
Target to Buy Shipt for $550M - sedtrader
https://www.bloomberg.com/news/articles/2017-12-13/target-to-buy-shipt-for-550-million-in-bet-on-same-day-delivery
======
harrisreynolds
I was employee #2 at Shipt and the early CTO. Was really great seeing us go
from absolutely nothing to a strong platform, great team and lots of
customers.

In telling our story early on I would talk about how Lyft was #2 in the ride-
hailing space and was a billion dollar company. If we could be #2 in the
grocery delivery space we should command a comparable valuation to Instacart
(meaning we'd be worth a fraction of their valuation, but it would still be
great by any standard).

And we did exactly this [1]. With much less cash (60M vs 800M+) and in a very
short period of time (we literally hadn't started building this three years
ago from today).

I haven't been involved in the past couple years, but am still friends with
the founder and several on the team; and had a bit of equity (whohoo! :-).

Really happy for everyone involved and for Birmingham and Alabama!

[1] Here are my ratios based on recent valuations:

Lyft/Uber, 11B/70B = .16

Shipt/Instacart, 550M/3.4B = .16

Astonishingly accurate! :-)

~~~
dvt
Congrats on your exit! Any lessons learned? Would love to pick your brain :)

~~~
notjustanymike
He probably learned to stay involved longer :)

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jonknee
Shipt is a Birmingham based company, quite the positive news day for Alabama!

~~~
esturk
If Amazon move its 2nd HQ to Alabama, how would it impact Shipt?

~~~
Dirlewanger
I don't know about Shipt, but their moving there would start moving the marks
on a lot of quality-of-life measurements and perhaps lift it out of dead last
for nearly everything.

~~~
chimmy_chonga
Hey now, we usually beat Mississippi

~~~
pfranz
For those who don't know
[https://en.wikipedia.org/wiki/Thank_God_for_Mississippi](https://en.wikipedia.org/wiki/Thank_God_for_Mississippi)

------
sedtrader
Smart decision by Target. Certainly a necessary move to simply keep pace with
walmart, bestbuy, Amazon, etc. Doesn't really provide a clear edge, but allows
Target to stay competitive in the market for the near future. Interesting
decision by Shipt, a little surprised they couldn't get at least 1 billion for
the purchase considering how big the e-commerce market is and its expected
long term growth.

~~~
QML
Do stores really have to be physical anymore? I think that’s what is holding
Target back.

------
saturdaysaint
Since I haven't read other user reports here, I'll chime in and say I get most
of my groceries from Shipt (in conjunction with a local grocer/retailer,
Meijer) and it's been a fantastic, reliable service. The shoppers have been
uniformly courteous and great at communicating if an item isn't available (you
can opt to have them use their best judgement in these scenarios, and it's
always worked out well). The experience of getting anything at a large
grocery/general store delivered to your house within an hour or two is
addictive. I really have nothing bad to say about it - competitors will have
to compete on price.

~~~
clairity
your use of "local grocer" made me chuckle since that term makes me think of
the corner grocery store. meijer on the other hand is one of the 100 largest
employers in the country and has ~$17B in yearly revenue.

~~~
freehunter
I don't know where saturdaysaint is located, but people in West Michigan
really do think of Meijer as a local grocery store. Many older people refer to
it as "Meijer's", as in "Fred Meijer's Thrifty Acres", the old name for the
store when it was far smaller than it is today.

They've enjoyed a lot of success, but Michiganders still think of it as "our"
store, and they're headquartered in a Michigan town you may have never even
heard of.

~~~
clairity
yes, i understand, but it's interesting how such a large corporation can
foster those kinds of brand associations.

~~~
ksenzee
A large corporation didn't. A small local company did.

~~~
freehunter
And even then, a large corporation that provides steady office jobs for an
area at the center of the Rust Belt? That's going to make people look fondly
on you, too.

