Target is pivoting its in-store fulfillment strategy as it prioritizes the customer retail experience.
The retailer recently ran a test in Chicago that helped it reevaluate which stores should fulfill online orders, COO and incoming CEO Michael Fiddelke said during an Aug. 22 earnings call.
Fiddelke noted that stores “built to fulfill” are equipped with large back rooms able to host pack stations. These locations also have a manageable level of in-store business that allows them to accommodate fulfillment for online orders in their markets.
On the other hand, stores less equipped for e-commerce fulfillment may shut down their pack stations and “sit this one out,” Fiddelke said. Instead, the COO advised that those stores can focus exclusively on drive-up business, pickup orders and the in-store experience.
“We've been pleased with what we've seen in that test, both on the digital fulfillment side and especially on the store experience side,” Fiddelke told analysts. “And so you'll see us take those learnings and apply them to somewhere between 30 and 40 more markets before the year is out.”
According to Target's website, the retailer fulfills more than 96% of its total merchandise sales at its stores, indicating that warehouses are a marginal share of its total sales.
Target has made several changes to its operating model over the past few years as it looks to solve supply chain challenges. Inventory management, for instance, has remained a priority for the retailer after it faced excess inventory in 2022, which impacted Target’s financial performance.
The retailer is also pursuing a more competitive omnichannel strategy. Last year, Target announced that it had 10 supply chain facilities in the pipeline to increase efficiency and profitability.
The retailer recently announced the incoming departure of its current CEO, Brian Cornell, effective Feb. 1, 2026. With Fiddelke set to take the wheel, board members believe that he can help the retailer achieve a turnaround.
The C-suite shakeup comes as Target reported a year-over-year decline in sales and operating income in Q2. Target hopes that the incoming CEO can help make a return to growth, with Fiddelke noting that “we’re not realizing our full potential right now.”
