Target Invests $100M to Expand Next-Day Delivery Service

Large retailers as well as specialty niche chains, like apparel makers Gap and American Eagle Outfitters, have been expanding their e-commerce and logistics platforms to offer an alternative to Amazon, which is charging third-party sellers half of their sales to use its platform

Giants like Walmart and Target continue to add muscle to their logistics networks, with Target recently announcing a $100M expansion of its package-sorting network.

The discount retail chain will add more than six new facilities—Target calls them sortation centers—by the end of 2026, bring the total number of last-mile delivery logistics centers to 15, according to a report in Chain Store Age.

The sortation centers, a concept Target piloted in 2021, streamlines the last-mile process of fulfilling and delivering online orders, removing the sorting process from the backroom of stores.

Packages are retrieved daily from a range of 30 to 40 local stores in a market and transported to a sortation center to sort, batch and route them for delivery to local neighborhoods by a third-party carrier or Shipt delivery route, depending on the lowest-cost option, the report said.

Target currently operates sortation centers Minnesota, Texas, Colorado, Illinois, Georgia and Pennsylvania. The retailer recently opened two sortation centers in Chicago and one in the Denver metro.

“With sortation logistics dedicated off-site at our sortation centers, our stores have more room for picking and packing items for guest orders,” Richard Dean, a Target stores director in Minnesota, told CSA.

According to Target, the sortation center strategy has enabled the retail giant to engineer a 150% increase in its next-day deliveries.

The sortation centers delivered 26 million packages last year, a total Target expects to nearly double, to 50M, this year. According to the delivery service Shipt, 40% of the retailer’s delivery orders with Shipt are arriving the next day.

The $100M logistics upgrade at Target also includes a partnership with Shipt for an expansion of fleets of delivery trucks, as well as routes that drivers are taking: Target has expanded its routes and is funding larger capacity vehicles that can hold up to eight times more packages per route, CSA’s report said.

The stores-as-a-hub concept, which has been adopted by several retailers, leverages a chain’s logistics network as a launchpad for online orders for smaller retailers.

Two specialty apparel retailers have announced ventures with digital inventory platforms to offer their distribution networks as shipping outlets for smaller businesses—and one of them is offering one-day deliveries of orders.

The latest to join the parade is Gap, which has followed up a low-key announcement last year of its new logistics business—called GPS Platform Services—with news of a game-changing partnership with a company that, along with Amazon and FedEx, has experience running one of the busiest logistics networks in North America: UPS.

Gap is teaming with UPS’ Ware2Go digital platform to offer small shippers access to Gap’s network of 35 fulfillment center for outsourced distribution services, including use of Ware2Go’s inventory tracking platform.

Gap says it is aiming to offer one-day “click-to-door” fulfillment to customers of businesses utilizing GPS Platform Services. These companies will have access to supply chain capabilities “previously only available to billion-dollar brands,” Gap said in a press release.