Arriana McLymore & Siddharth Cavale

NEW YORK (Reuters) – Target Corp (NYSE 🙂 will allow shoppers to use food stamps for their online purchases, following the lead of Amazon.com and Walmart.com. This move could make Corp the seventh largest retailer in America, helping them gain more market share from lower-income customers.

Food stamps are used by approximately 21.7 Million households in America. They provide limited payments for cold food, and other non-alcoholic beverages, and seeds, and plants.

Target informed Reuters last Wednesday that they will accept food stamp payments online. It is expected to begin accepting payment through Shipt (its delivery arm) in April.

Target could offer food stamp payment online to fill an in-depth gap in its strategy. This would allow Target to reach more households who might not otherwise shop at “dollar stores” or Walmart Inc.

Amazon.com Inc (NASDAQ) and Walmart already allow food stamp purchases on their sites since 2019. This is part of a partnership with the U.S. Department of Agriculture which distributes food stamps. Instacart, a grocery delivery company, also allows this option.

Even though Target lost its early mover advantage in the market, analysts and investors are positive. Huntington Private Bank’s senior equity analyst David Klink stated that accepting food-stamp payment online can build customer loyalty, and it could also help the company sell additional products. Huntington Private Bank holds more than $30 million of Target shares.

He stated that Target was taking a long view and saying they can accept your food stamps. Target will always be there to fulfill your different shopping needs, so maybe you won’t need food stamps at all.

Klink stated, “I would not call it a world-changer but I believe it is important.”

Target’s grocery business is an important part of its operations. The 20% figure puts Target in direct competition with some of the largest U.S. grocery stores, such as Kroger (NYSE 🙂 or Albertsons. According to the company, it plans on expanding its grocery sales by focusing more attention on private label.

Target’s chief food & beverage officer Richard Gomez told investors on March 1 that Target “will make the entire experience in-store as well as online accessible to all families” and would allow them to choose how to pay for groceries.

Target’s house brand, Good & Gather, now offers nearly 2,500 food and beverage products. Target, for example, sells a 12-ounce can of Good & Gather evaporated milk for $0.99 on its website, compared to Nestle’s Carnation condensed milk for $1.69.

Burt Flickinger from Strategic Resource Group said that Target will display Nestle’s leading brand, but the Target private-label product next to it. This move would be “transformative.”

In October, President Joe Biden announced that his administration would provide food stamps to approximately 42.8 million more people through the Supplemental Nutrition Aid Program (SNAP).

In January 2018, more than 3 million households with food stamps purchased groceries online, which is almost double what they were a year earlier. A food stamp recipient must be able to purchase groceries online using an electronic benefits transfers (EBT) card. This card is very similar to a bank debit card. Card holders cannot use these benefits to purchase non-food products.

Target is unsure whether recipients of food stamps will pay for delivery charges. Shipt is a Target acquisition that charges $7 for delivery, but provides free same-day delivery to $99 subscribers.

Instacart is offering a $3.99 discount on food stamps purchased online by BJ’s Wholesale Club (Food Lion), Publix, Ahold Delhaize USA and Ahold Delhaize USA.

Amazon offers discounts up to 15% for select meats and produce purchased through Amazon Fresh.

EBT cards cannot be used for Amazon Prime memberships, tips, or other items. However, Amazon does offer a $6.99 monthly discount for those who qualify for government programs such as SNAP and Medicaid. Amazon Prime is $14.99 per month or $139 for a year.

Low-income households experience a decline in their purchasing power due to rising meat, bread, and gas prices. According to Adobe’s (NASDAQ: Digital Economy Index), the average price for groceries online increased 7.6% in February compared with a year ago.

Bill Kirk, MKM Partners consumer analyst, stated that the 50 billion dollars Americans spend on grocery shopping each year with food stamps only 5% of the $1.5 trillion they spend on food-at–home each year.

Target’s latest payment option demonstrates its desire to increase market share in grocery, an area where it is difficult to find strong volume growth and inflation.