Target Marketplace Adds Sellers through Shopify Integration

• Target has partnered with Shopify to identify emerging brands and popular products for its online marketplace.
• By adding items to Target's online store, the discounter can increase online traffic and drive sales growth.
• Retailers can benefit from third-party marketplaces as they receive a share of sellers' profits and have the option to offer additional services such as advertising or fulfillment.

is turning to to add new and trendier brands to its website.

Starting Monday, companies that work with Shopify can apply to join Target Plus, a third-party marketplace of the Minneapolis-based discounter. Some of Shopify's customers are smaller or up-and-coming brands that use the e-commerce platform to build and operate a website.

The financial terms and duration of the deal between Target and Shopify were not disclosed.

Target's Chief Guest Experience Officer, Cara Sylvester, revealed in an interview with CNBC that the retailer will use Shopify to identify popular items and make them available online quickly. Additionally, some of these popular items will be placed on store shelves.

Target's marketplace enhances its business by attracting customers who visit its website more frequently and purchase from both marketplace sellers and Target's own brands as the company expands its online selection and offers eye-catching merchandise.

Despite declining sales of discretionary merchandise, the big-box retailer is striving to regain growth, with the discounter lagging behind grocery competitors. In the past four quarters, Target has experienced a decline in comparable sales, with overall sales falling in three of the past four quarters.

Despite efforts, the company has faced challenges in expanding its e-commerce business. In the first quarter, Target experienced a 1.4% increase in digital sales, marking the first growth in over a year.

In May, company leaders stated that Target is projected to achieve sales growth in the second quarter, although this is partly due to its poor performance compared to the previous year. For the entire year, Target anticipates that its comparable sales will be between flat and up 2%, with adjusted earnings per share ranging from $8.60 to $9.60.

Despite outperforming the broader stock market, Target's shares have underperformed compared to their peak during the Covid pandemic years.

Despite its decline in shares following its May earnings report, Shopify could still benefit from a boost. Its stock has fallen approximately 17% this year.

Unlike other third-party marketplaces such as Amazon, Walmart, and eBay, Target only has a small number of sellers, with more than 1,200 brands invited to join the platform. In comparison, Amazon has approximately 2 million sellers, and Walmart has around 135,000 sellers, according to estimates by Marketplace Pulse.

Target's website features a wide range of products, including the viral UnBrush detangling hairbrush and premium items like Ray-Ban and Coach sunglasses. With over 2 million products from brands such as Ruggable and Timberland, the assortment covers various categories like apparel, sporting goods, and home decor.

Its marketplace has experienced significant growth, with more than double the number of sellers and products compared to the previous year.

The retailer does not separate the revenue generated through its third-party marketplace in its financial filings. Instead, it combines it with other sources of revenue, such as credit card profit-sharing and advertising revenue from Roundel. The total revenue from these sources was $388 million, which is less than 2% of the $24.53 billion in revenue reported in the most recent quarter, which ended May 4.

Sylvester stated that Target Plus is one of the fastest-growing segments of Target's business.

Sellers who join Target Plus may become potential customers of Roundel, as the advertising business experienced a growth of over 20% in the last quarter. However, Sylvester did not disclose the exact percentage of this growth that came from ads purchased by Target Plus sellers.

Retailers are increasingly turning to third-party marketplaces to drive higher profits, as they allow retailers to rely on sellers who typically store and own the inventory, and take on the financial risks if customers don't want items or the products must be marked down.

Retailers typically receive a portion of sellers' sales and can also charge for services, such as fulfilling online orders or selling advertisements for sellers' products.

Instead of providing fulfillment services, Target relies on Target Plus sellers to store, package, and ship their own products.

Walmart has intensified its marketplace efforts to narrow the gap with Amazon and its dominant e-commerce platform. It has been attracting sellers and providing new services, such as the ability to ship bulky items like patio furniture or canoes. In the first quarter, sellers in Walmart's U.S. marketplace experienced a 36% growth, and the company now has over 420 million unique items, as CEO Doug McMillon stated on the company's earnings call in May.

Likewise, other marketplaces, including TikTok Shop and Temu, are experiencing rapid growth.