I mean hell, people in West Michigan think highly of _Amway_ of all places,
because they pay well and employ a ton of people at their headquarters in the
area.

~~~
maxsilver
> people in West Michigan think highly of Amway of all places

...not really. A very token few people _actually_ think highly of Amway.

The majority will quietly put up with Amway, since they do give a few people a
small living, but will always temper that statement with "of course Amway is a
giant pyramid scheme scam and you shouldn't ever be a reseller, don't fall for
the trap".

They'll just coat that statement in Midwest-nice language that _sounds_ like
praise. If you don't speak the language, it's easy to miss the subtleties.

~~~
freehunter
Right, not 100% of Grand Rapids people love Amway. But if you talk to people
who work for Amway (the corporate Amway, not as a reseller) or people who have
family who work for Amway, you're not going to find many complaints about the
corporate entity.

I say this because it's in stark contrast to what you mentioned, anyone who
doesn't work for Amway _corporate_ will generally have a negative opinion
about Amway.

------
ourmandave
Lately I've heard a lot of radio spots pushing Target's free shipping and
pick-it-up at your local store.

Which is competing / catching up with WalMart.

~~~
koolba
I’ve used both Target and a Walmart’s pickup options and the former is
superior.

Walmart makes you go to the back of the store. The walk alone takes a few
minutes. Then you wait for an employee to show up, then you wait for them to
lookup your order, then they go into the back room to get it. Then walk all
the way back out.

For Target the pickup spot is right by the entrance and there’s already a
person waiting there. They just scan your barcode, show your ID, and hand you
your item.

~~~
astura
Walmart is totally revamping the store pickup and putting a huge emphasis on
it with lots of branding. My store has already switched over to the new system
but they may still be in the process of rolling it out. They moved it to the
front of the store next to the entrance and you check yourself in on a touch
screen kiosk, either scanning a barcode or looking up your order by name or
order number. Then an employee gets a notification on a smartphone and they
grab your order. There is a status bar on a monitor letting you know what's
going on.

When it works it works really, really, really well. I mean, in and out in less
than two minutes. However, there was a time the employee didn't get a
notification, so it might still need to get the kinks ironed out.

I agree that previously the store pickup was an afterthought and not always
run very well.

~~~
HeyLaughingBoy
Yup.

I did an in-store pickup at Walmart last night. I got a text message with the
pickup # and when I went there (Walmart's on my way home and I stop there most
days), the greeter at the door was the person who got my order. Pickup station
was right by the door and I was done in under 2 minutes.

It's improved a lot in the last year!

------
MrMember
I go to Target like three times a week on average. $99 a year for same day
delivery is totally worth it for me.

~~~
exclusiv
I just tried the pickup in store option and it was really convenient although
since it was my first time I didn't know there was convenient parking on that
side.

I also bought some stuff there and then went to get my online pickup and tried
to go back to my car through the store - the cart's wheels locked up because
it thought I went to the parking lot. I had to move all my stuff to a new
cart.

Store pickup is still nice but $99/yr for delivery is even nicer.

------
kelukelugames
Yes please. I would love an amazon alternative, because I want to support a
company that values its employees better. I started by letting my prime
subscription expire.

~~~
melq
What leads you to believe Target is better to it's employees than Amazon?

~~~
strictnein
One example: they raised their minimum wage to $11 an hour and are on track to
bump it to $15 by 2020.

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bluedino
This is a very convenient service. But how viable is it long-term? People will
only shop+deliver for $15-20/hour for so long until they realize between the
cost of the vehicle and their time (plus taxes), they're not making nearly as
much as they think.

~~~
freeflight
On their application page, shipt requires of potential "shoppers" own a
"reliable vehicle, 15 years old or newer", I wonder how well defined "vehicle"
is in the fine print?

What's to stop "shoppers" from using something like a bike for the deliveries?
Drastically cuts down on the operating costs of the shoppers, adds a good
workout, I can see the appeal for many people. Could maybe even be good for
marketing "Eco shipt, the local and green delivery".

It's what German startup Foodora has been doing with take-out food deliveries,
so far quite successfully.

