Target buys Shipt to boost same-day delivery service

Last Updated Dec 14, 2017 11:06 AM EST

NEW YORK - Target (TGT) plans to boost its same-day delivery capability by paying $550 million for Shipt, its latest move to try to catch up with Amazon (AMZN).

Shipt delivers groceries to its members, who pay $99 a year. Target said Wednesday that it will add more products to the service next year, such as home goods and electronics, and most of its in-store products will be available on Shipt by 2019. 

Target shoppers will have to make orders through Shipt's app or website and pay the annual fee to get same-day delivery. There are plans to incorporate Shipt into Target's app and website, but the companies did not say when that would happen.

"With Shipt's network of local shoppers and their current market penetration, we will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country," said John Mulligan, chief operating officer for Target, in a statement.

Retailers have been looking for ways to speed up delivery as they try to match the fast service offered by Amazon and amid the explosion in ecommerce. Earlier this year, Target bought delivery logistics company Grand Junction to offer same-day service to in-store shoppers. It also has hired executives from Walmart (WMT) and General Mills (GIS) to help grow its grocery business.

Minneapolis-based Target expects half of its 1,800 stores to offer Shipt's service by next summer. It'll be available to most of its stores by the 2018 holiday shopping season.

Shipt, founded in 2014, will operate separately from Target and remain in its headquarters in Birmingham, Alabama. Shipt said it will keep working with other retailers, such as Costco (COST) and Meijer, and Shipt said it won't share customer data from Target's rivals with its new owner.

Target said it expected the deal to be completed before the end of this year.