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Target Gets a Marketplace and Shopify Merchants Get Distribution

Target store

For Target, the most immediate impact adding Shopify sellers to its third-party marketplace may be a lift in its online fortunes.

To that end, and as reported this week, Target will begin including select Shopify merchants on Target Plus, the retailer’s third-party digital marketplace. Target also is planning to offer some of these merchants’ products in its physical stores.

Shopify merchants in the United States can use Shopify’s Marketplace Connect app to apply to sell online on Target Plus and to sell and manage orders on that and other marketplaces, according to the release.

Target, for its part, is fashioning a broader online marketplace by integrating a marketplace populated by Spotify’s roughly two million merchants. The cross-pollination potential may be good for both firms, offering Shopify’s merchants new channels, including brick-and-mortar settings.

Integrating the Shopify merchants would give some momentum to Target’s online efforts. In the company’s latest earnings report, and in its 10-Q filed with the Securities and Exchange Commission (SEC), the firm detailed that although first quarter comparable sales declined 3.7%, digital comparable sales grew 1.4%. Same-day services grew nearly 9%, led by more than 13% growth in Drive Up offerings. Drive Up sales were $2 billion in the most recent quarter, up 30x versus pre-pandemic levels.  Digitally originated sales represented 18.3% of the total top line, up from 17.5% a year ago.

Emphasis on Target Plus

Target’s third-party eCommerce marketplace, known as Target Plus, has been cited by management as a critical component of the retailing giant’s strategy as its jockeys against Walmart, Amazon and other firms that are expanding their third-party reach.

During the most recent earnings call with analysts, Christina Hennington, executive vice president and chief growth officer, stated: “We’re …focused on growing relevance, particularly where there may be opportunities in our current on-line assortment. As we’ve shared previously, we think our digital marketplace, Target Plus, will play an outsized role in our growth in the quarters and years to come, even as we continue to prioritize the curation of both our assortment and digital partners on the platform. In the past year, we’ve more than doubled the number of partners and products hosted on Target Plus.”

That expansion is now bolstered with the Shopify announcement this week. As Hennington said during the same call, “digital [is] more than just a sales channel. It’s also the connective tissue across most of our transactions.”

Cross-Pollination Potential

As for cross-pollination, it’s important to note that by bringing at least some merchandise options from Shopify sellers into the actual stores — part of the evolution of the combined efforts — Target may also be able to spur some additional foot traffic or Drive Up activity.

Management has already noted some improvement in some categories of discretionary spending, notably in apparel, with performance improved by approximately four percentage points sequentially from the fourth quarter. Shopify’s SEC documents detail that in the most recent fiscal year, 54% of its sales came from North America, so having further reach via Target’s online and physical channels would prove beneficial.

The foundation for those cross-channel and cross-company efforts remains firmly in place. The PYMNTS Intelligence report, the “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar™ Shopper and What It Means for Merchants,” found that more than seven in 10 consumers prefer to visit stores at some point in their shopping journey.