Target Buying Delivery Platform Shipt for $550M

Target announced today it has agreed to acquire Shipt, Inc., an online same-day delivery platform, for $550 million in cash. The retail chain said it will use its network of stores and Shipt’s proprietary technology platform and network of more than 20,000 members to bring same-day delivery to customers across the country. Shipt differs from other delivery services in that its personal shoppers, which are vetted by the company, fulfill the orders and stay in touch with customers as they pick up items in stores, texting if an item is out of stock, and alerting them en route to delivery. To start the process, a Target customer must first become a Shipt member, paying a $99 annual fee to use the service. There are plans, however, to integrate the service with Target.com and the retailer's app.

Target will begin to offer same-day delivery of groceries, home furnishings, electronics and other products via Shipt's platform, starting in early 2018. The service will be available for the majority of Target's stores before next holiday season. By the end of 2019, Target plans to use Shipt for same-day delivery of all major product categories.

Shipt will be a wholly owned Target subsidiary, and will continue to run its business independently. It also plans to expand partnerships with other retailers seeking same-day, last-mile capabilities.Currently, Shipt works with Costco, Kroger, Meijer and HEB, and will continue to do so. All current Shipt employees will continue to be employed by Shipt and will work from their current offices in Birmingham, Ala. and San Francisco. Shipt CEO Bill Smith will remain in his current role. The transaction is subject to customary closing conditions and is expected to close prior to the end of calendar year 2017.

Total Retail's Take: This is exciting news for Target, and builds on the big-box retailer's billion-dollar investment strategy and longer-term goals to catch up with rivals Wal-Mart and Amazon.com, which have been making splashes for much of 2017. While Amazon scooped up Whole Foods in August and Wal-Mart purchased Jet.com in late 2016 to deepen its reach in the grocery space, Target has been focused on its turnaround efforts and pushing for growth internally. The acquisition of Shipt, however, elevates Target to a bigger threat to Amazon and Wal-Mart. What is surprising is that Target purchased Shipt rather than Instacart, Shipt's primary competitor that had been working with Target for several years for grocery delivery in select markets. Over time, Target said the acquisition will boost its digital and overall sales growth.