Target Corp. revealed that it has agreed to acquire Shipt, Inc. for $550 million in cash.
Company officials said the retailer will leverage its network of stores and Shipt’s proprietary technology platform and community of shoppers to quickly and efficiently bring same-day delivery to guests across the country adding that the acquisition significantly accelerates Target’s digital fulfillment efforts, bringing same-day delivery services to guests at approximately half of Target 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.
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.
“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," John Mulligan, EVP and COO for Target, said in a statement. "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.”
Tushar Patel, CMO of commerce software company Kibo, commented that in an age where same-day delivery service is a rule for top retailers, Target has has unequivocally positioned itself in Amazon’s "swimming lane' of fast and seamless delivery services. He added that the announcement also comes at the heels of UPS admitting that many Black Friday and Cyber Monday package deliveries are being delayed because of the unexpected flood of orders from online shoppers.
"Bottom line, these types of delays are simply not acceptable to shoppers any more," he said. "The question that remains unanswered is if consumers will pay for same-day delivery. With the acquisition of Shipt, Target is betting on it and is marching in double time to make sure they get general merchandise, fresh and frozen groceries into the hands of their customers. We believe it will force more and more retailers to expand their delivery service capabilities, which are and will continue to be critical to have ready during high traffic shopping days.”
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 Mulligan. In addition to same-day delivery capabilities, Target will also leverage Shipt’s expertise as the company enhances and strengthens its supply chain, including integration with the recently acquired transportation technology company, Grand Junction.
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, company officials said, and 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.