MINNEAPOLIS - On the heels of Amazon's recent price hike for Prime, Target is shaving $2 off the delivery fee for Restock, its next-day delivery service for household essentials and nonperishable pantry items such as laundry detergent, cereal, and diapers.
And Target is making the service, which previously cost $4.99 an order and has been reduced to $2.99, free for Redcard holders, who already receive free shipping on Target.com orders.
"This definitely feels like Target is trying to make Redcard a little more digital-centric and more competitive against Prime," said Ben Antenore, an analyst with consulting-group Kantar.
The Minneapolis-based retailer is also taking Restock, which was first tested last summer in the Twin Cities and has since been expanded to 10 more markets, nationwide to about 60 major metro areas, reaching about 75 percent of the U.S. population.
Last month, Amazon announced that it was raising the annual fee for its Prime membership to $119 from $99, a change that took effect last week and will apply to renewals starting next month. Amazon also recently shifted its pricing approach for Prime Pantry, a program similar to Target Restock.
To encourage people to use it more frequently, Amazon now charges Prime members an additional $4.99 a month to get unlimited free shipping on Pantry orders of at least $40. Or shoppers can pay $7.99 a box. It previously charged $5.99 per box with no monthly membership option. Prime Pantry orders arrive within 1 to 4 business days.
Through Prime Pantry and Target Restock, both retailers have been trying to nudge online shoppers to bundle low-priced but often bulky household essential items together instead of spreading them out into several smaller shipments. Doing so is more cost effective for retailers, which have been taking a hit to profit margins as more shopping has shifted online.
"We wanted to make sure Target Restock was even more compelling for guests," Jamie Bastian, a Target spokeswoman, said of the decision to lower fees. "Because we have a year under our belt, we determined economically that we could support a reduced fee and free shipping for Redcard holders."
Target has been steadily expanding Restock since it first launched. While about 10,000 items were initially eligible for the service, it's now up to 35,000 products. Customers can fill up a box about the size of a shopping cart with up to 45 pounds of items.
The orders are fulfilled from nearby Target stores and FedEx handles the deliveries. If orders are placed by 7 p.m. Monday through Friday, Target says the orders will reach customers' doorsteps by the next day. (By comparison, many Target.com orders now reach customers within two days.)
Antenore, of Kantar, said it's hard to know how popular Restock has been since executives haven't talked about it much other than noting expansions to more markets. "It has really fallen into the background," he said, especially since Target bought delivery firm Shipt and has been rolling out same-day delivery to more markets.
While she did not say how many customers use Restock, Target's Bastian said the program has been popular. About 40 percent of Target Restock customers make another order within 3 to 4 weeks, she said.
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