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Target is set to open its 11th sortation center this week, in Detroit, Michigan, according to an updated fact sheet from the retailer.
Sortation centers are where orders shipped from Target stores are sorted, batched, and routed to your front door by third-party delivery partner Shipt. In 2023, the company announced a $100 million investment to build 15+ such facilities by 2026, with the goal of expanding its next-day delivery capabilities.
- These facilities operate downstream of stores, in keeping with Target’s “stores as hubs” strategy, which uses brick-and-mortar stores to fulfill delivery orders. Stores currently fulfill “more than 96% of total sales,” according to the company’s website.
Beyond stores: Yet Target’s sortation centers are effectively moving the fulfillment process outside stores. In fact, per the fact sheet, that’s their primary benefit.
“By removing the sorting and packing process from our store backrooms, we save valuable time and space for our store teams to fulfill additional orders and serve guests,” the company noted. “And because our sortation center technology presorts and arranges packages for easy pickup, it reduces processing time for our delivery partners.”
- Target said sortation centers have increased the number of next-day deliveries by more than 150%.
COO and CFO Michael Fiddelke told shareholders last week that these facilities “processed 19% more packages than a year ago,” and that their deliveries arrived more than a day faster than the company’s network average, at 20% lower cost. He added that the new facility in Detroit will serve more than 3 million customers and process up to 60,000 packages a day by 2028.
He also hinted that soon, sortation centers will be shipping products between themselves: “Our recently opened sort center in Chicago will be feeding the Detroit sortation center, increasing the number of packages eligible for next-day delivery in that market.”
Kirthi Kalyanam, professor and executive director of the Retail Management Institute at Santa Clara University, said Target’s build-out of sortation centers marks an evolution of the store fulfillment model rather than a backing away.
“We are getting more sophisticated and saying we can rely on the stores for inventory, but not necessarily do we have to deliver and fulfill out of the store,” he told Retail Brew.