How the Shipt-Target Deal Could Affect Birmingham

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Andrew Yeager,WBHM

Target wants in on the same-day delivery business. And last week it announced it’s spending $550 million to buy the Birmingham-based startup, Shipt. With Shipt, users order grocery items through an app. And the company sends a shopper to the store to buy those items and deliver them to your house. Some believe Target’s acquisition of Shipt will open the door to many other tech companies flourishing in Birmingham.

Like a lot of retail giants, Target offers same-day pick up in all of its stores. It also offers online shipping. But over the last few years, Target’s been aggressively looking at ways to make shopping even more convenient. And what’s more convenient than ordering online and having your stuff delivered the same day? To that end, Target is buying Shipt for $550 million. Eddie Baeb, a Target spokesman, said Shipt will allow them to add groceries, electronics and home furnishing products to start, with other items added later.

Shipt started in 2014 as a small Birmingham start-up. It works like this: customers order items on an app. The company then sends a shopper out to the store to get everything on the list. They pick through things like parlsey and frozen waffles and eggs for you. Today those Shipt shoppers in green t-shirts are in stores in 72 cities. And with Target’s acquisition, it’ll be in hundreds of Target stores by early 2018 and nationwide in 2019.

Under the deal, Shipt can keep growing its roster of retailers, which now includes stores like Publix, Piggly Wiggly, Costco and Whole Foods. That Target would buy a company that partners with some of its competitors seemed a little odd to Andrew Frank. He’s a tech analyst with Gartner. But he says the biggest competition is Amazon. “To me it reflects the idea that retailers consider perhaps Amazon a more important competitor to reckon with than one another.”

Frank says some people looking for same-day delivery service will have to choose: Amazon Prime or Shipt. Both charge an annual $99 membership fee. But with Shipt, there’s a small upcharge –say 30 cents tacked onto the price of a loaf of bread – to cover the cost of picking and packing your stuff. That won’t change for Shipt subscribers. And the $99 annual fee, at least, will apply to Target’s same-day delivery service, too. “I think that people will have to decide who they want to give $99 a year to because I don’t think they’re gonna give it to everyone,” he said.

Still, the fact that Shipt is helping a retail giant like Target compete is huge, says Deon Gordon, president of Tech Birmingham. Shipt will have a lot more business, and it’ll probably need to hire more people to keep up with demand. Basically, Shipt’s success story is every app developer’s dream. Build it, grow it, and sell it for $550 million. Gordon said in the tech world, it is the largest acquisition in the state of Alabama.

Gordon says Shipt’s early success had already set off a wave of other start-ups around Birmingham. And with the Target acquisition, he says expect another domino effect: more venture capital money flowing through the city. And it’ll help the city attract the tech talent many of these companies need to go to the next level.

The city is on track to recruit top developers, he says. And look, Birmingham is no Silicon Valley. But the Shipt-Target deal, Gordon says, tells tech entrepreneurs they can still make it big in the Magic City. And with much cheaper rent.



Gigi Douban

Gigi Douban

News Director