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Why Target Spent Half A Billion On This Start Up

Why Target Spent Half A Billion On This Start Up

In an effort to fight back against Amazon, Target is spending $550 million on Instacart competitor Shipt.

Target made the announcement Wednesday morning that it would be making one of its biggest acquisitions in recent history by acquiring Shipt, a start-up out of Birmingham, Ala. that delivers groceries the same day they are ordered by customers.

Like Instacart, Shipt partners with brick-and-mortar grocery store chains and sends workers in to collect orders of their shelves and deliver them to customer’s doors.

Target will join the Shipt marketplace, and eventually, Target will offer Shipt’s same-day delivery service on target.com and the Target app.

Currently, Shipt customers pay $99 a year for unlimited deliveries from partners that include Harris Teeter, Meijer, and Texas-based grocery giant H-E-B, and operates in 72 cities with plans to be in 140 markets, including most major U.S. metro areas, by the end of 2018. As part of the acquisition deal with Target, Shipt will continue to serve its other retail partners.

The deal is the latest move by Target to modernize its logistics and fulfillment efforts. Targets other initiatives include curbside pickup and using its physical stores as fulfillment centers for online orders.

Early in 2018, Target’s customers who want to use the Shipt service will have to pay for a Shipt membership and order via the Shipt platform. Half of Target’s 1,800 stores will be on the Shipt platform by summer, and all stores are expected to be on board by next year’s holiday season.

Target plans to eventually offer same-day deliver on its own website and app, however, Target’s chief operating officer, John Mulligan, said in a call to reporters that it is too early to offer any details on how much the company will charge customers for same-day delivery when the time comes.

The acquisition also comes not long after Amazon closed its acquisition of Whole Foods, a move that shocked big retailers and grocers and made it clear that grocery delivery was moving more into the mainstream.

With Shipt, Target will also offer a selection of other products in addition to groceries, and plans to expand that selection over time. Same-day delivery of groceries and a range of homewares to electronics would make Target a more credible threat to the Amazon juggernaut.

“We believe that if you deliver groceries, you can deliver anything,” said Shipt founder and CEO Bill Smith.

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