Target Boosts Grocery Delivery -- WSJ
December 14 2017 - 2:02AM
Dow Jones News
By Khadeeja Safdar
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 14, 2017).
Target Corp. is paying $550 million to acquire grocery delivery
startup Shipt Inc., moving to match services that have been rolled
out by rivals Amazon.com Inc. and Wal-Mart Stores Inc.
Shipt, like rival Instacart, uses thousands of contractors to
buy products at retail stores and deliver them to customers. It
charges a $99 membership fee and its shoppers buys products from
local stores, including grocers like Kroger Co. and Costco
Wholesale Corp. Shipt typically sells items at a slight premium to
the in-store price, and charges delivery fees for orders less than
$35.
For Target, the deal helps the company quickly expand its
delivery services, an area where rivals have been aggressively
doubling down. Wal-Mart, which sells far more groceries, has
expanded curbside grocery pickup this year and programs to make
home grocery deliveries. Amazon has upended the grocery market with
its acquisition of Whole Foods and rapid expansion of its Pantry
and Fresh delivery services.
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. Amazon already makes up more than half of
online food orders through its Fresh, Prime and Prime Now
services.
Target said the acquisition would allow it to offer same-day
delivery services in about half of its Target stores by early 2018.
It plans to have the service in all major markets before next
year's holiday season. Currently, the retailer has used a
partnership with Instacart to deliver groceries in three
markets.
Shipt, which was founded in 2014 in Birmingham, Ala, currently
offers its service in more than 70 cities through 20,000 shoppers.
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.
The acquisition puts Target "several years ahead" in its efforts
to offer delivery services to customers, said John Mulligan,
Target's chief operating officer. "They have built their business
model based on the customer experience through the entirety of the
purchase pipeline."
Executives didn't disclose whether Shipt is profitable or how
much revenue it is expected to generate this year. Target said it
expects the transaction to add to its earnings starting in
2018.
Target said Shipt will operate as a subsidiary and seek to
maintain its partnerships with other chains, but it won't utilize
the customer data of other retailers on the platform. "We're going
to be very respectful of the data of other companies," said Mr.
Mulligan.
Target has been catching up to rivals after coming late to some
aspects of e-commerce. The company outsourced nearly all of its
online operations to Amazon in 2001 before ending the relationship
in 2011. It has partnered with several e-commerce companies over
the years and considered acquiring some. Earlier this year, it
bought a small logistics software, Grand Junction, to help it
expand its same-day delivery offering for in-store purchases.
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.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
December 14, 2017 02:47 ET (07:47 GMT)
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