Target has agreed to buy tech startup Shipt as it bids to become better with its same-day delivery to maintain pace with its biggest rivals.
The retailer, looking to compete better with Walmart and Amazon said Wednesday it agreed to pay $550 million for Shipt in an all cash deal. This becomes Target’s biggest acquisition of late.
With its purchase, Target is planning to have same-day delivery available in close to half its 1,600 stores by the summer of 2018 prior to a roll-out to almost its entire lineup of stores by the 2018 Christmas season.
Shipt is to become a Target wholly-owned subsidiary that will continue soliciting business from retailers, and continue to work with chains like Kroger and Costco by making the items at any store available online.
When clients place orders with Shipt, the service sends one of its more than 20,000 shoppers to a store to pick up the items and deliver them. Shipt was founded in Alabama in 2014 and charges $99 per year for an unlimited number of deliveries.
The acquisition marks a ratcheting up of the efforts by Target to speed up its delivery service. About three months ago, the discount retailer said it would acquire Grand Junction, a startup based in San Francisco that connects retailers as well as other distributors to a network that has over 700 carriers in North America.
Walmart is rolling out its grocery pickup at more of its stores and looking at its own same-day delivery service. Amazon is making moves of a similar nature with more expected following its Whole Foods acquisition this past summer.
Therefore, Target has little choice but to increase its pace, and the discount retailer wants to maintain the growth of its business online, which grew during the last quarter by 24%.
Target has been carrying out a pilot program for same-day deliveries at its Manhattan TriBeCa store that has been led by its recent acquisition Grand Junction.
The acquisition makes Shipt a far bigger player in the current delivery wars and will likely begin narrowing the gap with Instacart a much larger rival, with which Target is a current partner in three large markets.
Shipt, whose team of management will remain and operate independently in Birmingham, Alabama, is now serving 70 markets in the U.S. in comparison to only 30 one year ago.