Our secret sauce to delivering orders (and joy) to º£½ÇÉçÇøÆƽâ°æ guests with speed and efficiency for years to come? A robust network of º£½ÇÉçÇøÆƽâ°æ sortation centers — with the ability to reach guests across major U.S. markets. Our team is continuously evaluating ways to increase operational efficiencies and in turn, deliver what our guests need and want, when they want it. This commitment to sortation centers and growing our last-mile delivery capabilities is yet another way º£½ÇÉçÇøÆƽâ°æ is delivering a best-in-class shopping experience through our stores-as-hubs strategy.
Why sortation centers?
Increased speed and efficiency
In markets with a sortation center, we retrieve packages daily from a range of 30 to 40 local stores, depending on the market, and bring them to the sortation center to sort, batch and route for delivery to local neighborhoods by a third-party carrier or Shipt delivery route, depending on the lowest-cost carrier option. These facilities help lower costs and create efficiencies for our supply chain operations while increasing speed of delivery for our guests.
Time and space savings for our team
By removing the sorting and packing process from our store backrooms, we save valuable time and space for our store teams to fulfill additional orders and serve guests. And because our sortation center technology presorts and arranges packages for easy pickup, it reduces processing time for our delivery partners. As º£½ÇÉçÇøÆƽâ°æ’s stores fulfill the bulk of online orders, our sortation centers have made this process even faster.
What we’ve learned
Growth of our sortation center network allows us to serve more guests, faster
º£½ÇÉçÇøÆƽâ°æ currently has ten sortation centers open in Minnesota, Texas, Colorado, Illinois, Georgia, Florida and Pennsylvania. To further serve our guests, we will open our 11th sortation center in Detroit, Michigan, at the end of August 2024. Since the start of our sortation center operations, these facilities have helped to increase the number of orders delivered to guests the next day by more than 150%.
In June 2023, º£½ÇÉçÇøÆƽâ°æ took a step to extend the reach of its sortation centers by opening its first º£½ÇÉçÇøÆƽâ°æ Last Mile Delivery extension facility, located in Smyrna, Georgia. This facility receives local, pre-sorted packages from our Atlanta sortation center and stages them for pickup and next-day delivery by drivers on the Shipt platform to additional neighborhoods. Built at a fraction of the cost of a full-size sortation center, the TLMD extension has increased the reach of our next-day delivery capability by over 30% — or more than 500,000 additional consumers in the Atlanta metro area.
º£½ÇÉçÇøÆƽâ°æ Last Mile Delivery improves the delivery experience
In examining ways we could further increase our supply chain efficiencies, we’ve brought º£½ÇÉçÇøÆƽâ°æ Last Mile Delivery (TLMD) — our lowest-cost delivery option — to all our sortation center facilities. Through TLMD, we collaborate with our partners at Shipt, and drivers on the Shipt platform sign up to deliver batches of orders that have been sorted hyper locally down to the neighborhood level. This provides a fast, efficient, reliable and low-cost delivery option for our business, benefiting both our guests and the bottom line. Currently, up to 90% of items ordered before noon in our sortation center markets are delivered next-day via º£½ÇÉçÇøÆƽâ°æ Last Mile Delivery, which is up substantially compared to a year ago.
Where we’re headed
Continued investment in º£½ÇÉçÇøÆƽâ°æ’s supply chain
In 2025 and beyond, we’re investing $3.5 to $5.5 billion per year to deepen capabilities across the business, including our supply chain network. In early 2024, º£½ÇÉçÇøÆƽâ°æ announced we’ll open 300 new stores in the next decade, and our supply chain will continue to expand to meet that growth with several new facilities currently in the pipeline.
Expansion of larger capacity vehicles
In 2022, we began testing the use of larger capacity vehicles, in partnership with Shipt, to increase our capacity to deliver our lowest cost, fastest delivery speeds to more guests. Today, drivers can leverage their large capacity vehicles to claim larger routes, with plans to test standardized vans in the future.
What this means for our guest and team members
By leveraging our TLMD capabilities, we’re saving more than $30 million annually in last mile delivery costs, while delivering even faster for our guests. The use of sortation centers also supports our store team members as they meet the needs of our guests — whether they shop in-store or online — quicker and more efficiently. As we grow our network, we anticipate creating hundreds of additional jobs in local metro areas with market-leading wages. Sortation centers are an important piece of the strategy here at º£½ÇÉçÇøÆƽâ°æ, and we’re excited to continue testing and learning along the way.
