The strategy: Target is rethinking the ecommerce fulfillment strategy it has deployed since 2017 to ease operational pressures.

• Rather than rely on its entire store fleet to fulfill the vast majority of ecommerce orders—97.7% in Q2—it has stopped fulfilling online orders entirely from some stores (all stores still handle curbside and in-store pickup orders).
• That approach concentrates online order fulfillment at fewer stores.
• After testing the strategy in Chicago, the company currently had the plan in place in 36 markets as of the end of October, with plans to expand to more areas next year, per CNBC.

Why it matters: Target’s in-store fulfillment strategy enabled the retailer to triple its ecommerce sales between the fiscal year that ended in early 2020 and the year that ended in early 2025 without the major expense of building out a large network of distribution centers. But it came at a cost to the in-store experience: Store associates were stretched thin and key items were unavailable.

With Target reporting its 11th straight quarter of flat or falling sales in Q2, the retailer is right to look for ways to streamline its online operations.

• For example, delivery trucks make fewer stops, saving transportation time and costs, and stores that pack delivery boxes can better plan their staffing.
• The change has also enabled Target to offer a longer window for next-day delivery orders. In Chicago, for example, the cutoff time for next-day delivery shifted from noon to 6pm.
• Most notably, Target told CNBC the change has improved the in-store experience. Stores that no longer fulfill online orders have seen out-of-stocks fall, in-store sales have risen, and surveys of shoppers on store cleanliness and the quality of employee interactions showed 10% improvement. However, it still has plenty of room for improvement since the company underperformed Walmart and other rivals on the availability of items, per HundredX data cited by CNBC.

Our take: While it’s encouraging that Target is taking steps to improve online fulfillment efficiency, it still has work to do to steady the ship. At a time when consumers prioritize speed, convenience, and selection, Target all too often falls short.

• It recently expanded next-day delivery service to 35 US markets—a promising but limited move compared with the broader coverage Walmart and Amazon offer. Walmart provides next-day delivery in select cities for some marketplace orders fulfilled by third-party sellers, while Amazon aims to expand same- or next-day delivery to more than 4,000 smaller communities by year’s end.
• But Target’s bigger challenge is its heavy reliance on discretionary purchases at a time when consumers are shifting toward essentials. To stay competitive, it must sharpen its value proposition or risk continued market share losses.