Target Corp. is testing a direct-home shipping model that would ship products directly from factories to homes, a model popularised by speedily expanding Chinese e-commerce companies Temu and SHEIN.
The pilot, which is still in its nascent stage, is designed to increase Target’s value-priced product portfolio, which includes categories such as apparel, home decor, and other non-food items. Individuals familiar with the test indicated the pilot could enable the retailer to price more competitively.
The retailer is coming under increasing pressure to reassert itself after a run of weak sales, declining store traffic, and inventory blunders.
Historically, US retailers have shipped online orders by sending products through distribution hubs to make the final delivery. By skipping these warehouses and sending goods directly from factories, Target aims to simplify operations and provide cheaper prices—a welcome option for price-sensitive shoppers.
Tightening up of the US government’s de minimis import regulation—which had been used to permit foreign retailers to send low-priced items (below US $ 800) without paying duty—has already taken some of the starch out of Temu and SHEIN. Any additional policy changes could have similar effects on American retailers testing out direct import models.
As inflation-fatigued consumers have adapted to their new spending habits by reducing discretionary expenditure, such as clothing, toys, and home furnishings—core categories for Target—the retailer is looking at new opportunities to drive growth again. Tariffs and consumer outcry over social causes have compounded the headwinds.
Target cut its full-year sales forecast in May after it reported smaller-than-expected quarterly sales. Executives confessed that the brand was missing out on crucial areas, saying that although marquee events and limited-edition collaborations continue to draw customers, the company is finding it difficult to maintain steady daily traffic.
To meet these challenges, Target has sped up its product development timeline and redoubled its value-driven initiatives. The direct-from-factory pilot is just one of a number of steps aimed at honing its competitive advantage over its competitors such as Walmart, Amazon (which recently opened the price-conscious ‘Haul’ storefront), SHEIN, and Temu.
