Birmingham, AL-based Shipt, a three-year-old grocery delivery company that competes with Instacart and AmazonFresh, has been acquired by Target for $550 million in cash. The acquisition of Shipt’s delivery platform and on-demand shopper network will help Target compete with the likes of Amazon, along with recently rolled out same-day services of Walmart and others.
Shipt was founded in 2014 by Bill Smith, a young serial entrepreneur, and launched in its first market in 2015. Named a 2017 Ernst & Young Entrepreneur of the Year, Smith formerly built and exited a card services company. He self-funded Shipt at first and then raised about $60 million in outside funding to expand to the company’s current 72 markets.
Much of their initial success came from launching in markets that were originally underserved by rivals like Instacart — the first was their hometown in Alabama, and they rapidly spread across the Southeast and middle of the country.
The company employs about 270 and has a network of over 20,000 shoppers who serve more than 20 million families with its membership-based delivery service. Shipt will continue to operate independently as a Target subsidiary and will keep its employees and Birmingham headquarters, along with a satellite San Francisco office; Smith will remain CEO.
This year’s record-breaking Cyber Monday sales — at over $6 billion, it more than doubled last year’s total — shows how consumers are increasingly turning online for all their retail needs. At first, Target says it will offer same-day delivery on groceries, essentials, home, and electronics products; the plan is to offer the service at approximately half of Target stores by early next year.
They say they plan to expand to the majority of stores within a year and cover all major product categories by the end of 2019.
Target shoppers who want to use the service will have to pay Shipt’s normal annual membership fee of $99, at least at first.
“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 John Mulligan, Target’s executive vice president and COO, in a statement.
Smith also emphasized that the personalized, high-quality customer service that Shipt has focused on throughout its growth will remain the same.
“For instance, we make sure that the same person who shops for our customers’ items is also the person who delivers those items. We also recently built a rating system that allows customers to give feedback in real-time. If they rate a shopper highly, they are more likely to be paired with them again,” says Smith.
Now, they’ll focus on expanding to even more markets across the country.
“It’s win-win for us. We get to continue growing this company we love, at a more accelerated pace. With Target’s support, we’ll be able to reach more customers in more markets across the country. We’ll also continue to grow our marketplace approach with new and existing partners, a strategy that drives scale and efficiencies for all,” says Smith.