Target Corp. is partnering with e-commerce specialist Shopify Inc. to expand its marketplace for third-party merchants, as the big-box retailer seeks to catch up with larger competitors Walmart Inc. and Amazon.com Inc.
The Minneapolis-based retailer said that vendors using Shopify’s e-commerce platform can now apply to sell their products on Target’s marketplace, Target Plus. Select Shopify clients will also be able to sell in Target stores.
Target shares gained 1.6% at 9:39 a.m. in New York trading, bringing the stock’s year-to-date gain to about 4%. Shopify, which has declined 16% this year, rose 0.7%.
The partnership, which is the first of its kind for Target Plus, will help broaden the marketplace’s assortment of merchandise and accelerate its growth, said Cara Sylvester, Target’s chief guest experience officer. Target and Shopify will share insights on trends — such as products that are being mentioned on social media — and react quickly to offer popular goods on the marketplace, she added.
Since launching its marketplace in 2019, Target has been selective with the products it offers there, in contrast with Amazon, which offers a vast array of goods. Target Plus operates on an invite-only basis for merchants and currently offers more than 2 million items through more than 1,200 sellers, according to the company.
In comparison, Amazon in 2022 said it had 2 million merchants selling on its platform. Walmart, which does not disclose the number of merchants, sells about 420 million items on its marketplace. Walmart and Amazon started their marketplace businesses in 2009 and 2000, respectively.
“We are not the everything store. We don’t aim to be,” said Sylvester, who oversees Target’s e-commerce, loyalty and marketing businesses.
Extra income
Marketplaces are an easy way for retailers to expand their range of merchandise and price points, while adding extra income via fees and advertising from merchants. Walmart, the world’s largest retailer, has touted its marketplace as one of the fastest-growing parts of the company. It’s been adding sellers and products while introducing new features.
Amazon uses its marketplace to expand its inventory of items without spending its own cash like a traditional retail business would. Independent businesses sold more than 60% of the items purchased on Amazon in the period ended March 30, paying the e-commerce giant commissions on each sale as well as fees for logistics and other services. Online marketplaces can also be launchpads for profitable advertising businesses, with merchants paying for prominent placement in front of shoppers.
Target more than doubled the number of sellers and products on its marketplace over the past year, with Sylvester saying it’s one of the fastest growing parts of the business.
The company plans to maintain its invite-only model and continue vetting sellers on the platform. Curating the selection — for example, allowing only one vendor to offer any given item — is a strategy that will let Target stand out, she said. It will also build trust with consumers by ensuring only quality items appear, she added.
Target’s partner, Shopify, makes software that helps vendors quickly set up online stores and process payments. The company says it works with millions of merchants in about 175 countries. Globally, shoppers will spend $282 billion this year on stores managed with Shopify software, according to analyst estimates compiled by Bloomberg. That’s more than double Target’s projected sales for the year.
Shopify is mostly a behind-the-scenes software that many consumers don’t realize is processing purchases of goods which are typically found via marketing campaigns on social media sites such as Instagram. Its consumer app, Shop, lets users search products from Shopify’s merchant partners, and is the closest thing the Ottawa-based company has to its own online marketplace.
