Target Buying Shipt for $550M
Target Corp.'s acquisition of Shipt Inc. is not expected to change the third-party delivery service's existing relationships with other retailers, at least for the foreseeable future.
The Minneapolis-based retailer is paying $550 million in cash for the Birmingham, Ala.-based company, which operates in 72 markets, to leverage its own network of stores and Shipt’s proprietary technology platform and community of 20,000-plus personal shoppers to quickly and efficiently bring same-day delivery service to guests nationwide.
The acquisition “significantly accelerates” Target’s digital fulfillment efforts, bringing same-day delivery services to guests at approximately half of Target’s stores by early 2018. Most Target stores, and stores in all major markets, will provide the service prior to next year’s holiday season.
Upon launch, Target will offer same-day delivery of groceries, essentials, home, electronics and other products, with selection expanding over time. By the end of 2019, same-day delivery will include all major product categories at Target. Additionally, Target plans to leverage Shipt’s expertise as it enhances its supply chain.
“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,” said John Mulligan, EVP and COO, Target. “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.”
And while Target already has been working with Instacart in certain markets, this partnership likely will go away: Target isn’t dipping its toes in the water and just testing another solution – it outright dove in with the acquisition, suggesting the retailer likely will streamline the shopper service through Shipt.
“This makes economic sense as it'll help strengthen profit margins by consolidating sales volume via a single-source while strategically it improves their control of the shopping experience from order to fulfillment,” he stated. “However, this will take time as Shipt expands its market coverage to support more Target stores.”
Additionally, other retailers partnering with Instacart might begin contemplating what will happen if another company buys the San Francisco-based delivery service. Up to this point, Bishop noted, Instacart’s white-label platforms have helped many retailers get into the online race more quickly, especially helpful when Amazon snapped up Whole Foods. However, that benefit now may be overshadowed by longer-term concerns over continuity and control of the program.
“If this thinking spreads and negatively impacts Instacart’s ability to acquire and retain retail customers," he said, "that will create significant headwinds for Instacart’s ability to strengthen its profitability."