Target Explores Factory-Direct Shipping Model Used by Temu

Business of Fashion

6 hours ago

Target Corp. is testing the delivery of products directly to customers' homes from factories, said people familiar with the matter, an effort by the big-box retailer to launch a service similar to the Chinese e-commerce platforms Temu and Shein.
The company is seeking to broaden its range of low-cost offerings through the initiative, said the people, who asked not to be named because the test hasn't been announced. Products would primarily include apparel, household goods and other non-food items, according to the people, who added the effort is in the early stages.
A Target spokeswoman said the company is constantly testing new ways to deliver products and services.
'In all cases, we uphold the high quality, responsible sourcing and sustainability standards that Target is known for and that consumers expect from us,' she said.
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The Minneapolis-based retailer has struggled to revive sales growth in recent years and is looking for new avenues following choppy store traffic, soft demand and inventory missteps. Target shares are down 28 percent so far this year, while the S&P 500 Index has risen 3.6 percent, raising pressure on management to improve results.
Most online orders from Target and other US retailers get sent to warehouses before going to consumers via truck delivery. By shipping directly from production sites, Target can offer lower prices and potentially increase market share among discounters.
The X factor remains the US government's move to close the so-called de minimis exemption, which for years allowed Shein and Temu to capture market share by shipping orders of less than $800 to US customers duty free. The change has eroded performance at both companies, and could also impact direct-shipping efforts of Target and other retailers.
After years of price increases across the economy, shoppers are spending less on toys, clothes and other discretionary items — Target's core categories. Tariffs are creating new challenges, as are boycotts after the company pulled back on diversity initiatives earlier this year.
Target slashed its full-year sales forecast in May after missing Wall Street expectations for its last quarter. Target executives acknowledged then that they are not hitting the mark.
Major holidays and limited-time design collaborations are bringing shoppers into stores, but the company isn't seeing that momentum every day, executives said. To counter this, the retailer is sharpening its focus on low prices and new products. In recent months, Target has said it's speeding up product development.
Target's competition includes Temu, a unit of PDD Holdings Inc., Shein, Walmart Inc. and Amazon.com Inc., which started a low-cost online storefront called Haul that sells most items for under $20.
By Jaewon Kang
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