Target Bets on Bigger Stores to Fulfill More Online Orders

During the pandemic, shoppers shifted to picking up online orders at physical locations. The chain’s new prototype dedicates more space to e-commerce.

Target is betting that this redesign will boost its strategy of using stores as fulfillment hubs for digital orders. (REUTERS)

Target Corp. is mapping out its next generation of stores near Houston, and this much is clear: the retail giant thinks bigger is better.

The new store in Katy, Texas, covers almost 150,000 square feet, compared with the company average of about 130,000. The backroom space devoted to handling online orders for same-day pickup is five times larger than at stores of a similar size.

Target is betting that this redesign will boost its strategy of using stores as fulfillment hubs for digital orders — an approach that gained ground during the pandemic. Next year, the retailer will incorporate elements of it into about 30 new locations and half its planned 200 remodels and then expand its use in 2024.

The new design “is what we think the next generation should be to deliver for both the store guest and our digital business,” Chief Operating Officer John Mulligan said in an interview. “Those two things came together, and we ended up with a store design that's a little bit bigger.”

The new concept, which opens Thursday, is roomy enough to fit an expanded food section and outposts for partners such as Ulta Beauty Inc. and Walt Disney Co. It also adds large windows, plants and walls of reclaimed wood. The right-hand entrance is designed to cater to customers looking to stay and shop for a while. It funnels shoppers by a Starbucks counter illuminated by natural light.

“This is by far the most windows and light we've brought in,” said John Conlin, Target's senior vice president of properties.

An upgraded employee breakroom isn't far from the staging area for same-day orders and the merchandise earmarked for replenishing the sales floor. Target's stores already fulfill more than 95% of the company's online orders. Handling both businesses smoothly is key to its growth strategy.

“A large store allows us to really stand up stores as hubs,” Conlin said. “It allows us to do a lot more.”