Customers ordering through Shipt would pay the same prices charged customers shopping in Target stores. CEO Bill Smith will remain in his current role, and will report to Target Chief Operating Officer, John Mulligan.
As for Shipt, the deal will make it a much bigger player in the delivery wars and likely begin to narrow the gap with much bigger rival Instacart, with which Target now partners.
"First, it gives Target the infrastructure and operational capacity to grow its market share in the online grocery channel", said Neil Saunders, managing director of GlobalData Retail.
Meanwhile, on the same day that Target announced its acquisition of Shipt, Amazon had an announcement of its own. Earlier this year, it bought a small logistics software, Grand Junction, to help it expand its same-day delivery offering for in-store purchases.
With Walmart rolling out grocery pickup at many more stores and looking at same-day delivery, and Amazon making similar moves with more expected in the wake of its acquisition of Whole Foods this year, Target has no choice but to pick up the pace.
Target said it expected the deal to be completed before the end of this year.
Shipt, whose management team will remain in place and will operate independently in its hometown of Birmingham, Ala., now serves 70 US markets, compared to 30 a year ago. This all-cash acquisition will be immaterial to Target's near-term financial results. Forward-looking statements speak only as of the date they are made, and Target does not undertake any obligation to update any forward-looking statement. By summer, about half of Target's 1,800 stores will have joined the Shipt platform. Since 1946, Target has given 5 percent of its profit to communities, which today equals millions of dollars a week. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.
Founded three years ago in Alabama, Shipt is a membership-based grocery marketplace that uses "personal shoppers" to fill online orders from shops. The company now has offices in Birmingham, AL, and San Francisco, CA.