The battle between Amazon and Walmart is widely known, but Target is now entering the space in a new way. Target announced its plans to buy Shipt, a grocery delivery startup, in a $550 million all-cash deal. Created in 2014, Shipt lets members order groceries online from various supermarkets and then sends a shopper to pick up and delivery the items on the same day.
Shipt is based in Birmingham, Alabama, and already has partnerships with some of the big grocery chains across the country, including Costco, Kroger, Publix, and HEB. Under the deal, Shipt will be a wholly owned Target subsidiary and will continue to operate independently while serving Target’s new same-day delivery efforts.
Target already offers same-day delivery in New York City, but online retail seemingly becomes more competitive each day. Target’s acquisition follows Walmart’s recent purchase of Parcel, a New York City-based delivery company that Walmart plans to use to offer same-day delivery in the New York metro area. Meanwhile, Amazon offers same-day delivery in thousands of markets cross the country, and its $99-per-year Prime membership offers free two-day shipping to most areas.
Using Shipt’s infrastructure, Target expects to offer same-day delivery of groceries, household essentials, and electronics in half of its stores across the country by the summer of 2018. Target plans to offer the service at the majority of its stores by the 2018 holiday season and will expand the products that can be ordered for same-day delivery through 2019.
The kicker here is the cost of Target’s new delivery service. Shipt already charges $99 per year for members to get unlimited same-day grocery deliveries, and according to a Bloomberg report, Target plans to use that same pricing model for now. It’s akin to Amazon’s Prime membership fee, but Target won’t initially offer as many same-day-delivery products as Amazon (nor does it provide as many other perks as Amazon Prime does). Target is also working on integrating Shipt’s ordering technology into its website and mobile app.
The ultimate goal is to get products to customers as quickly as possible. Brick-and-mortar stores have always had the upper hand in this area since customers can walk in, buy what they need, and walk out with it immediately. However, Amazon and other online retailers have closed the instant-gratification gap enormously with delivery times that seem to shorten every year. Walmart, Best Buy, and now Target are all experimenting with ways to hold their own next to online retailers, and their brick-and-mortar stores may help them do that. Target, for example, has more than 1,800 stores around the country, allowing it to reach more customers in more areas than Amazon may be able to with its dispersed warehouses.
Target’s acquisition of Shipt is expected to close before the end of 2017.
from Ars Technica http://ift.tt/2AXZGtD
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