Target’s recent $550 million acquisition of grocerydelivery company Shipt was a bold play to compete with both Amazon and Walmart in the same-day delivery game by leveraging the network of more than 20,000 personal shoppers Shipt uses to select and deliver items to customers. But will people power be enough to make up for the weakness of having relatively few of the warehouses and distribution centers needed to keep up with e-commerce demand?
Thanks to Shipt, Target says it expects half its roughly 1,800 stores to offer same-day delivery of groceries and certain other products early this year, with a plan to expand the selection of available products next year.
Amazon already offers two-hour delivery to members of its Prime program in 32 cities, while Walmart offers two-day shipping, though that timeline speeds up to same-day delivery in New York City. As Target is doing now, both massive retailers have beefed up their services partly by acquiring other companies, such as Amazon’s acquisition of Whole Foods and Walmart’s acquisition of Jet.com and Parcel.
But Target has only about 40 distribution centers to facilitate its delivery system – significantly less than either Walmart or Amazon.
Walmart has over four times more distribution centers and warehouse facilities than Target, while Amazon has eight times more, according to supply chain and logistics consulting company MWPVL. Its data show that Target has less than half the square footage of Walmart and Amazon when it comes to storage and distribution.
Why is that important?
E-commerce and industrial real estate are closely entwined. While the rise of e-commerce has contributed to the retail segment’s nosedive, it has benefited light industrial real estate, specifically the warehouses and distribution centers e-tailers need so they can have the right products on hand when orders come in.