Walmart and Target keep trying to outdo each other when it comes to testing out new delivery methods, with one looking to slash shipping times and the other aiming to cut costs.
Walmart is reportedly testing out a dark store in Dallas to facilitate faster deliveries, while another report says Target is piloting deliveries that would ship directly from factories to the end consumer. Bloomberg reported both news stories on Tuesday.
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“We regularly test new tools, features, and capabilities to better connect with and serve our customers—wherever and however they choose to shop,” a Walmart spokesperson said, without confirming the details of the Bloomberg report. “Regardless of the channel, our goal remains the same: to deliver a fast, seamless, and engaging customer experience.”
The report also indicated that Walmart plans to test a dark store in the retail giant’s hometown of Bentonville, Ark., and is exploring additional undisclosed locations.
Dark stores are physical store or warehouse locations that retailers use exclusively to fulfill online orders. These sites are not open to public customers despite typically looking like a traditional brick-and-mortar outpost.
According to the report, these locations would carry popular items, which would effectively amplify the reach of existing stores and bigger warehouses that fulfill orders.
This wouldn’t be the first time Walmart has operated dark stores, with the company experimenting with them during the Covid-19 pandemic when stay-at-home laws were put in place.
As far as completing its objective goes, Walmart has already made plenty of inroads to swifter shipping. Over the past year, the number of deliveries made in less than three hours grew by 91 percent, said CEO Doug McMillon in May.
Much of this can be attributed to the company’s offering of store-fulfilled delivery to 93 percent of U.S. households, as well as more densified delivery routing. And for the remaining deliveries from fulfillment centers, the retailer has gone all-in on automation across unloading, receiving, picking and packing in recent years.
Like the delivery windows, the company’s delivery costs have plummeted as a result of the changes, helping Walmart U.S. achieve e-commerce profitability in the first quarter for its first online profit ever.
Target has similarly leveraged same-day delivery recently to cut delivery costs , but these expenses still weigh on overall margins compared to its chief competitor.
In the first quarter, Target’s gross margin saw a year-over-year decline of 60 basis points to 28.2 percent, with digital fulfillment and supply chain costs bringing 80 basis points of pressure, according to chief financial officer Jim Lee.
By deploying direct-to-consumer delivery from its factories, Target would look to reduce the burden on margins while further broadening its range of low-cost offerings.
Products offered within the model would primarily include apparel, household goods and other non-food items, according to the Bloomberg report, which indicated that the effort is in the early stages.
Sourcing Journal reached out to Target.
Such a move is similar to the business model both Shein and Temu operated to skyrocket their popularity in the U.S. and circumvent a longer supply chain that typically involves more logistics costs across warehousing, labor, fulfillment and transportation.
Conversely, most online orders get sent to stores or warehouses before being sent to consumers via truck delivery. Target has made plenty of investments to optimize the supply chain once the product reached the U.S., with the company in the process of building out 15 sortation centers to better support route optimization for improved last-mile delivery.
It is unclear which factories, or from which markets, Target has plans to import directly from. The company partners with factories across markets including China, Vietnam, India, Bangladesh, Mexico, Pakistan, South Korea, Thailand, Turkey and the U.S. among others
The Bloomberg report indicates that Target’s potential decision could be impacted by what follows the closure of the de minimis provision , which had previously enabled companies like Shein, Temu and Amazon to directly import shipments into the U.S. from China tax-free as long as they were under $800.
While the closure currently affects goods out of China, it would be extended to all countries if the President Donald Trump-approved One Big Beautiful Bill Act passes through Congress.
The suspension of de minimis from China made a quick impact on U.S. demand, at least from a user perspective. Temu’s U.S. daily active users dropped 52 percent in May versus March, while those at rival Shein were down 25 percent, according to data from market intelligence firm Sensor Tower.
Ahead of the de minimis suspension, both e-commerce giants increased prices , further signaling the challenges posed when adding duties to cheaper shipments directly from factories.
