December 14, 2017

Target acquires Shipt in major push into same-day fulfillment

$550 million cash purchase opens digital door for retailer.

By DC Velocity Staff

Target Corp. yesterday jumped into the same-day delivery fray by acquiring Shipt Inc., a Birmingham, Ala.-based delivery concern, for $550 million in cash.

Minneapolis-based Target will begin deploying Shipt during early 2018, when the retailer expects to offer same-day deliveries of groceries, home essentials, and electronics from about half of its stores. The network will expand by the 2018 holiday season to cover most of Target's 1,400 stores and all major markets, Target said in a statement announcing the deal. By the end of 2019, virtually all of Target's major product categories will be eligible for same-day delivery, the retailer said.

Shipt customers currently receive unlimited grocery deliveries for an annual fee of $99. Customers receive unlimited free deliveries for orders totaling more than $35. Orders of less than $35 are subject to a $7 delivery fee. Target customers will initially use Shipt's platform to place orders, according to a Target spokeswoman.

Founded in 2014 and operating in more than 72 markets, Shipt relies on more than 20,000 "shoppers" working in specific markets, who will shop and deliver customers' items. The same person who shops for a customer will deliver that order, according to the Shipt model.

Target has been pushing to build its digital offerings in an effort to play catch-up with Seattle-based Amazon.com Inc. and Bentonville, Ark.-based Wal-Mart Stores Inc. Amazon remains in hyper-growth mode through internal expansion and acquisition, such as its $13.7 billion acquisition earlier this year of Dallas-based Whole Foods Market. Amazon said yesterday that it expanded its same-day delivery and one-day shipping service to thousands more markets across the U.S., in time for last-minute holiday ordering. Customers of Amazon Prime—who pay $99 for unlimited two-day deliveries of most items on Amazon's site and also have access to Amazon's next-day and same-day delivery network—will now have 8,000 cities and towns available to them, up from 5,000.

Wal-Mart, meanwhile, has used its August 2016 acquisition of Jet.com for $3.3 billion to become a major force in online fulfillment. In January, Wal-Mart began unlimited two-day deliveries to all customers for a $49 annual fee.

Target, by contrast, has been late to the digital conversion and has struggled to gain traction against its formidable rivals. It reshuffled its logistics ranks in March 2016, hiring Arthur Valdez, a top Amazon executive, to run its logistics operations. Earlier this year, Target acquired Grand Junction Inc., a technology firm specializing in supporting last-mile delivery services.

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