Reports indicate that Target is set to purchase Shipt, an app-based delivery service, at a price of $550 million. The deal is expected to place Target in a better position to compete with Amazon. It also caps of a year where traditional retailers stepped up their e-commerce efforts by offering more delivery and in-store pickup options.
“This is continuing the trend we’ve seen this year of traditional brick-and-mortar retail not being willing to roll over and let Amazon take their market share. They all have the same goal: capture as much of each consumer’s dollar as they can,” JLL’s Justin Greider said.
Shipt was started three years ago and currently serves customers numbering approximately 20,00o. The shipping service already has partnerships with Costco, Kroger, HEB Grocery Co and Publix Super Markets. Discussions on the deal between Target and Shipt began in summer.
Convenience of online shopping
Target’s intended acquisition of Shipt coincides with big moves by other retailers such as Walmart and Publix Super Markets to spruce up their e-commerce initiatives and appeal to shoppers who have been lured by the convenience offered by Amazon. In some markets Amazon now delivers some items within an hour after ordering.
With the purchase of Shipt, Target will be in a better position to serve those shoppers who are seeking convenience and this will also assist in capturing a bigger grocery market share. In a survey conducted by Temando, a fulfilment software maker, about 80% of shoppers are interested in same-day shipping though only about 50% of retailers provide that. In a statement, the chief operating officer of Target, John Mulligan, said that Shipt will allow the retailer to reduce shipping time from days to hours.
Same-day delivery service
In about 50% of its stores, the acquisition of Shipt will allow Target to offer same-day delivery by summer next year. By the holiday season of 2018, the number of Target stores offering same-day delivery is expected to be in the majority. In this regard Target is introducing a service which will cost an annual fee of $99 which will allow an unlimited number deliveries for subscribers.
Initially the service will be restricted to categories such as electronics, household essentials and groceries before it encompasses all the major product groups in two years. Per Adobe Systems Inc, this holiday season has recorded a 17% increase in e-commerce sales. On Cyber Monday online merchants saw sales reach a figure of $6.59 billion.