Dive Brief:

• Target on Wednesday announced the acquisition of same-day delivery platform Shipt for $550 million in cash, one of the largest acquisitions in Target’s history, the company said in a blog post.
• Shipt, which will continue to operate independently under CEO Bill Smith, was founded in 2014 and operates in more than 72 U.S. markets. Shipt will be a wholly owned Target subsidiary, but its offices will remain in Birmingham, AL, and San Francisco. 
• At launch next spring, Target will offer same-day delivery of groceries, essentials, home, electronics and other products; by the end of 2019, it will include all major product categories, the company said.

Dive Insight:

Same-day delivery is the closest that e-commerce can get to an in-store purchase where shoppers walk away immediately with products. Shipt's model essentially takes that brick-and-mortar advantage and turns it into a service.

The company enlists a network of more than 20,000 "shoppers," who pick out customers’ orders. The same person shopping also makes the delivery, and when a match works well (based on Shipt’s rating system allowing customers to give feedback in real-time) the same shopper and customer are likely to paired again.

The acquisition is a move to accelerate Target's digital fulfillment efforts. According to the company, it will help bring same-day delivery services to about half of Target stores by early 2018. The service will be offered from the majority of Target stores, and in all major markets, before the holiday season next year.

In a Bullseye blog post question-and-answer with Target Chief Operating Officer John Mulligan and Shipt CEO Bill Smith, Mulligan said the acquisition will help the retailer meet a rising customer demand for a service that was already a priority outlined by the company early this year. Between Target's network of stores and Shipt's proprietary tech, as well as its community of shoppers, the mass merchant said it can bring same-day delivery to its customers nationwide.

Like the retailer’s earlier acquisition of San Francisco-based transportation technology company Grand Junction (also founded in 2014), the Shipt deal "accelerates its evolution and gives them another key omnichannel logistics capability," Profitero Senior Vice President of Strategy and Insights Keith Anderson told Retail Dive in an email.

"It will improve customer experience starting in early 2018 [and] underscores the growing importance of same-day delivery and the potential edge that store-based retailers have in some markets," he said.