Target announced to invest of $100 million in constructing additional supply chain hubs, called sortation centers, to enhance efficiency and decrease the expenses of delivering online orders.
The Company aims to have a minimum of 15 sortation centers in operation by the end of January 2026, with nine already operational after piloting the idea in Minneapolis.
Furthermore, the expansion will lead to an increase in Target’s workforce, with over 100 individuals typically employed at each sortation center.
Despite experiencing a surge in inventory and a visible decline in sales, the Company is confident in the potential for e-commerce expansion. Target has recently revised its holiday–quarter projections downwards and intends to reduce expenses by up to $3 billion within the next three years.
The Company has observed a decrease in the growth rate of e-commerce sales, attributable in part to the significant surge experienced at the beginning of the pandemic, resulting in difficult year-over-year comparisons.
During the most recently reported quarter, which concluded in late October, digital sales rose by less than 1%. In comparison, during the same period in the previous year, e-commerce sales grew by nearly 29%.
Target’s recent announcement reveals that since the launch of its first sortation center in 2020, it has witnessed a 150% growth in next-day deliveries. Additionally, the Company anticipates its sortation centers will deliver approximately 50 million packages this year, nearly twice as many as in 2022.
In the previous year, Target had communicated its intention to double its investments in sortation centers, with CEO Brian Cornell highlighting that the company’s digital business had attracted 90 million new customers to its retail stores and online platform over the previous three years.
The Company’s latest store designs are intended to provide a backroom fulfillment area that is five times larger than in previous stores of similar size. The new layout is expected to assist the company in fulfilling the majority of its digital orders through its physical stores.