Target’s paid membership program has boosted same-day delivery growth
Target’s paid membership program, Target Circle 360, appears to be boosting the retailer’s same-day delivery services.
In April 2024, the Minneapolis-based retailer launched Target 360 in a bid to boost profits and growth. Since then, it has reported few details about the success of its membership program. However, since the launch of the program, it has reported year-over-year growth in “same-day delivery powered by Target Circle 360” — a number that keeps going up.
During its first-quarter earnings report, held on Wednesday, Target reported that this number was up 35% year over year, the highest percentage growth since the company started breaking that figure out last year. Same-day services are available to non-members as well for $9.99 per order, but Circle 360 members get access to complimentary same-day delivery as part of their membership.
This marks an increase of 15 percentage points since the third quarter last year, when Target began reporting same-day delivery growth through Circle 360. At that time, it was up about 20%.
The company has also said 13 million new members have joined Target Circle and Circle 360 since launching the paid membership last year, but it does not split the two out.
The program has a steep mountain to climb to compete with more built-out industry leaders Amazon Prime and Walmart+, but Target continues to try new initiatives to convince its shoppers to become subscribers and build out a flywheel of digital services.
Target launched Target Circle 360 last year to supplement its free Target Circle program and also help reach its long-term goal of growth and profitability. In addition to the same-day deliveries — which are free for orders over $35 — the $99-per-year or $10.99-per-month program offers early access to sales events like Target Circle Week, monthly free products or dollars toward future purchases, free two-day shipping, and extended return windows.
On May 19, the company introduced a new perk for the program: the removal of price markups from the 100-plus other retailers like Petco, CVS Pharmacy and Lowe’s available through Target subsidiary Shipt. Free same-day deliveries through Shipt were already available through Circle 360 but with additional fees.
“As you know, for items delivered same-day from Target, we’ve never marked up prices, and now we’re extending that policy for all other retailers on the platform,” Target chief commercial officer Rick Gomez said in the company’s latest earnings call. “Many membership programs provide access to only one retailer, and others offer deliveries from multiple retailers but charge additional fees.”
Melissa Minkow, global director of retail strategy for CI&T, described the Shipt benefit as a price and convenience play, but questioned whether it will be enough. “Target has long been on a mission to prove that it can beat Walmart’s prices, so these updates continue to take direct aim at that goal,” she told Modern Retail.
Some staple offerings of Amazon Prime and Walmart+, like free streaming subscriptions and gas discounts, are still missing from Target’s offering.
“The big challenge is that they’re up against two giants who have very robust offerings in paid membership,” said Sky Canaves, principal retail and e-commerce analyst for eMarketer. “The challenge for Target is: How do you then become the third membership that people are willing to pay for [from] a retailer?”
Canaves said she doesn’t think the Shipt announcement is enough to move the needle, especially as some of its more loyal customers may have become more critical of Target following its pullback of diversity, equity and inclusion policies. The company continues to struggle in sales, as well, disclosing this quarter that comp sales were down 3.8% year-over-year. Part of that was due to a decline in foot traffic, which was down 2.4%. Its average ticket was also down 1.4%.
“Particularly in this era where there are so many subscriptions, consumers get subscription fatigue,” she said. “If they’re not getting real value and real and regular value out of a membership program, they’re more likely to give it up as they scrutinize their budgets.”
Target still hopes the Shipt program will build loyalty by mirroring the experience of an in-person retail center.
“When we choose where to open physical stores, we’re intentional about selecting locations that are convenient for our guests and situated near other prominent retailers. This strategic placement not only increases visibility but also drives relevance and foot traffic by aligning our brand with familiar and complementary shopping destinations,” Target COO Michael Fiddelke said in the last earnings call. “This proximity, whether physical or virtual, enhances discovery, encourages cross-shopping, and builds affinity and relevance for the Target brand.”