Can Target compete with Amazon when it comes to paid memberships? That’s the key question following this week’s announcement of the launch of Target Circle 360, an extension of the company’s existing membership options. On April 7, the big-box retailer will reintroduce its loyalty membership program, Target Circle, with a suite of memberships that build on each other, including the continuation of Target Circle, a free-to-join membership, Target Circle Card (formerly Target RedCard),
d), a retail payment card options and Target Circle 360.
Target Circle 360 is a subscription-based program that comes at an annual cost of $99 and will offer members unlimited free same-day delivery for orders of $35 and up, along with free two-day shipping. It rivals similar offerings from competitors like Walmart and Amazon.
Can Target Circle 360 compete with other paid subscription-based programs?
Steve Dennis, president and founder of SageBerry Consulting, which provides strategic advisory services to the retail, fashion, and luxury industries, told Inside Retail that Target’s latest move might be a bit too late to be effective.
“Target is engaging in what I call ‘innovating to parity’, in other words, they’re doing something new but not something that is going to create any meaningful competitive advantage as their offering is not meaningfully different, and they are playing catch-up,” Dennis said.
“Even if Target had moved earlier and faster, they’re not likely to have nearly the success of Amazon or Walmart given the comparative narrowness of their product offering in high-frequency items,” he continued.
Target Circle 360 taps into the growing trend of paid membership programs, Dennis said, “which are gaining in popularity given retailer’s desire for more customer data and focus on customer lock-in, while at the same time needing to offset some of their higher servicing costs”.
Neil Saunders, managing director and retail analyst at GlobalData, echoed Dennis’ thoughts.
“Target’s new membership program is more of an exercise in tidying up existing programs than creating something new and truly innovative,” he said.
“It is understandable why Target wants to have a paid program as this provides both an additional revenue stream and allows Target more data and insights which it can use in its retail media business. However, currently conceived, the program does not seem all that compelling and doesn’t stack up very well against rivals like Walmart and particularly Amazon.”
Saunders warned that the Target Circle 360 program “really needs to deepen the value consumers get if it wants to compete with rivals, especially at a time when most households have subscription fatigue”.
Target’s long-term plans for growth
The announcement of Target Circle 360 marks just one of the ways Target is working to update its image and increase consumer awareness, a plan that seems to be effective, according to recent numbers.
Despite revenue decreasing last year, due to lower comparable sales, Target’s annual net earnings almost doubled in FY23.
Net earnings increased by 48.8 per cent year on year to $4.14 billion, while revenue fell by 1.6 per cent to $107.4 billion. Sales slid by 1.7 per cent to $105.8 billion, reflecting a 3.7 per cent decline in comparable sales.
“The revenue weakness reflects the broader economic trend of Americans cutting back on non-essential spending which has hit Target, with its discretionary offer, particularly hard,” Saunders said.
Despite this, the company has announced that it will be building over 300 new stores and will be investing to enhance the vast majority of its nearly 2,000 stores, with projects ranging from full remodels to adding Ulta Beauty locations, over the next 10 years.
Additionally, Target will continue enhancing supply chain operations for increased efficiency, speed, and capacity, including next-day delivery through sortation centers, and using artificial intelligence to drive improved inventory efficiency and forecasting across its network.
Furthermore, the company plans to launch and expand several owned brands in 2024 to offer a wider range of options across categories, products and prices, including:
Dealworthy
A new brand designed to give consumers great value on nearly 400 everyday basics across apparel and accessories, beauty and essentials, electronics and home, starting under $1 with most items under $10.
up&up
Target’s relaunched essentials brand, the company’s largest and most expansive own brand, with new formulations, branding and packaging, plus hundreds of new everyday items in personal care, health, pet care, storage, and more to round out the essentials assortment.
Gigglescape
Target’s newest children’s brand, with items like plush toys and books priced under $20, is designed to be “truly adorable, high quality and affordable, with details that inspire creative play and bring joy to kids, parents and gift givers,” said Jill Sando, Target’s executive vice president and chief merchandising officer of apparel and accessories, home and hardlines.
In a public release, Brian Cornell, Target’s chair and chief executive officer, stated, “We’re making strategic investments that expand on our core strengths, further elevate our guest experience, and deepen our connection to both current and new guests. Most importantly, these plans provide fuel for our next era of growth.”