Shopify announced this week that it has partnered with Target to give its merchants online amplification and distribution on Target.com. Though this is mostly an eCommerce play, it also exposes Shopify merchants, offering a potential path to brand growth and physical retail presence.
This arrangement will sit under Target Plus, a program meant to showcase the products of smaller third-party merchants. The program currently supports 1,200 merchants – a number that will likely inflect with Shopify’s merchant influx, starting with True Classic, Caden Lane, and a handful of others.
Target Plus launched in 2019 to bring a curated set of third-party merchants into the fold. Some of the larger brands in the program have included Crocs, Maui Jim, Timberland, and Ruggable. With Shopify merchants, the program will not only grow in volume but bring smaller merchants into the mix.
One Fell Swoop
Target Plus’ growth potential is one of the main drivers for this deal, as Target’s merchant volume trails that of Amazon (2 million) and Walmart (135,000). This could be its first step in scaling up that program Just like Amazon and Walmart have seen, third-party sellers represent a long-tail revenue opportunity.
And the timing is right, as Target has seen a few quarters of revenue declines. Specifically, its first-quarter earnings included a 3.2 percent decline in revenue and a 3.7 percent decline in comparable sales. Worse, it marked the fourth consecutive quarter of comparable sales declines.
These numbers have likely motivated Target to seek additional growth avenues, so here we are. Rather than blitz a number of brands to diversify its product mix and attract a broader range of shoppers, it’s making one big move with Shopify to expand the product catalog in one fell swoop.
History Repeats
There’s also some precedent here, as Target has likely seen what Shopify can do. It formed a similar deal with Walmart in June 2020, involving distribution for Shopify merchants on Walmart.com. As Target looks to catch up to Walmart’s merchant volume (per the above figures), this week’s move was a logical step.
Notably, this move also makes sense for Shopify. Like the above Walmart.com deal, it makes Shopify a more attractive commerce platform for merchants. As we examined at the time of that deal, those merchants suddenly get access to much larger shopping audiences, simply by being on Shopify.
That last part is key, as Shopify has to continue to find ways to grow its merchant base, while also hitting key targets like retention. The more distribution it can drive for merchants – beyond their core Shopify-run eCommerce stores – the more revenue potential it can offer them. And that’s what speaks loudest.
