CHICAGO (Reuters) - Target Corp (TGT.N) will buy grocery delivery platform Shipt Inc for $550 million in cash, it said on Wednesday, promising same-day delivery of all goods by the end of 2019 to lure customers that have turned to online retailers such as Amazon.com Inc (AMZN.O).
The Minneapolis-based big-box retailer said it would roll out same-day delivery for groceries, essentials, home products, electronics and other items at about half its stores by early 2018.
Shipt’s services, which cost $99 a year for unlimited deliveries made by more than 20,000 personal shoppers, will be at most Target stores before the 2018 holiday shopping season, the retailer said.
Target, like other traditional retailers, has invested heavily this year in its digital business and delivery options. Amazon.com’s purchase of Whole Foods has rattled the grocery industry on worries the e-commerce giant will disrupt the business in the same way it did with books and electronics.
“That Target will have this service in place during 2018 will significantly improve its online competitive position as the service is integrated and rolled out to customers,” said Moody’s analyst Charlie O‘Shea. “This is yet another example of a brick-and-mortar retailer leveraging its physical assets to improve its online offerings.”
Target, which has been trying to overhaul its grocery business, said the Shipt acquisition would also strengthen its supply chain.
Shares in Target were up 1.4 percent in morning trading on Wednesday.
“We will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country,” Target Chief Operating Officer John Mulligan said. He expects the deal to be immaterial to Target’s near-term results and modestly accretive to earnings per share in 2018.
Mulligan said Birmingham, Alabama-based Shipt would continue to work with other retailers and provide its services to customers who are not shopping at Target.
Shipt’s founder and Chief Executive Bill Smith said on a call that Target would not have access to data of customers using Shipt to shop at other retailers on the platform, which include Kroger Co (KR.N) and Costco Wholesale Corp (COST.O).
Target said in August it would buy San Francisco-based transportation software firm Grand Junction to speed up delivery and work on Target’s same-day delivery pilot in Tribeca, New York.
Reporting by Richa Naidu; Editing by Susan Thomas