A Target store in New York, USA, on Monday, March 4, 2024.
Shelby Knowles | Bloomberg | Getty Images
Goal announced Tuesday that it will launch a paid membership program next month that follows the rules of its competitors Amazon And Walmart.
The Target Circle 360 subscription-based program launches in early April and costs $99 per year. Target is offering a discounted price of $49 per year as part of a promotion from launch through May 18. The company then continues to offer the lower price to its credit card holders. The program includes unlimited free same-day delivery on orders over $35 in just one hour with no delivery fees and two free same-day deliveries, along with other perks.
Target is turning to the new revenue stream to boost weaker sales. Fiscal fourth-quarter earnings and sales reported Tuesday beat Wall Street expectations, but comparable sales fell for three straight quarters.
The move also sees the company following in the footsteps of retailers who have turned membership fees into a moneymaker and revenue driver. It’s unclear how many people might sign up for the paid tier. The free Target Circle has more than 100 million members, according to the company.
In an interview with CNBC, CEO Brian Cornell said the paid membership program will encourage customers to place more online orders at Target. He said the company’s market research has shown that customers value home delivery, even as they use curbside pickup more often.
“There’s a guest who wants the ease and convenience of having something delivered directly to their home – in some cases within an hour – and we just want to raise awareness that we can do that,” he said.
Home deliveries are handled by Shipt, a membership-based company that Target acquired in 2017 for $550 million. Similar to other gig economy companies like DoorDash, the company relies on independent contractors to pick up purchases and deliver them to customers’ front doors.
By eliminating delivery fees, Target could use the membership program to boost its e-commerce business. Digital sales have declined every quarter over the past year, falling 0.7% year-over-year in the fiscal fourth quarter.
In addition to launching its paid membership program, Target is taking other steps to keep customers coming back. The company is relaunching its free Target Circle loyalty program and credit card, Sylvester said. Target Circle, launched in 2019, is becoming more user-friendly and personalized. For example, members who join the free program automatically receive discounts instead of having to browse offers in the app, she said.
Target’s Circle card offers an additional 5% off customers’ purchases, includes free two-day shipping and offers additional time for returns. The card was previously known as the Target RedCard.
Sylvester said the company is exploring a wide range of potential benefits to enhance its membership offering and increase subscriber numbers.
Target is borrowing from its competitors’ playbook for a reason: Memberships have boosted business for retailers like Amazon.
Amazon launched its Prime program in 2005 with perks like free two-day delivery and streaming popular movies and original television shows. It costs $139 per year or $14.99 per month, with the video-only membership option at $8.99 per month.
Amazon doesn’t often share the total number of Prime members. The company had more than 200 million Prime members worldwide as of early 2021, according to a recent letter to shareholders from former CEO Jeff Bezos.
Walmart launched its program, called Walmart+, in 2020. It costs $98 per year or $12.95 per month and offers perks like free shipping, free grocery deliveries on orders of at least $35, and gas discounts.
Walmart hasn’t said how many people subscribe to Walmart+, but its CFO John David Rainey said on the company’s earnings call in February that its membership continues to grow at a double-digit rate.
Walmart CEO Doug McMillon told investors on the company’s earnings call in February that Walmart+ members spend nearly twice as much as non-members and buy more over the course of a year.
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2024-03-05 19:36:44
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