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Following its acquisition of Shipt at the end of last year, Target will begin offering same-day delivery from stores in Alabama and Florida.

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Target has acquired Shipt, an online same-day delivery platform, in a deal valued at $550m.

Enables Target to offer same-day delivery

This acquisition significantly advances Target’s digital fulfilment capabilities, enabling it to offer same-day delivery services to its shoppers at around half of its stores by early 2018. The retailer plans to extend this service to almost all of its stores before the 2018 holiday season.

Membership based delivery model

Shipt is a membership-based grocery marketplace that delivers fresh foods and household essentials from a range of retailers. Members pay an annual fee of $99, and order via an app, providing unlimited free delivery for orders over $35. The company uses a network of 22,000 ‘Shipt Shoppers’ to pick and deliver orders across 72 US markets. Target’s customers will need to pay the annual membership fee to be able to use the service, which could deter some customers who are already Amazon Prime members. Recently it expanded its partnership with Lidl for grocery delivery in the US, and also works with major retailers such as Costco, Publix and Meijer. It remains unclear how the deal will impact Shipt's relationship with these businesses, many of which are Target's competitors. 

All major product categories to be offered by the end of 2019

At launch, Target will offer same-day delivery of groceries, essentials, home, electronics and other products. By the end of 2019, Target expects to offer all major product categories through the service. This will be a major change for Shipt which has focused on grocery deliveries to date. The acquisition is in line with the retailer’s plans to improve its fulfilment capabilities. Earlier this year it acquired Grand Junction to help it offer same-day delivery in the New York market. The acquisition enables Target to reduce delivery lead times from days to hours, accelerating its ability to offer same-day delivery across the entire US.

Acquisition enables Shipt to scale up its model

Shipt will operate as a wholly-owned subsidiary of Target and will continue to run its business independently. It will continue to work with other retailers and develop new partnerships with companies seeking to offer same-day delivery. Although Target could have opted to partner with Shipt in the same way as other retailers have, by acquiring the company it will be able to significantly accelerate its ability to offer same-day delivery and help Shipt scale its business model. Shipt CEO, Bill Smith, will remain in his current role and will report to Target’s Chief Operating Officer, John Mulligan. Target will also aim to optimise Shipt’s expertise as it strengthens its supply chain, including integration with Grand Junction.

Source: Target, Shipt

Last mile: the new battleground

Last mile, same-day delivery has become the new battleground in US ecommerce. Recently Walmart acquired Parcel to enable same-day delivery in the New York market. It has also partnered with Uber and Lyft to offer same-day delivery from its stores, while also rapidly expanding its grocery pick-up service. Target has been making progress in this area as part of its strategic plan, having lagged many of its competitors for some time. It has been working with Instacart in selected markets to offer same-day delivery, testing a ‘Drive Up’ pickup service at selected stores, and developing its ‘Restock’ program for next-day delivery. Both Walmart and Target have focused on reducing delivery lead times as shoppers’ expectations around fast and convenient delivery have continued to be reset. The growth and development of programs such as Amazon Prime and Prime Now, along with third-party delivery services such as Instacart and Shipt, have been central to this.

Since Amazon’s acquisition of Whole Foods Market earlier this year, there has been a significant increase in activity in this space, with several grocery retailers partnering with companies such as Shipt and Instacart to offer same-day delivery for the first time. We expect this deal will further intensify retailers’ efforts in this area.

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Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Target. He is also responsible for shaping IGD's research program across North America. Contact Stewart at stewart.samuel@igd.com for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

Target has launched Wallet within its mobile app, enabling shoppers to pay with their REDcard with a single scan of their phones at the checkout.

Four times faster than other payment types

This is the latest enhancement to its mobile app by Target, having successfully integrated its Cartwheel savings program earlier this year. The launch of Wallet in the Target app is expected to significantly improve checkout speeds, with processing times up to four times faster than other payment types.

Source: Target

Convenience of incorporating digital savings

Wallet also combines Target’s digital savings programs, Cartwheel and Weekly Ad coupons, with the REDcard 5% discount. This provides shoppers with increased ease and convenience in terms of providing access to relevant promotions at the point of purchase. Wallet is expected to be rolled-out to non REDcard holders in 2018.

Looking to replicate success of Walmart Pay

Target will be hoping to replicate the success Walmart has achieved with Walmart Pay. Launched in late 2015, it has grown to be the second largest mobile payment solution in the US behind Apple Pay. It also offers shoppers the benefit of being incorporated into the retailer’s mobile app, along with programs such as Savings Catcher and Mobile Express Pharmacy. Coupled with the retailer’s Scan & Go technology, it also offers shoppers an almost ‘checkout-free’ experience.

Driving digital innovation

Target has been pushing hard with digital-led initiatives over the last few months. Last month, it launched Target Restock, which offers next day delivery of essential items, while it continues to test Drive Up, a service which enables shoppers to have their online orders brought out to their cars. It has also partnered with Google, offering two-day delivery through Google Express ahead of introducing voice based ordering next year, and is working with Pinterest on a visual search pilot.

Learn more about Target and the top retail trends by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Target. He is also responsible for shaping IGD's research program across North America. Contact Stewart at stewart.samuel@igd.com for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

As one of the key trading days in the year, and the unofficial start to the holiday season, we look at how Walmart and Target set out to win Black Friday, and what learnings can be applied to other large-scale in-store events.

Walmart: colour coding to make it easy to find key departments

While its stores did not open until 6pm, Walmart’s Black Friday deals started at 12.01am on Thanksgiving Day morning on Walmart.com. To help customers in-store, it introduced colour-coded departments, highlighting electronics, toys, home and clothing, with the same colour coding used within its Black Friday flyer. This made it easy for customers to head towards the relevant departments to shop specific deals, especially given the volume of customers seen in stores. 

Source: Walmart

Walmart: local in-store maps to help shoppers

Given the scale of Walmart's stores, and the high level of traffic on Black Friday, providing in-store maps was an important element. Walmart made store specific maps available with the Walmart app, which also featured the relevant colour codes. Providing them within the app is a convenient solution for its shoppers and reflects Walmart's focus on providing its customers with locally relevant tools. 

Source: Walmart

Target: maximising Black Friday itself

Target also made its Black Friday deals available online on Thanksgiving Day, with stores opening at 6pm. However, its stores closed at midnight, reflecting the tradition for many shoppers to make Black Friday the traditional shopping day. Over the past several years, Black Friday has been the day when Target has seen the most shopping it its stores over the holiday weekend. To help manage the larger crowds, Target also had designated team members positioned within its stores as service ambassadors and to distribute tickets for some of its ‘doorbusters’.

Source: Target

Target: promotion to drive future traffic

To support this, the retailer was offering a future 20% saving based on shoppers spending over $50 on Black Friday only. Not only did this help to potentially shift sales from Thanksgiving Day to Black Friday, but will also help to drive traffic when its competitors will be looking to capitalise on their promotional investments over the next two weeks.

Source: Target

Optimising organisational capabilities: making it a multi-channel event

While heading to the stores on Black Friday is a long-held tradition associated with the Thanksgiving Day holiday, the growth and development of ecommerce has made it a multi-channel event. Both retailers emphasised their capabilities in this area, including store pickup and in-store ordering for products out of stock. The advent of Black Friday ‘preview sales’ and ‘Cyber Monday’ have also impacted the intensity of Black Friday itself.

Learn more about US market trends by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Walmart and Target. He is also responsible for shaping IGD's research program across North America. Contact Stewart at stewart.samuel@igd.com for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

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