Target Rolling Out More Sortation Centers To Speed Delivery

Target Corp. plans to open three more logistics facilities that it calls sortation centers, two in greater Chicago and one in metro Denver, to facilitate quicker orders and reduce shipping costs, according to the company.

The three new locations will bring the total to nine for the retail giant, which says it will open more nationwide, though it hasn't released a timetable.

Last year, the company rolled out a number of sortation centers based on the success of a pilot program at an almost 400K SF facility in Minneapolis, the company's hometown. Besides the Twin Cities, Target has sortation centers near Atlanta, Austin, Dallas, Houston and Philadelphia. During Q1 2022, they handled 4.5 million packages.

The sortation centers draw inventory from surrounding Target stores to fill online orders, thus centering the stores within the company's distribution network. The facilities are part of what the company refers to as its stores-as-hubs strategy, which aims to make the delivery of goods faster and less expensive.

"If [customers] want us to ship something to their home, we want to make that as efficient as possible,” Chief Operating Officer John Mulligan told CNBC.

In the case of the Minneapolis sortation center, packages are picked up from the 43 Twin Cities Target locations twice a day, then sorted at the facility. The deliveries are then picked up by Shipt drivers and other third-partner carrier services, which deliver them.

The company says that its digital sales have grown nearly $13B from 2019 to 2021, and its stores fulfilled more than 95% of total sales in 2021.