After years of treating e-commerce as an afterthought, Target (NYSE:TGT) has finally gotten the memo about online retail. The company rolled out free two-day shipping on orders of $35 or more in March, matching Walmart's earlier move and providing the same shipping speed as Amazon (NASDAQ:AMZN) Prime.
Target made an even bolder move on Tuesday, launching a revamped version of its Restock service nationwide. Restock is similar to Amazon's Prime Pantry, allowing shoppers to buy up to 45 pounds of household staples and have them delivered to their home for a flat fee. Where the services differ is price and speed. The new Restock service features far lower fees than Prime Pantry, and it puts Amazon's shipping speeds to shame.
Image source: Target.
Cheap next-day shipping
Target Restock is a carbon copy of Prime Pantry in a lot of ways. Shoppers choose from thousands of household items, including cleaning supplies, beauty products, personal care items, non-perishable food and beverages, and pet products. Each item takes up a certain percentage of space in the box, based on size and weight. The maximum size order would contain about as many items as one shopping cart.
The first big difference between Target Restock and Amazon Prime Pantry is price. Restock now costs just $2.99 per box, with no minimum order size. For those using a Target REDcard, either the debit or credit version, that shipping fee is waived.
Prime Pantry costs $5.99 per box and requires a Prime membership. Amazon is reportedly transitioning to a subscription model, where a $5 monthly fee will provide free shipping on orders of $40 or more. Those who don't subscribe will pay $7.99 per box, and smaller orders will carry the same fee. This new pricing model hasn't fully rolled out yet -- Amazon's Prime Pantry webpage still shows the $5.99 fee.
Just on price alone, Restock blows Prime Pantry out of the water. But Target has another trick up its sleeve. Restock orders placed before 7 p.m. on weekdays are delivered the next day, with orders placed later arriving in two days. Prime Pantry orders are shipped via ground shipping, with most orders arriving within four days, according to Amazon.
Target can promise next-day shipping because it's fulfilling Restock orders from its stores instead of a far-away distribution center. While Amazon's fulfillment network is unrivaled, Target has over 1,800 stores in the U.S. that can act as mini-distribution centers.
Here's a table that sums up the two programs:
| Category |
Target Restock |
Amazon Prime Pantry |
|---|---|---|
|
Membership required |
None |
Amazon Prime ($119 annually) |
|
Delivery fee |
$2.99, or free with REDcard |
$5.99, or $7.99 under new pricing model |
|
Order minimums |
None |
The $5-per-month option provides free shipping for orders over $40 |
|
Shipping speed |
Next-day, or two-day for orders after 7 p.m. |
Most orders arrive within four days |
Data source: Target and Amazon.
Restock looks like a winner
While Target's rollout of free two-day shipping earlier this year was the company playing catch-up to Walmart and Amazon, the new Restock service is an aggressive attack on Amazon's Prime empire. This comes at a time when Amazon is not only moving to a new Prime Pantry pricing model that raises the per-box rate, but also boosting the price of Prime. The new $119 annual fee includes a $20 increase over the old price.
Even for Prime members, Target Restock looks like a better deal than Prime Pantry. Amazon may have the advantage when it comes to selection, although the gap probably isn't that big. Both Amazon and Target boast of "thousands" of eligible items.
I think Target has finally figured out online retail. By undercutting Prime Pantry on price and offering much faster shipping without any membership fees, Target Restock could be a game changer for the retailer.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.
