Target Partners with Shopify to Expand Its Third-Party Marketplace

Target is partnering with Shopify to bring new and trendier brands to its website. Starting Monday, Target announced that companies using Shopify can apply to join Target Plus, its third-party marketplace. Shopify’s clients, often smaller or emerging brands, utilize the platform to build and operate their online presence.

Financial terms and the duration of the partnership between Target and Shopify were not disclosed.

In an interview with CNBC, Target’s Chief Guest Experience Officer, Cara Sylvester, stated that Shopify would help Target identify popular items and quickly make them available to online shoppers. Some of these popular items might even find their way onto Target’s store shelves.

Sylvester highlighted that Target’s marketplace enhances the overall business by attracting more customers to its website, which in turn boosts sales for both marketplace sellers and Target’s own brands.

Target is aiming to revive its sales growth amidst declining discretionary spending by consumers. The retailer has experienced four consecutive quarters of declining comparable sales, and overall sales have decreased in three of the past four quarters. Target’s e-commerce growth has also been sluggish, with digital sales increasing by only 1.4% in the first quarter, the first rise in over a year.

Company executives indicated in May that they expect a return to sales growth in the second quarter, partly due to a weak performance the previous year. For the full year, Target anticipates comparable sales to be flat to up 2%, with adjusted earnings per share projected between $8.60 and $9.60.

Target’s stock has underperformed compared to the broader market, with a 2% increase versus the S&P 500’s nearly 15% rise. Its stock price of $146.13 remains significantly below the peak of over $260 during the Covid pandemic.

Shopify, which has seen its shares drop about 17% this year following a disappointing earnings report in May, could also benefit from this collaboration.

Target Plus, unlike other third-party marketplaces such as Amazon, Walmart, and eBay, operates by invitation only and currently has over 1,200 sellers. In comparison, Amazon has around 2 million sellers and Walmart about 135,000, according to Marketplace Pulse estimates.

Target’s marketplace offers a diverse range of products, from viral items like the UnBrush detangling hairbrush to premium brands like Ray-Ban and Coach. With over 2 million products, the assortment includes categories such as apparel, sporting goods, and home decor. The number of sellers and products on Target Plus has more than doubled in the past year.

Revenue from Target’s third-party marketplace is grouped with “other revenue” in financial reports, which includes credit card profit-sharing and its advertising business, Roundel. This category totaled $388 million, less than 2% of Target’s $24.53 billion revenue for the quarter ending May 4. However, Sylvester noted that Target Plus is one of the fastest-growing segments of Target’s business.

Brands on Target Plus can also utilize Roundel for advertising, a business that grew over 20% in the most recent quarter, though the contribution from Target Plus sellers was not specified.

Third-party marketplaces are attractive for retailers due to their higher profit potential. Retailers receive a portion of sellers’ sales and can charge for additional services like order fulfillment and advertising. Unlike Walmart, which offers fulfillment services, Target relies on Target Plus sellers to handle storage, packing, and shipping.

Walmart has been expanding its marketplace to compete with Amazon, adding new services and growing its seller base by 36% in the first quarter. The marketplace now offers over 420 million unique items.

Other marketplaces like TikTok Shop and Temu are also experiencing rapid growth.