Target acquiring Shipt for $550 million

Shipt Will Deliver The Goods For Target 
  Mercator Overviews  by Raymond Pucci

Shipt Will Deliver The Goods For Target Mercator Overviews by Raymond Pucci

Target wants to offer same-day delivery service for online purchases. As a result, it plans to offer same-day delivery at about half of its 1,800 stores by summer ahead of a roll-out to almost the entirely fleet by next year's Christmas season.

With the $550 million cash acquisition of Shipt, Target has leaped into the same-day delivery battle that has so far been dominated by Amazon and Walmart. Target's fleet of shoppers will then pick up the items and deliver them to customers' doorsteps within the same day. Competition in this space is growing fiercer, though, as rivals Wal-Mart Stores and Best Buy have started offering same-day service, aiming to keep pace with Amazon. Shipt will add a network of local shoppers to aid delivery. Amazon has upended the grocery market with its acquisition of Whole Foods and rapid expansion of its Pantry and Fresh delivery services.

"We believe we will be able to leap several years ahead, significantly accelerating our nationwide delivery", John Mulligan, Target's operations chief, told reporters on a conference call.

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The acquisition will allow Target to deliver groceries, furniture, and other products the same day that customers order it.

As for Shipt, the deal will make it a much bigger player in the delivery wars and likely begin to narrow the gap with much bigger rival Instacart, with which Target now partners. We're coming on as a Shipt retail partner, and will expand into more markets and product categories over time.

Alabama-based Shipt, which also has an office in San Francisco, will continue to work with other retailers despite being owned by Target, Shipt CEO Bill Smith said. The startup, which has about 275 employees, has raised more than $60 million in venture capital, from backers including Greycroft Partners and Harbert Venture Partners.

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The two companies began discussing the deal in the middle of the summer, Mulligan said.

After weak holiday performance in 2016, the company has been making headway on its three-year plan to spend $7 billion on stores, supply chain and digital improvements. Target has already been piloting same-day service at its TriBeCa store in Manhattan, an effort led by Grand Junction.

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