19 December 2017

ACQUIRE - Target buys Shipt for US$550M Cash

Target ramps up same day delivery to compete with Walmart and Amazon

According to TechCrunch, Target's acquisition of the Birmingham-based online grocery delivery service Shipt, marks the largest known acquisition of a venture-backed company in the state of Alabama.

According to an article in RetailDive today, Daphne Howland expects Shipt, to be a wholly owned Target subsidiary, operating independently under CEO Bill Smith. The company was founded in 2014 and operates in more than 72 U.S. markets. The online service enlists a network of more than 20,000 "shoppers" who pick out customers' orders and deliver them for an average of $20 per order. 

Back in August, Target acquired Grand Junction, a San Francisco based transportation technology service founded the same year as Shipt (2014). According to Ms. Howland, the purchase of these two operations is based on two essential ideas: that retailers know their inventory really well and that a slew of local and regional delivery companies already exist. The key has been to match those two things up, via technology. In both cases, Target is accelerating its same-day services by acquiring technology, infrastructure and talent from established players.

Sucharita Kodali, Vice President & Principal Analyst at Forrester Research, published her prognosis for the Target acquisition of Shipt, in Forbes magazine yesterday. She continues to see issues with adoption of paid delivery services and expects to see the free delivery service offered by Walmart as well as Amazon Prime, as services that will be hard to beat.  

Why this is important:
It is clear that retailers are acquiring emerging companies that already exist with expertise, management talent and ecosystems which allows the retailer to gain traction quickly. Building your own technology and infrastructure is too costly and time consuming to be an appropriate competitive response in this environment.

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