Target (NYSE:TGT) will be buying the tech start-up company Shipt, in the hopes of installing and bettering its same-day delivery service.
Target’s largest competitors, Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) are already well-versed in the area, so Target needs to work fast if it doesn’t want to fall behind any further. Its first attempt to do so is through this $550 million purchase of Shipt, which should help Target to bring same-day delivery to its 1,800 locations by the Christmas season for 2018.
Shipt currently works with Kroger (NYSE:KR) and Costco (NASDAQ:COST) and will continue to do so even after it is fully acquired by Target.
Customers can place orders on Shipt and someone called a “shopper” for Shipt will be sent to the store to get all of the items. The shopper will then deliver the items to the customer. Shipt charges $99 a year for unlimited deliveries.
Target’s operations chief, John Mulligan, believes that Target “will be able to leap several years ahead, significantly accelerating [its] nationwide delivery.” He expects that the company will be able to bring its delivery service down to a matter of hours, rather than its current days.
The deal will also be beneficial to Shipt, giving it a better competitive edge against its rival Instacart.
Target will start by offering same-day deliveries for groceries, home, essentials, and electronics. Over the course of the next two years, that reach will be increased to all major product categories at Target. The deal will eventually start to benefit Target’s online growth, although in the short-term it is unlikely to see many financial results to begin with.
Featured Image: twitter
