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Target Tries to Answer Amazon and Wal-Mart's Shipping Dominance

By Daniel B. Kline – Updated May 9, 2017 at 9:54AM

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The retailer plans to expand a test of a new one-day shipping program, but it may not be enough to compete.

Target (TGT 0.53%) has become a distant third in the three-way race for digital customers between it, Amazon (AMZN -0.07%), and Wal-Mart (WMT 0.21%). Amazon remains the established leader offering everything from free two-day shipping to its Prime members, to one- or two-hour delivery in some markets. Wal-Mart has enhanced its position as the runner-up by being boldly aggressive under new digital boss Marc Lore. That has included dropping its $50 Prime knockoff ShippingPass in favor of offering free, two-day shipping to any consumer who orders over $35 worth of eligible items.

Target, like Wal-Mart, has been touting the ability for a consumer to order online and pickup in store or to return an online order at a physical store. What it lacked was a signature shipping promotion, an offer that's at least a little different from what its rivals are doing.

Now, in its home market of Minneapolis, the company is doing just that. Target has launched a pilot program where it's testing next-day delivery for certain home essentials.

Boxes roll on a conveyor belt at a Target shipping facility.

Target Restock will let consumers fill a box for next-day delivery at a set delivery price. Image source: Target.

What is Target doing?

While the program has only reached the stage of being tested by employees at Target headquarters, Target plans to test what it's calling Target Restock with consumers this summer in the Minneapolis area. the program offers a limited selection of items, what the company calls "essentials" for next-day delivery.

"We created Target Restock to save busy guests time, and make it easier than ever to get household essentials delivered quickly," the company said in a press release.

How will Target Restock work?

People who hold a Target REDcard, the chain's credit and debit loyalty card, living in the test area will be able visit a new, dedicated online shopping area where they can "access thousands of household essentials." Once inside the digital store, they will be able to order items, which, if he or she places the order by 1:30 p.m,, will be delivered to his or her home by the next business day.

Target has not released what each delivery will cost. Amazon offers free two-hour delivery in select markets to Prime members through its Prime Now program and charges $7.99 for one-hour delivery, also in limited markets. Wal-Mart, Target, and  Amazon all offer one-day shipping on many items for an added fee that varies based on what you are buying. In addition, Wal-Mart offers discounts on some orders if they are placed online and picked up in a store.

Will this work for Target?

While it's nice to see Target trying new things, Restock seems like a niche program at best. Amazon has made two-day shipping a sort of consumer standard, and in most cases, that's good enough, even on the items Target has deemed essential.

Instead of focusing on one-day delivery, Target would be better off finding a way to at least match, if not improve upon Wal-Mart's free two-day shipping on any eligible $35 order offer. Target currently offers free shipping at that dollar amount ordered, but it only promises delivery in 3-5 days.

It's easy to see why consumers might pay for the near-immediacy of one- or even two-hour delivery. It's less logical to see a place in the market for one-day delivery, assuming orders are placed by 1:30 p.m. Serving people who can wait one, but not two, days may prove to be perhaps too much of a niche audience for Target.

The company deserves credit for trying, and perhaps Restock will develop into something more useful. The idea as it currently stands, however, seems like an idea that may appeal to Target's core customer, but not one that will win it any Amazon or Wal-Mart loyalists.

Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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