• by Thom Forbes  @tforbes, December 14, 2017

Target is speeding into the same-day delivery zone with its $550 million acquisition of Shipt, a service founded in 2014 that has 20,000 personal shoppers in 72 major markets across the U.S.           

Through its app, Shipt provides personalized grocery delivery to “tens of millions” of households, it says, for a $99-per-year fee from retailers such as Costco, Meijer and Kroger. It has offices in Birmingham, Ala., and San Francisco. Its CEO, Bill Smith, will report to Target COO John Mulligan. 

“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,” according to the release announcing the deal.

The Minneapolis-based retailer says the acquisition will bring same-day delivery services to about half of Target stores by early 2018 and will be offered by the majority of Target stores, and in all major markets, before the 2018 holiday season.

It also will “add more products to the service next year, such as home goods and electronics, and that most of its in-store products will be available via Shipt by 2019,” the AP reports in the Los Angeles Times. 

“The deal … is another example of how every single store in America is responding to the very real threat that Amazon will drink their milkshake and eat their lunch, shortly after it delivers those things to their doors in 30 minutes or less,” Jonathan Shieber observes for TechCrunch.

“A combination of Shipt’s delivery services, with Google Express and its voice-enabled shopping options, provides a kind of upside-down universe for retailers that are worried about the Amazon monolith,” Shieber continues. “And this is happening amid a broader upheaval in the retail world. Amazon has consolidated its own empire with the acquisition of Whole Foods, and Walmart has taken its own steps to expand and better integrate traditional retail and e-commerce.”

Walmart purchased Brooklyn-based Parcel in October and uses Uber drivers to deliver groceries in some cities, in addition to being a member of the Google Home network. 

“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,” Jason Del Rey writes for ReCode.

In a conference call with reporters, “Target’s Mulligan said one reason to buy Shipt, instead of simply partnering with it, is to pump resources into the platform to help it grow its customer and partner base quicker than it otherwise could have. The more volume that flows through the Shipt platform, the more sustainable the business will become over time,” Del Ray continues.

“If you look at the big picture, this acquisition will mark an important milestone in an ambitious strategy we laid out in early 2017, which included strengthening Target’s supply chain and digital capabilities to make shopping at Target easier, more reliable and more convenient for our guests,” Mulligan says in a Q&A with Smith that’s posted to Target’s A Bullseye View blog.

“We’ve already made significant progress, expanding ship-from-store, launching Target Restock and Drive Up, acquiring Grand Junction, a last-mile transportation technology company, and expanding ship-from-store capabilities to more than 1,400 stores nationwide,” Mulligan continues.

Yet, “concentrated in cities and surrounding suburbs, grocery delivery is still a small business, accounting for less than 2% of last year’s $715 billion in food-retail sales, according to research firm Technomic Inc.,” reports Khadeeja Safdar for the Wall Street Journal. “Amazon already makes up more than half of online food orders through its Fresh, Prime and Prime Now services.”

Still and all, Target will have to pick up the pace, some observers say, on what will be an increasingly travelled path to convenience in the near future.

“Target’s plan to acquire Shipt signals a clear intent to capture a much larger slice of the online grocery market,” says Neil Saunders, managing director of the research and consulting firm GlobalData Retail, Abha Bhattarai  reports for the Washington Post. “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.”