Target taps Shopify to add sellers to its third-party marketplace

Target is switching Shopify to add new and trendier brands to your website.

Starting Monday, the Minneapolis-based discounter said companies that partner with Shopify can sign up to join Target Plus, its third-party marketplace. Some Shopify customers are smaller or emerging brands that use e-commerce platforms to build and operate websites.

Target and Shopify did not disclose financial terms or length of the deal.

In an interview with CNBC, Target’s Chief Customer Experience Officer Cara Sylvester said Shopify will help retailers discover hot items and quickly deliver them to Target’s online shoppers. She said Target plans to bring some popular items found through the Shopify deal to store shelves.

Target’s marketplace creates a “halo” and is “a catalyst for the entire business,” she said. Sylvester added that as the company expands its online assortment and adds more eye-catching items, customers tend to visit the company’s website more often and buy from both marketplace sellers and merchants. Target’s own brand.

The major retailer is trying to regain sales growth as consumers buy fewer discretionary goods, with discount stores lagging behind grocery competitors like Walmart. Target has posted four consecutive quarters Comparable sales decreasedand its total revenue has fallen in three of the past four quarters.

The company is also struggling to grow its e-commerce business. Target’s digital sales rose 1.4% in the first quarter, its first increase in more than a year.

Company leadership said in May that the retailer was on track to achieve sales growth in the second quarter, but that was partly due to performing poorly year after year. For the full year, Target said it expects comparable sales to range from flat to up 2%, with adjusted earnings per share of $8.60 to $9.60.

Target’s shares have underperformed the broader stock market. As of Friday’s close, the company’s shares were up about 2% compared with a nearly 15% gain for the S&P 500. Its $146.13 share price is also well below the highs it reached in the Covid pandemic years, when it peaked at $260.

Shopify could also use a boost feature. Share decline after earnings report in May and is down about 17% this year.

Target Plus has only a tiny fraction of the revenue and sellers on other third-party marketplaces. Unlike Amazon, Walmart, eBay and others, Target allows brands to participate by invitation only. According to Target, it has more than 1,200 sellers. Amazon has about 2 million sellers and Walmart has about 135,000 sellers, according to estimates by Marketplace Pulse, an e-commerce research tracker.

Through the marketplace, Target’s website sold items like the UnBrush, the detangling hair brush that went viral on TikTok, and high-end products, such as sunglasses from Ray-Ban and Coach. It offers over 2 million products from brands including crocodile, Ruggable and Timberland. This category includes many categories including clothing, sporting goods, and home decor.

Target says its marketplace has gained momentum. It said its sellers and product count more than doubled in the past calendar year.

The retailer does not split revenue earned through third-party marketplaces. Instead, it lumps it together in its financial filings with “other revenue,” such as money earned from profit sharing from credit cards and its advertising business, Roundel. That other revenue totaled $388 million, less than 2% of the $24.53 billion in revenue reported in the most recent quarter, which ended May 4.

However, Sylvester said Target Plus is “one of the fastest growing parts of Target’s business.”

Brands that join Target Plus also become potential customers for Roundel. The advertising business grew more than 20% in the most recent quarter. Sylvester did not say how much of that came from ads purchased by Target Plus sellers.

Third-party marketplaces have become a hot area in retail because they tend to be more profitable. Instead of purchasing from suppliers, retailers rely on sellers who often store and own inventory. Those sellers also bear the financial risk if customers do not want to buy or the product has to be discounted.

Retailers are often entitled to a portion of the seller’s sales. Additionally, they may charge for services, such as fulfilling a brand’s online orders or selling advertising, like sponsored search results, for a seller’s products.

Target does not offer fulfillment services, instead relying on Target Plus sellers to store, pack and ship their own merchandise.

In particular, Walmart has it increase its market efforts as it tries to close a huge gap with Amazon and its dominant e-commerce platform. It was Recruit sales people and offer new services, like the ability to transport bulky items like patio furniture or canoes. Walmart US marketplace seller increased 36% in the first quarter and it now has more than 420 million unique items, CEO Doug McMillon said during the company’s earnings call in mid-May.

Other marketplaces, such as TikTok Shop and Temu, are also growing rapidly.