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Target Partners with Shopify to Expand Online Marketplace with Trendy Brands

BusinessTarget Partners with Shopify to Expand Online Marketplace with Trendy Brands

Target has announced a collaboration with Shopify to bring new and trendy brands to its website, starting Monday. This partnership allows companies working with Shopify to apply to join Target Plus, Target’s third-party marketplace. Shopify’s clientele includes smaller or emerging brands that utilize the e-commerce platform to build and operate their websites.

The financial terms and duration of the deal between Target and Shopify were not disclosed. Target’s Chief Guest Experience Officer, Cara Sylvester, highlighted that Shopify will help the retailer quickly identify and offer popular items to Target’s online shoppers. Some of these popular items may also find their way onto Target’s store shelves. According to Sylvester, Target’s marketplace enhances the overall business by attracting more frequent website visits and increasing purchases from both marketplace sellers and Target’s own brands.

Facing a need to revive sales growth, Target aims to recover from a slump in discretionary spending, which has lagged behind grocery competitors like Walmart. The retailer has experienced four consecutive quarters of declining comparable sales, with overall sales falling in three of the past four quarters. In the first quarter, Target’s digital sales saw a modest increase of 1.4%, the first rise in over a year.

Target leaders have expressed optimism about returning to sales growth in the second quarter, albeit due to weaker performance the previous year. For the full year, Target projects comparable sales will range from flat to up 2%, with adjusted earnings per share between $8.60 and $9.60. However, Target’s stock has underperformed the broader market, rising only about 2% this year compared to the S&P 500’s nearly 15% increase.

Shopify, facing its challenges with a 17% drop in shares this year, could benefit from this partnership as well. Target Plus, with over 1,200 sellers, remains significantly smaller than other third-party marketplaces like Amazon and Walmart. Target’s invitation-only model contrasts with the open registration seen in larger marketplaces.

Target’s marketplace features items such as the UnBrush, which gained popularity on TikTok, and premium products like Ray-Ban and Coach sunglasses. With more than 2 million products across various categories, including apparel, sporting goods, and home decor, the marketplace has more than doubled its seller and product count in the past year.

Although Target does not disclose revenue from its third-party marketplace separately, it groups this income with other revenue streams like credit card profit-sharing and its advertising business, Roundel. This category totaled $388 million in the most recent quarter, less than 2% of Target’s $24.53 billion in revenue.

Sylvester emphasized that Target Plus is one of the fastest-growing segments of Target’s business. The collaboration with Shopify is expected to drive higher profits by expanding the assortment of unique and trendy products available to Target’s customers.

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