Target (TGT) is partnering with e-commerce specialist Shopify (SHOP) to expand its marketplace for third-party merchants.
This is a big deal so don’t diminish this news.
I honestly applaud this maneuver by Target, because it adds e-commerce footprint without paying a premium for it.
Everyone knows that everything is a total rip-off these days like adding an incremental addressable audience at a tech company.
Target has a lot to do to catch up with Amazon, but that’s the direction they should be headed in.
In the future, there is a highly likelihood that TGTs digital business will determine whether they succeed or fail as a tech company.
Everyone is going digital now. Adapt or die.
Shopify is a powerful back-end ecommerce foundation and integrating that with Target appears as a win-win decision moving forward.
We only need to look at competitor Walmart (WMT) which presides over a booming e-commerce business.
That is by decision as they launched a digital-first strategy and have made serious inroads into picking up e-commerce market share.
This partnership also on boards Target into a whole load of new products that they could only dream of selling and the process was rather painful.
Target Plus operates on an invite-only basis for merchants and currently offers more than 2 million items through more than 1,200 sellers.
Online marketplaces can also be launch pads 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.
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.
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. That’s more than double Target’s projected sales for the year.
We are at the late stage of the tech cycle that has been long in the tooth.
It’s not a shocker at this point for tech models to be petering out and management looking for that extra juice to kick-start revenue growth for however long the rest of the business cycle lasts.
Clearly, debt financing isn’t an option these days and I do believe this is a time when management showed their worth as conditions have been extraordinarily tight for the last 2 years.
There is also no guarantee that business conditions will reverse and go back into that pre-pandemic goldilocks phase.
The jury is still out but higher interest rates could be in the mix for the foreseeable future.
Therefore, it is clever by TGT and SHOP to strike up a partnership in which TGT expands their offerings and SHOP merchants get a crack at a new audience.
These opportunities are limited in fashion, but tech in 2024 isn’t about an unlimited addressable audience.
Tech in 2024 is more about efficiency and staying lean because the past 2 years have really been about cutting the bloat.
Target obviously has the more upside in this relationship and I expect them to add other partners that can move the needle.
TGTs share price has been flat for the past 6 months and migrating further into a digital strategy could be the formula to nudge that share price back into high gear.
The stock price is now at $150 per share and I do believe TGT has the chance to grind higher closer to $200 per share by year-end.
