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Target bets on same-day delivery with big acquisition

The delivery wars keep ramping up, with the latest salvo being fired by Target Corp.

In one of the largest acquisitions in its history, Target has agreed to acquire Shipt, a leading online same-day delivery platform, for $550 million in cash. The acquisition will significantly expand Target’s digital fulfillment efforts, bringing same-day delivery services to shoppers at approximately half of Target stores by early 2018. The service will be available from most of Target's stores, and in all major markets, before the 2018 holiday season.

"With Shipt's network of local shoppers and their current market penetration, we will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country," said Target executive VP and COO John Mulligan.

The acquisition comes as Walmart and Amazon have both been expanding their own same-day delivery offerings. In addition to giving a big boost to Target's delivery options and online growth, the deal also makes Shipt a more important player among its peers, which include its main rival, Instacart.

Founded in 2014, Shipt will be a wholly owned Target subsidiary and will continue to run its business independently. Its offices will remain in Birmingham, Alabama, and San Francisco, with Shipt founder and CEO Bill Smith at the helm. It plans to expand partnerships with other retailers seeking same-day, last-mile capabilities.

Shipt leverages an extensive network of over 20,000 personal shoppers to fulfill orders from various retailers and deliver within hours in more than 72 markets. Through Shipt's app, members are connected to local, shoppers who help facilitate a quality delivery experience that is personalized, efficient and convenient, the company said.

Target said it will leverage Shipt's expertise as the retailer continues to enhance and strengthen its supply chain, including integration with the recently acquired transportation technology company, Grand Junction, which is also focused on same-day delivery.

"This acquisition will mark an important milestone in an ambitious strategy we laid out in early 2017, which included strengthening Target’s supply chain and digital capabilities to make shopping at Target easier, more reliable and more convenient for our guests," Target COO Mark Mulligan stated in a blog on the retailer'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's same-day delivery via Instacart will initially focus on groceries, essentials, home, electronics and other products. But it will expand to encompass other major product categories in time.

Michelle Grant, head of retailing at business intelligence company Euromonitor International, commented that Target's decision to buy Shipt was a smart move that will help ensure the discounter stays in the grocery category.

"Target has longed struggled in this category, but seems to be turning the corner," Grant said. "Its third quarter results showed an increase in comparable sales for food and beverage, especially in areas it has invested: fresh, organics, in-stocks and labor. Having an ‘instant’ delivery option, whether it's click and collect or hyperlocal, is tablestakes now for grocers.”
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