Retail Watch: Target’s Move into the Paid Membership Arena

Target will launch its new paid membership program next month alongside a revamped loyalty program. In addition, Target just announced it will be expanding its brick-and-mortar footprint by an additional 300 stores with a refreshed store experience over the next 10 years. The newly announced initiatives come as the mass-merchandiser recently reported its first full-year sales decline since 2016. We provide our initial observations on the latest developments from Target in the post below.

Breaking Down New Target Circle Offerings

• Target Circle: Launched in 2019, Target’s free loyalty program, Target Circle, has amassed over 100 million members. Initially only offering clip-able coupons on the app, the program now automatically applies deals at checkout for enhanced convenience. In-store, customers can either input their mobile number at checkout or scan their Target Circle barcode in the Target app to apply the discounts. While free, Circle members previously received 1% earnings on each purchase, the revamped program will replace this perk with personalized
• Target Circle Card: Formerly known as the Target RedCard, the Circle Card comes in options of debit, credit, or reloadable offerings. Despite the name change, the benefits for cardholders will remain the same. Cardholders save 5% on in-store and online purchases, in addition to the Target Circle deals. Moreover, members enjoy free 2-day shipping and no-rush returns, granting customers an additional 30 days to return items.
• Target Circle 360: Target’s entirely new paid membership program includes unlimited free same-day delivery for orders over $35, powered by Shipt. This delivery deal applies to more than 100 of Target’s retail partners as well. Paid members also receive free 2-day shipping and no-rush returns, the same perks as Circle Card holders.

Target Circle 360 vs. Amazon Prime vs. Walmart +

In 2020, we discussed Walmart’s entry into paid membership and its positioning against Amazon Prime (See: Will Walmart+ Threaten the Dominance of Prime?). As Target enters the arena, there are several key differences worth noting among these competitive offerings.

• Price: For the initial launch, consumers will be able to access Target Circle 360 at $49 until May 18th, 2024. Target Circle Card members will be able to keep this low price, and for others it will jump to $99 a year. This is in line with Walmart+ at $98 and lower than Prime at $139. It seems as if Target will only be offering annual memberships, unlike their competitors (at least to start).
• Speed: Due to Target’s acquisition of Shipt in 2017 for $550 million, Target can offer same-day delivery for purchases over $35 in as little as an hour. On the other hand, Prime and Walmart+ only provide this timely service for grocery purchases over $100 and $35, respectively. Target is emphasizing delivery speed as a point of difference in its initial marketing efforts.
• Services and Experiences: Walmart+ offers gas discounts and free subscriptions to Paramount Plus whereas Amazon provides streaming, gaming, and music services and prescription discounts; however, Target Circle 360 has not yet disclosed providing any value-added services or experiences.

Commitment to Brick-and-Mortar

In addition to revamping its digital and omnichannel capabilities, Target will continue to invest in enhancing the in-store experience for its customers, with expected runway for hundreds of new locations. The company intends to expand its current fleet of 1,956 stores by adding 300 new locations, which will support same-day delivery services offered through Circle 360. Furthermore, Target will continue to prioritize its shop-in-shop concepts, featuring retailers such as Ulta Beauty, Starbucks, Apple, Disney, and Kendra Scott (See: ?2021 Blog on Ulta Beauty Shop-in-Shop).

Will Target’s Paid Membership Omnichannel Approach Steal Share?

As close observers of the retail industry, we will look forward to watching the impact Target’s Circle 360 has on consumers – particularly in its ability to steal share from Amazon and Walmart.? The most distinguishing feature of the initial offering is fast shipping – which is an increasingly difficult area for retailers to differentiate and win.? We expect Target’s program to continue to evolve and improve in the months ahead to stand out (rather than play catch up).

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