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Retail Channels
01 March
Target plans to expand retail media, delivery hubs in 2023
With same-day services accounting for half of Target's digital sales, the retailer is adding drive-up returns.

Photo by Daniel ODonnell on Unsplash
Following the pandemic ecommerce boom, Target is a more digitally-oriented business. Yet the retailer is keeping stores at the center of its overall strategy.
In 2023, Target's growth plans involve boosting retail media, as well as delivery capabilities through new supply chain hubs, executives said on an earnings call this week. But the retailer continues to see stores as the center of the operations that move goods to customers, with the vast majority of orders being routed through the brick-and-mortar locations.
Target’s digital business nearly tripled in size over the last three years, as the retailer was among the big winners of the pandemic-era combination of demand for goods and increased digital adoption. With the return to in-person shopping, annual growth of digital comp sales slowed down to 1.5% for the 12 months ended January 2023, from 20.8% in 2021. Yet Target isn’t pulling back on expansion to existing digital capabilities and the introduction of new services that became a hallmark of the pandemic.
On the call, executives outlined a few of the ways the retailer is investing in the shopping experience and logistics:
Digital experience: Retail media and loyalty
For Target, digital sales now represent 19% of the business.
This is the result of concerted expansion over the last several years. More customers shifted to digital during the pandemic, and Target built up ecommerce capabilities to serve them.
“A strong digital shopping experience is every bit as important as the one we create in our stores,” said Chief Growth Officer Christina Hennington. “So, we've been investing to ensure that the experience is seamless across every channel, regardless of how our guests shop.”
Target has made upgrades to the digital shopping experience, boosting discovery capabilities as customers both search and browsing for new products. It is using data and insights from consumers to provide personalized content such as customized homepages and improved search.
This is powered by a group of key services within Target that are designed to be “greater than the sum of the parts,” Hennington said.
Target operates retail media through the company Roundel. The advertising business has grown 60% over the last two years, executives said. But boosting bookings isn't the only goal. The data made available through media is being harnessed to create a better shopping experience.
“To us, Roundel is more than a digital advertising platform or another revenue source on the P&L,” Hennington said. “The goal is for our guests to have a tailored, relevant experience while helping our vendors reach the guests who are most likely to be interested in their products. Said simply, Roundel makes us better merchants, more consistently serving our guests with the products they want. This is why our approach to digital advertising looks different than others.”
Target’s loyalty program, called Target Circle, is another key driver of the digital experience. It has more than 100 million members, and served three times more personalized offers in 2022 than the year prior. Members of the program spent three times more on average over the holiday season, as well.
Like Roundel, the data and insights from Target Circle are also being put to work to help the retailer improve personalization. This shows up not only in the offers through the program, but also homepages and search noted above.
“Roundel makes for a more deeply engaged guests and partners,” said Target CEO Brian Cornell. “And because it gives us a better understanding of our guests' preferences, it makes us an even better and more profitable retailer. So, we intend to place additional emphasis and advancement toward Circle and Roundel in 2023 given the growth potential they'll unlock."
Same-day services
For Target, the store and ecommerce are operationally linked. That’s most evident in the company’s approach to fulfillment. Following a “stores as hubs” strategy, Cornell said 95% of Target orders – whether digital or in-store – are fulfilled by stores.
So the services that the retailer creates to improve the digital experience have space at the store.
Target had some news on this front Wednesday: It is now offering drive-up returns, enabling guests to drop off an item they want to return, just as they would pick up a purchase. The service started as a pilot, and is now going into wide use.
“Not only is this a huge win for our guests who can now do even more drive-up, but it brings more efficiency to our returns process with more resale opportunities and fewer expenses for mail and returns,” said COO John Mulligan. “We're combining the strength of our digital self-service returns process with our industry-leading drive-up experience to meet our guests where they are.”
It underscores the importance of same-day services for Target, which provide customers with the ability to order online and receive an item later that day. These services grew 7% in 2022, and now represent over half of digital sales. They account for 10% of Target’s total sales. Along with curbside, Target also offers same-day delivery through its company Shipt, as well as in-store pickup.
Behind the scenes, Target is also making improvements designed to bring down the cost of packing and delivering digital orders. The average fulfillment cost per unit decreased 40% over the past four years, even as same-day services grew.
