“It's also important to note that while our stores are fulfilling more digital orders it's not coming at the cost of in-store sales… our stores as hubs strategy isn't putting our core business at risk. It's simply helping us grow faster.”
- Brian Cornell, Target CEO, in 2019
In 2017, Target kicked off a 3-year, $7 Billion program to start using dedicated space in the backrooms of their stores for eCommerce distribution. They called it the ‘stores as hubs’ program, and it was an attempt to take an omnichannel approach to marketing, customer experience, and retention.
In August, they announced that they will be backing away from the program, starting with a test in Chicago and expanding to 30 or 40 other markets before the end of the year.
After all of the fanfare and nearly a decade of ‘stores as hubs’ order fulfillment, why are they changing their minds?
Too good to be true?
Omnichannel retail fulfillment is based on the idea that a company can meet a wide range of customer needs and preferences with one operational framework.
Customers can order online or shop in store, take their purchases home, have them brought to the car, delivered to their homes same day, or delivered through traditional shipping channels. All of it pulls from one pool of inventory and is supposed to preserve the customer experience across interfaces.
But wait - there’s more! ‘Stores as hubs’ promised considerable savings as well. Target’s own estimates were that fulfilling ecommerce orders using their pre-existing store network allowed them to save 40 percent per package compared to the cost of maintaining dedicated distribution centers.
It is almost like it was too good to be true.
Employee (Dis)satisfaction
In May of 2024, the ‘stores as hubs’ program was described as frictionless for customers, but maybe it wasn’t so great for their employees. And if your employees aren’t happy, your customers are about to have a bumpy in-store experience.
Data suggests that in-store employees don’t like having to do digital fulfillment. They are hurrying to fulfill online orders, which means store shelves are often plagued by higher-than-usual out-of-stock levels, and no one is available to help in-store customers. It wasn’t always made clear to store employees what they were supposed to prioritize.
Not only are stores trying to juggle the needs of traditional and digital sales, but they are also doing it with smaller teams in many cases. This led to a crisis of confidence. According to the Wall Street Journal, 40 percent of Target employees said they don’t have confidence in the company’s future. That average score is lower than it was in 2024, and the feeling is even worse for employees at the company’s headquarters in Minneapolis.
Target tried to fix the situation by hiring more employees for operational and fulfillment roles, and gave them better tools to find items for online orders. They reached the point where approximately 95 percent of store pick-up orders are ready to be picked up within one hour, but something is still off.
What will they do instead?
Target first tested the pullback of ‘stores as hubs’ in Chicago, and they plan to stop the practice in 30-40 more markets before the end of 2025, but have not yet specified which locations will be leaving the program.
They aren’t completely converting e-commerce fulfillment to a traditional warehouse-based strategy, but rather plan to handle fulfillment at larger stores in the region. Many of the stores originally chosen to be part of the program were selected because they had a “moderate” level of in-store traffic. Perhaps it will work better to follow the old adage: “If you want to get something done, ask someone busy.”
In February, Target CEO Brian Cornell will step down and be replaced by current COO Michael Fiddelke. If any insider can fix the chain, someone with operational experience is likely to have the insight required.
In retrospect, it is amazing how quickly Target went from ramping up ‘stores as hubs’ to walking it back. Next, they will need to solve two challenges in parallel: rebuilding the in-store experience they have become so famous for and reconfiguring their digital fulfillment so that part of the business is still empowered to grow.
