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Target makes digital investments in ads, fulfillment

The retailer is investing up to $5 billion to scale across operations.

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Coming off a surge of growth in the pandemic, Target is making an investment of up to $5 billion to improve its experiences and scale operations. This will include digital upgrades and fulfillment capabilities that will improve the retailer’s ecommerce operations.

Among digital upgrades, Target said it will expand Roundel, a service that optimizes advertising placement on Target.com. The media investment comes on the heels of announcements by Amazon and Walmart that revealed massive ad businesses worth billions of dollars. The company said Roundel drove more than $1 billion in value in 2021, but it's not clear whether that means overall revenue is at that level.

Target is also looking to expand its same-day fulfillment services. These have grown 400% since 2019, which accounts for half of the company’s $13 billion digital growth. Target will be expanding its sortation center model, which provides next-day local delivery in specific geographic areas, beyond Minneapolis. It is planning facilities in Dallas, Houston, Austin, Atlanta and Philadelphia, followed by five more cities to be announced at a later date.

This complements a strategy of positioning the big box locations for both in-person retail and ecommerce distribution hubs as online shopping increases. Target executives said 95% of orders were fulfilled in its stores in the fourth quarter, whether it was through an IRL sale or digital order.

When it comes to Target's growing ecommerce business, the stores serve as both order fulfillment and pickup locations. With nearly 2,000 stores, Target already has locally-positioned hubs to serve customers close to home. Now they will be complemented by more facilities enabling local-level delivery.

The growth announcements came as Target reported $106 billion in revenue for 2021, growing 35% over the two years of the pandemic-driven demand for consumer goods.

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