This past June, a Utah newspaper reported that Amazon planned to spend $200 million on a single Salt Lake City distribution center. That was a record amount, but not all that much when you consider that the Seattle-based behemoth has sunk tens of billions of dollars (and counting) into its distribution infrastructure. By comparison, Target’s $550 million acquisition of home-delivery startup Shipt seems modest.
Good. Let’s keep it that way. As a fan of Target, I’m glad the retailer isn’t trying to outspend Amazon by spending billions of dollars to build out physical infrastructure and ramp up home-delivery capabilities in-house.
Target CEO Brian Cornell understands that the company’s primary business is retailing, not delivery. Shipt, on the other hand, specializes in meeting that challenge via its decentralized, Uber-like model. In a press release announcing the deal, Target noted that Shipt will continue to run as an independent business (albeit a wholly owned subsidiary).
This is as it should be. When retailers stray from what they do best, they tend to get in trouble. In today’s utterly unforgiving environment, such mistakes can even be fatal. Complementary acquisitions, though, can work. This deal is on track to make same-day delivery of things like groceries, home goods and electronics possible at all Target stores by the end of 2017.
I’m already a loyal Shipt user for when I can’t get to Publix. Now I have one more reason to keep that subscription.
There’s been some speculation recently of Amazon acquiring Target in 2018, but I can’t see them duplicating their back-end distribution network even if on the front-end Target has 75% of the country within 10 miles of a store. Now, Nordstrom, that’s a different story.