Target announced its biggest acquisitions in recent history by purchasing Shipt, a startup that delivers groceries on the same day customers place an order According to the company the acquisition is of the size of $550 million in cash.
Like its chief rival, Instacart, Shipt partners with a network of brick-and-mortar grocery chains to pick orders off of their shelves and deliver them to customer’s doors on the same day they are ordered.
Target plans to join the Shipt online marketplace, while Shipt intends to keep serving its other retail partners. Eventually, Target will offer the Shipt same-day delivery service on Target.com and the Target app.
Shipt customers pay $99 a year for unlimited deliveries from a selection of partners that include Harris Teeter, Meijer and Texas grocery giant H-E-B. The company operates in 72 U.S. cities currently, and has said it plans to be in 140 markets, including most major U.S. metro areas, by the end of next year.
Online Shopping Scenario
The announcement comes just a few months after Amazon closed its giant acquisition of Whole Foods, sending shock waves through the board rooms of big retailers and grocers who expect the move to push grocery delivery more into the mainstream. In the wake of that deal, Shipt competitor Instacart has signed up a string of major grocers as partners.
The deal also marks the latest move by Target to modernize its logistics and fulfillment efforts. The company recently launched its own curbside pickup tests at about 50 stores, after initially working with a startup as a partner in previous years. It is also expanding how many of its stores serve as mini-fulfillment centers to source inventory for online orders.
Starting early next year, Target customers who want to order their groceries through the Shipt service will have to pay for a Shipt membership and order through the startup’s website or app. By summer, about half of Target’s 1,800 stores will have joined the Shipt platform; by next holiday season, all Target stores should be on board.
Eventually, Target plans to add the same-day delivery offering to its own website and app. But, in a call with reporters, Target’s chief operating officer, John Mulligan, said it is too early to offer details on how much Target will charge its customers for the service at that point.
Shipt was founded in 2014 by its CEO, Bill Smith, in Birmingham, Ala.. The company has 170 employees between its Birmingham and San Francisco offices, and will be run as an independent subsidiary of Target. It has raised about $65 million in venture capital from investment firms, including Greycroft Partners.