Target gets in Shipt shape
Retailer buys online delivery company.
In the latest salvo in the retail delivery wars, Target said Wednesday that it will buy online delivery company Shipt, a move that will enable most of its customers to have groceries dropped right at their front door shortly after they place an order.
The $550 million cash deal links Target’s network of stores with Shipt’s more than 20,000 personal shoppers, picking up products for shoppers and then delivering them within a couple of hours.
“We believe the move is a critical part of our strategy,” Target Chief Operating Officer John Mulligan said Wednesday. When it comes to speeding up delivery and bolstering the company’s digital experience, “we believe we’ll be able to leap several years ahead.”
The service is another way for Target to get a leg up in the race for shoppers who have grown used to the convenience and speed offered by Amazon and other e-commerce sellers.
Grocery delivery has become a retail battleground. Walmart has tested delivery runs with ride-hailing companies such as Uber and Lyft. Costco is set to launch two new delivery options for its millions of members late next year.
By 2025, as much as 20% of grocery shopping — or $100 billion in yearly consumer sales — may be online, according to the Food Marketing Institute, and more than 70% of shoppers say they expect to buy groceries with a tap of their smartphone or laptop within the next decade, if not sooner.
Shipt offers memberships to users who pay $99 a year for unlimited deliveries. Using the company’s app, customers designate the retailer they want to shop, pay for their purchases and choose a one-hour delivery window.
Kroger and Costco, the second- and third-largest grocery chains in the U.S., are among the stores whose products are currently available through Shipt.
The app will continue to feature a range of retailers even after the acquisition by Target is finalized.
“Having multiple retailers allows us to grow our membership base and make it even more attractive,” said Bill Smith, Shipt’s founder and CEO. “Everyone who participates in our marketplace will win.”
Target shoppers will initially need to join Shipt to get same-day delivery of groceries, home staples and other items. But eventually Shipt’s service will also be offered through the Target app and website.
The same-day service will be available at roughly half of Target’s locations by early next year and at nearly all of Target’s more than 1,800 stores by the end of 2018.
Talks between Target and Shipt began during the summer. After the acquisition, Shipt will continue to operate independently, with the same staff and executive team. The deal is expected to close before the end of this year.