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Target's Shipt acquisition reflects changing shipping trends (TGT)
BI Intelligence
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Target agreed on Wednesday to purchase grocery delivery startup Shipt, according to Bloomberg. Target plans to use the acquisition to roll out same-day delivery to about 900 stores by the summer, and hopes to have the option available in the majority of its stores in time for the 2018 holiday season.
The service will initially be exclusively for grocery, household essentials, and electronics, but the retailer plans to include all product groups by the end of 2019. Shipt will also continue to solicit business from other retailers, and will still be able to work with existing partners, such as Costco and Kroger.
Target has been ramping up same-day delivery in the second half of 2017, as it acquired Grand Junction, a startup that connects retailers to carriers, in August. Grand Junction handled same-day delivery services for Target’s Tribeca location, which led to an increase in basket sizes by six-times the standard transaction at that location. Target is likely hoping that this acquisition, along with its purchase of Shipt, will bring similar success to all of its stores.
Simultaneously, Amazon announced that it's expanding its same- and one-day delivery services to 3,000 more cities, bringing the total to 8,000. Amazon has been rapidly building out its same-day delivery services, as it only provided 1,000 cities with the option last year. The expansion of Amazon’s same- and one- day delivery capabilities is likely adding pressure to larger retailers, such as Target and Walmart, to have similar offerings.
Same-day delivery is becoming the new standard of fast shipping. Consumers' opinions on fast shipping are evolving rapidly; three- to four-day shipping was the standard in 2015, but now anything over two days is considered slow. Retailers are recognizing this — even Walmart acquired same-day logistics startup Parcel to compete in this area.
Additionally, same-day delivery is highly rated among consumers as a feature that can increase customer loyalty, so offering this perk could prevent customers from switching to competitors that have it. It may also be a large enough draw to prevent customers from moving to retailers with different features, such as voice shopping or mobile self-checkout.
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