Target plans to buy Shipt for $550 Million

Target Corp. has agreed to purchase the grocery-delivery service, Shipt Inc., for $550 Million. This is to compete with Amazon.com and their same-day shipping and to become a real competitor.

Shipt is an internet-based app where customers pick their local grocery store, make a list, pay for someone to pick up the groceries, and get the groceries hand-delivered to their doorstep.

Buying Shipt helps Target further prove that they can become a real competitor in the same-day shipping game. In New York City, Target offers same-day delivery and can send orders from 1,400 locations. Other companies are also trying to compete like rivals Wal-Mart and Best Buy, also offering same-day services to keep up with Amazon.

Kantar Retail analyst Robin Sherk said, “One-stop shopping was convenient in the 1990s, but for today’s families, you have to be able to do instant food delivery as well. It’s also a realization that Amazon, this big technology disruptor, has entered the consumer landscape. Amazon has become a giant that offers every service imaginable, which is difficult for other businesses to stay relevant.”

“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,” John Mulligan, Target’s chief operating officer, said in a statement.

This deal will give Target the ability to have same-day delivery available to half of its 1,834 locations by next summer. The service will be $99 a year for unlimited deliveries. The service will initially have categories like groceries, household items, and electronics before expanding further into more product groups.

Charlie O’Shea, an analyst at Moody’s Corp., stated in a note, “while it will not affect Target’s capability this holiday season, the fact that Target will have this service in place during 2018 will significantly improve its online competitive position.”

It has been seen that more and more customers prefer to shop online. Amazon has purchased Whole Foods and has put its hand into retail which has also sent other retailers in a frenzy to keep up. According to Adobe Systems Inc., E-commerce sales are up 17 percent this holiday season, and online stores made a record $6.59 billion on Cyber Monday alone.

The Target and Shipt deal is expected to close by the end of the year. Target has stated in its 3rd quarter report that their E-commerce sales have already jumped 24 percent. Shipt and Target’s partnership is already proving to be promising; 2018 will be a big year for online shopping.

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