Target's $550M Retail Technology Investment Ties it Up With Walmart and Amazon in the Delivery Race

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Target's $550M Retail Technology Investment Ties it Up With Walmart and Amazon in the Delivery Race

By Jamie Grill-Goodman - 12/14/2017

Target has made an aggressive move to boost its same-day delivery capability by acquiring delivery platform Shipt Inc. for $550 million.

The bog box retailer's latest move to compete with Amazon and Walmart, which recently bought same-day and last-mile delivery company Parcel, significantly accelerates its digital fulfillment efforts.

“We are now at a point where same-day delivery service is becoming the rule for top retailers, rather than the exception," commented Tushar Patel, CMO, Kibo. "With the acquisition of Shipt, Target has unequivocally positioned themselves in Amazon’s swimming lane of fast and seamless delivery services."

Target will leverage its network of stores and Shipt’s proprietary technology platform and community of shoppers to quickly bring same-day delivery services to half of Target's fleet of stores by early 2018. The service will be offered from the majority of Target stores, and in all major markets, before the 2018 holiday season. In addition to same-day delivery capabilities, Target will also leverage Shipt’s expertise as the company strengthens 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, executive vice president and chief operating officer for 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. 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.”

At launch, Target will offer same-day delivery of groceries, essentials, home, electronics and other products, while expanding the products offered over time. By the end of 2019, same-day delivery will include all major product categories at Target.

"Target's acquisition of Shipt represents a realization of the pressures on retailers to increase the digitization of their supply chain so that they can meet the demands of consumers for quick, streamlined deliveries," said Greg Ng, VP of digital engagement at PointSource, a Globant Company.  "As we continue to see companies like Amazon and Walmart duke it out for customer approval, Target’s move to incorporate same-day functionality to their arsenal will be essential."

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Founded in 2014 and located in Birmingham, Alabama, Shipt is a rapidly growing membership-based grocery marketplace and same-day delivery platform. The service leverages an extensive network of over 20,000 personal shoppers to fulfill orders from various retailers and deliver within hours in more than 72 markets. Through Shipt’s app, members are connected to local, reliable shoppers who help facilitate a quality delivery experience that is personalized, efficient and convenient.

“Partnering with Target and the national scale they provide allows Shipt to further accelerate our growth, bringing our service to more people, in more markets across the country,” said Bill Smith, Shipt’s founder and CEO. "We’ll continue growing our marketplace and membership base, working with a variety of retailers to drive scale and efficiencies."

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. All current Shipt employees will continue to be employed by Shipt and will work from their current offices in Birmingham and San Francisco. CEO Bill Smith will remain in his current role, and will report to Target Chief Operating Officer, John Mulligan.

The transaction is subject to customary closing conditions and is expected to close prior to the end of calendar year 2017. This all-cash acquisition will be immaterial to Target’s near-term financial results. It is expected to be modestly accretive to the company’s earnings per share in 2018, while accelerating digital and total sales growth over the medium term.