Target’s new paid membership program: What to know

Target has announced a paid membership program set to begin next month, launching a subscription service similar to those on offer at competitors Amazon and Walmart.

The membership program, called Target Circle 360, will cost $99 per year, unless new customers sign up at a discounted rate of $49 available until May 18, the company said in a statement Tuesday.

Subscribers will receive free same-day delivery in as little as one hour for goods available through its in-house delivery service, as well as discounted prices and 30 extra days to return products.

For hundreds of thousands of items unavailable through the in-house delivery service, subscribers will enjoy free two-day shipping.

"We've prioritized building strong relationships with guests since Target's inception, and our reimagining of Target Circle continues that commitment," Cara Sylvester, Target's executive vice president and chief guest experience officer, said in the company's statement.

Target's branded credit and debit cards will afford subscribers an additional 5% discount on any shopping trip for those enrolled in the membership program.

Since 2019, Target has offered a free subscription service called Target Circle, which has served more than 100 million customers, the company said. The new membership program will preserve a free option while adding the paid service.

The fresh offering from Target debuts at a lower price than an Amazon Prime membership, which costs customers $139 per year but includes additional benefits such as access to the e-commerce giant's streaming service, Prime Video.

The membership program at Walmart costs customers $98 per year, affording them special discounts, same-day delivery, gas price discounts at partner locations and other perks.

Sylvester told analysts Tuesday about the importance of the subscription program for the company's bottom line.

Last year, members of the company's free membership program visited Target five times more often and spent five times more than guests who weren't members, Sylvester said.

The new paid subscription service places additional emphasis on the company's shift toward e-commerce, which was accelerated by the COVID-19 pandemic.

"For those who want the magic of Target delivered to their door in as little as one hour, there's Target Circle 360," Sylvester said.

Target invested $100 million last year in a plan to improve its e-commerce business with an expanded delivery network. By 2026, the company will add at least 15 additional warehouses known as sortation centers, Target said in February 2023.

Speaking during an earnings call Tuesday, Target CEO Brian Cornell touted measures taken by the company to enhance its e-commerce service, especially same-day delivery.

"Continued innovation and better integration with our target ecosystem means we're ready to expand same-day delivery for our guests while also building on our next-day capabilities," Cornell said.

Target sales declined 4.4% over the three months ending in January compared to the same period last year, an earnings report on Tuesday showed. The slide in sales was less severe than analysts expected.

Digital sales dropped 0.7% in the three-month period compared to the same quarter last year, which marked an improvement from the 6% decline in the previous quarter.

Shares of Target climbed 2.5% in early trading on Wednesday.

The paid membership program makes up a key part of the company's plan to reverse the decline and return to growth, Cornell said Tuesday.

"This road map will help us meet consumers where they are," Cornell said.