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Cheap chic retailer makes $550M delivery bet
What the truck is going on with big box retailers?
Target on Wednesday became the latest big boxer to join the equivalent of the arms race for retailers — sameday delivery — with its purchase of Shipt, a grocery delivery service.
Target made the $550 million deal to compete in what is becoming a musthave service for retailers. While being able to offer customer same-day storeto-front door delivery doesn’t guarantee success, not having the service could spell doom for chains.
In October, archrival Walmart purchased Parcel, which will help it get packages to Big Apple residents’ homes within 24 hours.
That followed an announcement a month earlier by the discount giant, saying it was testing smart home technology that would allow Walmart workers to enter customers’ homes and put just-purchased groceries right into a refrigerator.
Amazon dangled its own offer on Wednesday, expanding a 30-day free trial of its Prime service for lastminute shoppers to include free shipping on two-day, one-day and same-day orders through Dec. 24.
“The team from Minneapolis is no longer sitting on its heels,” Gordon Haskett analyst Chuck Grom wrote in a research note, referring to Target’s hometown.
“What remains clear to us is that same-day delivery will soon be par for the course in the same way free two-day shipping has become standard in recent years,” Haskett said.
The Shipt acquisition is expected to close by Dec. 31, and the cheapchic chain is set on offering sameday delivery from half its US stores within six months — and from all stores by the end of 2018.
Target has been testing same-day delivery with Shipt competitor Instacart in several markets, including New York City.
Amazon’s purchase of Whole Foods, which upended the grocery industry with supermarkets eyeing a way to revamp their e-commerce strategy, also served as a catalyst for these developments.
Shipt will be a wholly owned Target subsidiary, but it will continue to run its business independently, keeping its partnerships with other retail chains, the companies said.
Target shares on Wednesday jumped 2.7 percent, to $62.67, but are down 13 percent year to date.