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Target, Eschewing Amazon’s Open Marketplace, Is Making Strides In E-Commerce

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Today, eMarketer reported that Target has surpassed three competitors to become the eighth-largest retailer in the U.S. in terms of e-commerce sales, up from 11th place just one year ago. 

While Amazon and Walmart rely heavily on a marketplace model for e-commerce growth, Target appears to be focusing more on its first-party assortment, which can be fulfilled by stores.

Target's e-commerce marketplace (known as Target+ or Target Plus) assortment is highly curated, as opposed to Walmart and certainly to Amazon. Amazon in particular has an open-door policy for new sellers. It’s straightforward to set up a new Seller account and start listing products almost immediately. Walmart has some additional screening requirements to validate the capabilities of new sellers. But Target is on a whole new level: Brands can only start selling on the marketplace if they are invited to do so. And those invites are definitely exclusive. The invite-only marketplace started with 30 merchants, and six months later has grown to just 60 merchants and 115,000 products as of the end of 2019, according to Marketplace Pulse data

The number of sellers is a good, but not perfect, proxy for overall assortment size. When analyzed at this level, the difference between the three marketplaces is stark:  

  • 60 active sellers on Target+
  • 36,754 sellers on Walmart.com
  • 1,010,695 active sellers on Amazon.com

(These figures are from Marketplace Pulse.)

Target+ exclusivity could prevent Amazon’s current challenges

The tiny assortment of Target+ could be key to the retailer’s strategy, however. 

Rick Gomez, chief digital officer at Target, said last year, “This is intended to be a very curated and select group of products and brands. … We are reaching out to the brands we want.”

In this way, Target can avoid some of the negative consequences of Amazon’s burgeoning marketplace, chiefly counterfeit products, gray-market inventory sold by third parties which creates headaches for brand owners, and fake product reviews. Amazon shoppers also face an avalanche of brandless products when searching across many product categories like bluetooth headphones, pajamas, and fish oil supplements. (For further reading, see this great New York Times piece.) While you’d imagine that the overabundance of options might cause many shoppers to abandon their searches, Amazon continues to power on—acquiring more market share every year. 

Target+ could also attract the same brands who have shunned Amazon in recent years due to concerns with counterfeiting and unauthorized resellers.  

EMarketer also forecasts that Target will inch past Costco this year, with only $10 million in e-commerce sales separating the two companies.

Target’s first-party assortment is critical

“At a time when brick-and-mortar stores are struggling to keep up with the fast-changing retail landscape, Target seems to have hit the bullseye,” eMarketer forecasting analyst Cindy Liu said. “Store renovations and expanding same-day fulfillment options, such as in-store pickup, drive-up and delivery with Shipt, are paying off. Target has found a way to use its stores to fulfill online orders while keeping up with customer demands for convenience and speed.”

Perhaps the Target+ marketplace will pick up steam in the future, as a low-capital way for Target to expand its assortment. But given its apparent success of integrating stores into the online experience, the marketplace may not be a key feature of Target’s e-commerce strategy. 

Time will tell which strategy—infinite options from third parties or curated first-party assortment—ultimately wins the hearts and wallets of shoppers. 

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