Target has agreed to acquire online startup Shipt for $550 million, making a major move into same-day delivery on the heels of Amazon’s acquisition of Whole Foods.
The deal announced Wednesday is one of the largest in Target’s recent history, positioning the retailer to offer a delivery service comparable to those of Amazon-Whole Foods and Walmart. Shipt delivers groceries on the same day customers place an order, using a network of 20,000 “shoppers,” and charges $99 a year for unlimited deliveries.
By next summer, about half of Target’s 1,800 stores will have joined the Shipt platform ahead of a roll-out to nearly the entire fleet by the 2018 Christmas season.
“Same-day delivery is a service that our guests are asking for more and more often,” John Mulligan, Target’s chief operating officer, said on the company’s website. “By acquiring Shipt, we’ll be able to take advantage of our network of stores and Shipt’s technology platform and shopper community to quickly offer same-day delivery to millions of our guests.”
Target has been seeking to strengthen its supply chain and digital capabilities, acquiring Grand Junction, a last-mile transportation technology company, earlier this year. It also recently launched its own curbside pickup tests at about 50 stores.
Target’s online business grew with 24% last quarter. “With Walmart rolling out grocery pickup at many more stores and looking at same-day delivery, and Amazon making similar moves … Target has no choice but to pick up the pace,” Fortune said.
“We believe we will be able to leap several years ahead, significantly accelerating our nationwide delivery,” Mulligan told reporters on a conference call.
Shipt, which was founded in 2014 in Alabama, has raised about $65 million in venture capital from investment firms, including Greycroft Partners. It competes with the larger Instacart and its partners include Costco and Kroger.
“With Target’s support, we’ll be able to reach more customers in more markets across the country,” Shipt CEO Bill Smith said. “We’ll also continue to grow our marketplace approach with new and existing partners, a strategy that drives scale and efficiencies for all.”