Target Investing $100M in New Sortation Centers

Target is investing $100 million to scale its sortation center network to more than 15 facilities, which includes opening more than six new centers by the end of 2026.

The mass merchandiser first talked about the centers in 2020 and announced last year it would spend $5 billion on its upstream supply chain, sortation centers, and distribution center automation to further reduce store workload.

The expansion is part of Target’s “stores-as-hubs” strategy. Target retrieves packages daily from 30-40 local stores in markets with a sortation center, and brings them to the sortation center to sort, batch and route for local delivery by a third-party carrier or Shipt delivery route, depending on the lowest-cost carrier option, the retailer explained. These facilities help lower costs and create efficiencies for its supply chain operations while increasing speed of delivery.

“By removing the sorting and packing process from our store backrooms, we save valuable time and space for our store teams to fulfill additional orders and serve guests,” Target noted. “And because our sortation center technology presorts and arranges packages for easy pickup, it reduces processing time for our delivery partners. As Target’s stores fulfill the bulk of online orders, our sortation centers have made this process even faster.”

The retailer said these facilities have helped to increase the number of orders delivered next-day by more than 150% and currently, up to 40% of Target Last Mile Delivery orders with Shipt are delivered by the next day. Target expects to increase next-day delivery capacity with this expansion. Sortation centers are also expected to double their delivery volume to more than 50 million packages in 2023.

“In examining ways we could further increase our supply chain efficiencies, we’ve brought Target Last Mile Delivery — our lowest-cost delivery option — to all our sortation center facilities,” Target said. “Through Target Last Mile Delivery, we collaborate with our partners at Shipt, and drivers on the Shipt platform sign up to deliver batches of orders that have been sorted hyper locally down to the neighborhood level.”

Target currently has nine sortation centers open in Minnesota, Texas, Colorado, Illinois, Georgia and Pennsylvania, and opened new sortation centers in the Chicago and Denver markets last month.