ​​retail because they tend to generate higher profits. Instead of purchasing goods from suppliers, retailers rely on sellers who typically store and own the inventory. These sellers also bear the financial risk if customers don’t want the product or if they have to mark down the price.
Retailers typically take a percentage of a merchant’s sales and may also charge a fee for services such as fulfilling online orders for the brand or selling advertising, such as sponsored search results, for the merchant’s products.
Target does not offer fulfillment services, instead relying on Target Plus merchants to store, pack and ship products.
Walmart, in particular, has been stepping up its marketplace efforts to close the gap between it and Amazon and its dominant e-commerce platform. The company is recruiting sellers and offering new services, such as the ability to ship bulky items like patio furniture and canoes. Sellers on Walmart’s U.S. marketplace grew 36% in the first quarter and now offer more than 420 million unique products, CEO Doug McMillon said on the company’s earnings call in mid-May.
Other marketplaces such as TikTok Shop and Temu are also growing rapidly.
