MINNEAPOLIS—In a deal widely seen as a shrewd move to both capitalize on the advent of e-commerce and drive in-store traffic, Target Corp. is paying $550 million to acquire same-day delivery platform Shipt Inc. The Minneapolis-based retailer expects to offer same-day delivery of groceries and other merchandise at about half its 1,834 stores early next year.
“The retail landscape has been undergoing a fundamental change,” Zacks Investment Management reported Thursday. “With digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers, including big-box, are struggling to compete with e-commerce channels and are being forced to trim store count to focus more on an online model.
“We believe the company's decision to bring same-day delivery services is likely to lure more customers and in turn will drive the top line higher,” says Zacks. At the same time, Zacks says, the deal will help Target compete with Amazon as well as two brick-and-mortar operators that are making major inroads into omnichannel: Walmart and Best Buy.
“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,” says John Mulligan, EVP and COO at 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, says Mulligan, “we will be servicing every major market across the country with same-day delivery.” By the end of 2019, same-day delivery will be available for all major product categories at Target. Mulligan adds that Shipt's service-oriented approach “aligns well with Target's commitment to delivering an exceptional shopping experience for our guests.”
Headquartered in Birmingham, AL, Shipt will be a wholly owned Target subsidiary, and will continue to run its business independently, led by CEO Bill Smith. Shipt also plans to expand partnerships with other retailers seeking same-day, last-mile capabilities.
Target's Shipt deal follows up its acquisition of Grand Junction, a transportation technology company that provides a software platform to manage local deliveries through a network of more than 700 carriers. “Grand Junction's technology and algorithms will help Target deliver to guests faster and more efficiently,” Arthur Valdez, EVP and chief supply chain and logistics officer at Target, said when the deal was announced this past August. He added that it was part of the company's ongoing efforts to strengthen its supply chain.
In October, Target announced that it was deepening its partnership with Google, among other things making it possible to shop via Google Express and, in the future, integrating Target's REDCard payment card into Google's shopping platform. In the same month, though, Target also opened a dozen brick-and-mortar stores, including 11 in a new smaller format.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
