Target is doubling down on its efforts to compete with Amazon and Walmart with the purchase of Shipt, a same-day delivery company that specializes in groceries.
The Minneapolis-based chain on Wednesday said it would pay $550 million in cash for the technology company, and that it will begin offering same-day delivery at about half of its 1,800 stores early next year.
The acquisition comes as Target’s largest competitors invest heavily in groceries, as well as speedy delivery. Walmart — the country’s largest grocer — in September paid an undisclosed sum for Parcel, a New York-based start-up that provides same-day deliveries. And Amazon on Wednesday said it had expanded its same-day delivery service to Prime members in 8,000 U.S. cities, up from 5,000 last month. Earlier this year, the online behemoth bought Whole Foods Market for $13.7 billion. (Jeffrey P. Bezos, Amazon’s chief executive, owns The Washington Post.)
“Target’s plan to acquire Shipt signals a clear intent to capture a much larger slice of the online grocery market,” Neil Saunders, managing director of the research and consulting firm GlobalData Retail, said in a note to clients. “As positive as the news is, it does not change the fact that Target has a lot more work to do in developing a clear proposition in grocery.”
In August, Target purchased Grand Junction, a San Francisco-based technology company that specializes in providing software for local deliveries. The company has also been expanding its Target Restock program to cities such as Dallas and Denver, where it now offers next-day delivery service on baby products, cleaning supplies and other everyday items.
“Same-day delivery is a service that our guests are asking for more and more often,” John Mulligan, Target’s chief operating officer, said Wednesday on the company’s website. “By acquiring Shipt, we’ll be able to take advantage of our network of stores and Shipt’s technology platform and shopper community to quickly offer same-day delivery to millions of our guests.”
The news comes as UPS and other delivery services warn of delays in holiday deliveries, putting pressure on retailers to find new ways to get products to customers quickly.
“Bottom line, these types of delays are simply not acceptable to shoppers anymore,” said Tushar Patel, chief marketing officer for Kibo Commerce, an e-commerce software company. “We are now at a point where same-day delivery service is becoming the rule for top retailers, rather than the exception.”
Shipt, founded three years ago in Birmingham, Ala., has more than 20,000 personal shoppers who buy and deliver items from a number of stores, including Harris Teeter and Kroger. The company, which will be a subsidiary of Target, plans to continue to work with other retailers.