Target is expanding its supply chain network beyond stores to realize new efficiency. Earlier this month, it announced plans to invest $100 million to build new sortation centers, which are key to two-day and same-day shipping. It currently has nine such centers, and is planning to have 15 in place by 2026.
It’s a move to invest in future growth that will likely lead to more cities realizing faster service.
“If you look forward..we think there's hundreds of million dollars to continue to unlock with our investment in sortation centers,” said Mike O’Neill, Target’s SVP of financial planning and analysis. “That's a capability that's been our on roadmap for a few years now, but requires scale and density at the market level to unlock, and given the growth over the last three years, we now have that. And so, we think there's opportunity in dozens of metro markets.”
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Operations
16 March
These drones are pinpointing lost inventory in warehouse stacks
Gather AI is deploying drones to help improve accuracy and speed within logistics operations.
(Photo via Gather AI)
Think of drones being used in ecommerce, and delivery probably comes to mind first. After all, Jeff Bezos’ famed 60 Minutes appearance in 2013 left a lasting vision of flying goods.
A decade later, a startup is showing that the last mile isn’t the only part of ecommerce logistics where autonomous aerial vehicles can make an impact.
Gather AI is deploying drones inside warehouses to help companies improve the accuracy of inventory counts, free up humans from repetitive labor and even locate inventory items that managers lost in the stacks. This week, the Pittsburgh-based company was named to the Retail Tech 100 from CB Insights, adding to a number of milestones over the last several years.
Founded out of Carnegie Mellon University’s famed robotics program by a team that was funded by DARPA to develop the first autonomous helicopter, Gather AI is applying the data collection capabilities of drones to inventory monitoring and asset gathering. During PhD work at CMU, CEO Sankalp Arora pursued a question at the center of how autonomous systems might interact with surroundings: How do you make drones curious?
“They were curious about landing zones, wires, openings in buildings and moving assets because my work was funded by the Department of Defense,” Arora said. “Now, my drones are curious about barcodes, boxes, racking and labels.”
Gather AI's drones are being used across multiple verticals of commerce, such as third-party logistics, retail distribution, manufacturing and food & beverage. Ahead of the company’s commercial launch in 2021, ecommerce emerged as a particular area that was rife with problems to solve. As fulfillment centers were getting bigger, the time required for humans with clipboards to count inventory only got longer. Additionally, the logistics space faced heavy labor attrition rates and even shortages, especially in the midst of the pandemic ecommerce boom.
“The warehouses were struggling to keep up,” Arora said. “Currently, our solution provides real-time inventory monitoring for those customers in warehouses nine to 15 times faster than current operations, and it is all visible and traceable, in real-time, with live photos.”
A drone flying in a warehouse. (Courtesy photo)
The drones fly between standing racks, using technology including robotics, computer vision and deep learning alongside cameras to map environments and collect data from the shelves. They run through an iPad, which provides monitoring and dashboards to review data. In one unique challenge among many that the company had to solve, there is no access to WiFi inside warehouses due to the metal construction, so the iPad and drones are connected.
The advancement of drones is an intriguing development for technologists, but for the people who run logistics operations, the question of their utility ultimately comes down to how it will help their business.
In some cases, these drones have been able to locate items after humans lost track of them. The company found 25,000 lost pallets for customers in 2022.
“It's misplaced inventory. It's not where it's supposed to be. It's somewhere in the warehouse. And as a result, if you get an order for that inventory, you don't get to pick it because you don't know where it is,” Arora said. “Now, we've found those and know exactly where they are, [so] they can fix their warehouse management system and start picking.”
That’s just one of the ways that the company said that drones improve inventory. Gather AI identified the following uses for warehouse drones, with stats from customers:
- Cycle count frequency: Full inventory collection time was reduced from 90 days to 2.5 days.
- Inventory accuracy: WMS error rate decreased from 11% to 3% in 3 months.
- Travel times: $250K-$350K was saved by improving putaway efficiency.
- Labor efficiency: 15x pallets were scanned per hour.
- Sales: 2x sales in one year.
To fuel growth, Gather AI raised $17.5 million to date from investors, including a $10 million Series A in 2021, and now has 30 employees. It is looking to continue to grow not only its customer base, but the number of facilities it is flying through for those current clients. Each time the company started with a company in one facility, it has added others from that same company. Now, it is expanding capabilities to expand visibility and traceability through the warehouses in order to function as a complete network.
With customer deployments and results to report, Gather AI will be heading to Promat 2023 and the IWLA Convention in March.
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