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MINNEAPOLIS — Target Corp. announced Wednesday that it has agreed to acquire the same-day delivery company Shipt Inc. for $550 million in cash.
Target CEO Brian Cornell with Shipt CEO and founder Bill Smith
The retailer said Shipt’s technology platform and its community of professional shoppers, together with Target’s own network of stores, will allow it to quickly and efficiently phase in same-day delivery throughout the country. Target said it expects to begin offering same-day delivery (of groceries, essentials, home goods, electronics and other select products) to guests at about half of its stores early next year, and will expand from there. It expects to offer the service at a majority of its stores, and in all major markets, in time for the 2018 holiday season. And by the end of 2019, same-day delivery will be available for all major product categories, the company said.
To use the service, Target customers will need to buy a $99 annual membership, which entitles them to free delivery of orders worth more than $35. Smaller orders are subject to a $7 delivery fee. Customers shop via an app or on Shipt.com, choose a delivery window and then pay for their purchases. One of Shipt’s shoppers fulfills the order by picking up the chosen products at the store, and then delivers the order to the customer’s home.
Target also plans to leverage Shipt’s expertise as it enhances and strengthens its own supply chain. That effort will include integration with Grand Junction, the transportation technology company Target acquired in August.
“We laid out an ambitious strategic agenda in early 2017, which included a focus on giving our guests a number of convenient ways to shop with Target, whether it’s ordering online and picking up in one of our stores, driving up to pick up an order, or taking advantage of services like our new Restock program,” John Mulligan, Target’s executive vice president and chief operating officer, said in a statement. “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. By the 2018 holiday season, we will be servicing every major market across the country with same-day delivery, and Shipt’s service-oriented approach aligns well with Target’s commitment to delivering an exceptional shopping experience for our guests.”
Shipt will be a wholly owned Target subsidiary. It will continue to run its business independently, according to the company, and plans to expand its partnerships with other retailers seeking same-day, last-mile capabilities. Shipt chief executive officer Bill Smith will remain in his current role, reporting to Mulligan.
“Building upon an array of initiatives and partnerships to offer guests more fulfillment options, Target made an intelligent decision, in our view, to further bolster its offering with the recent acquisition of Shipt,” Gordon Haskett analyst Chuck Grom wrote in a research note. “While one could debate whether buying versus building versus partnering was the best route or if the $550.0 million price tag is warranted, what remains clear to us is that the puck is moving in this direction and same-day delivery will soon be par for the course, in the same way free two-day shipping and BOPUS (Buy Online, Pick Up in Store) has become standard in recent years.”
Shipt was founded in 2014 and currently serves more than 72 U.S. markets. Shipt currently fulfills and delivers orders from various retailers, depending on the market, including Costco, H-E-B, Publix, Meijer and Kroger. Grom notes that Shipt’s annual membership fee of $99 per year “compares to Instacart at $149/year and Amazon Fresh at $14.99/month.”
The transaction is expected to close by year end.
