Target Buys Shipt, Expands Same-Day Delivery Capability

In the perpetual game of keep-up with Amazon and Walmart, Target announced plans to acquire delivery service provider Shipt for $550 million, expanding same-day delivery to half of its stores by early 2018 and all major markets by the next holiday season. The all-cash deal is expected to close before the end of 2017.

“With Shipt’s network of local shoppers and their current market penetration, we will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country,” Target Chief Operating Officer John Mulligan said in a release.

Shipt, which competes with Instart, among others, will continue to provide its services for other retailers after the acquisition, including grocers Costco, Kroger, Meijer and HEB, and will remain a wholly-owned subsidiary. Mulligan said the company hadn’t yet had discussions with Instacart, which it has been using for grocery delivery in some markets, according to CNBC.

In addition to groceries, Target said Shipt will deliver everyday essentials, home goods, electronics and other products, expanding the selection over time.

Shipt’s model leverages a network of more than 20,000 personal shoppers who fulfill and delivery orders within hours in over 70 markets. Members use its app to place their orders. They provide a personalized service, contacting customers en route about arrival time and letting them know if an item is out of stock.

The $64,000 question is, how many consumers are willing to pay for same-day delivery service? And how much actual demand is there, vs. a push approach?

“With the acquisition of Shipt, Target is betting on it and is marching in double time to make sure they get general merchandise, fresh and frozen groceries into the hands of their customers,” said Tushar Patel, CMO of Kibo. “It will force more and more retailers to expand their delivery service capabilities, which are and will continue to be critical to have ready during high traffic shopping days.”

MCM Musings: Given all the moves in the past year by Amazon and Walmart, it’s Target’s turn to make a big splash in the world of the omnichannel customer experience. On top of Target’s recent acquisition of Grand Junction, the major retailer is buying its way to supply chain expansion and an enhanced delivery service capability. Apparently, it had considered taking on Shipt as a partner but decided quickly that a purchase made more sense. It will be interesting to see how Target deals with grocery delivery partner Instacart in the wake of this deal.

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