~~~
bluedino
In some areas you need a car: the area might not have traversable by bike, you
might have a 80 item order, or have a 20 mile trip to make your delivery.

------
harrisreynolds
This is awesome news for the team at Shipt!!

It should be good for Target too. For them it is all about the technology and
the entry point with lots of customers. And ultimately about giving them a way
to better compete with Amazon and Walmart.

------
jamisteven
500m for what exactly? Really would like to see more numbers on this. Also
dont see what Target has to gain from the acquisition, seems pointless given
what I can see at surface level, there has to be more to this.

------
theklub
This reminded me of E-Dreams...
[https://en.wikipedia.org/wiki/E-Dreams](https://en.wikipedia.org/wiki/E-Dreams)

~~~
filmgirlcw
I was actually just thinking, “WebVan and Kozmo were just ahead of their time”
— now both businesses had major issues even aside from the .com bust (I
haven’t seen E-Dreams in at least 10 years but I recall it glossing over many
of the whys behind the company’s failing, probably because when the director
started working on it, it was a different story. Startup.com did a better job
pivoting in that respect), but the ideas of nearly 20 years ago are now
finally ready, thanks to improved logistics, customer mindset, and
infrastructure changes.

Speaking of Kozmo, I was in high school when Kozmo was briefly in Atlanta, and
I knew it couldn’t last. I would have DVDs and candy delivered to class for
almost nothing.

------
hypermatt
quite a big purchase for target, have they bought any other startups in the
space?

~~~
vm
Allegedly it tried to buy Casper for $1B but the company declined to sell and
had Target invest instead [https://www.recode.net/2017/5/19/15659562/target-
casper-inve...](https://www.recode.net/2017/5/19/15659562/target-casper-
investment-acquisition-talks-foam-mattress)

------
stocktech
This feels like Target grasping for straws. They're watching Walmart/Jet.com
and asking themselves how to compete. I'd be amazing if they don't fuck this
up.

~~~
darethas
Target is portrayed in the book "Naked Statistics" as having some pretty
advanced data collection and modeling techniques -- they could figure out
which of their shoppers were pregnant and adjust their weekly ads sent to
those particular households depending on that information. This was in fact
too good because the pregnant woman ended up being a teenager, and had an
angry father calling demanding to speak to a manager.

What any of this means to me is if they have capabilities like that I am sure
they made an informed decision based on where they see the market heading and
decided this would be a purchase that would increase the bottom line, not
grasping for straws as you say.

~~~
justinhj
If you lived in Canada or followed their operation here you’d probably take a
different view

~~~
astura
I thought Target pulled out of the Canadian market?

~~~
notatoad
I think that was the parent's point. Target spent a whole bunch to enter
Canada and it was an abject failure for, in retrospect, some pretty obvious
reasons. If they were so good at data-driven decision making, they wouldn't
have failed so badly.

------
lerie82
"We aren’t in your city right now, but don’t lose hope! We are expanding into
new cities every week. We’ll shoot you an email when we are expanding into
your area!"

This is definitely not in competition with Walmart, Amazon, or even a company
I currently use for grocery delivery (instacart). It's a great move for a
company that isn't even nationwide at this point. This should help them to
move into more cities.

~~~
strictnein
It is directly in competition with all of those companies you mentioned.

------
levicole
I just hope I can still get a publix sub with my groceries.

------
dwighttk
How in the world can they make money on $99/yr?

~~~
kennethologist
The markup on the grocery items they "sell" via their service.

~~~
dwighttk
The reason I've been seeing people subscribe and save on Amazon was heavily
predicated on the "save" portion and only slightly on the "don't have to go to
the store" portion. But maybe my sample isn't representative.

------
blairanderson
holy shipt

------
seattle_spring
I shipt my pants!

~~~
wccrawford
Memes aren't really welcome on Hacker News.

But yeah, that's the first thing I thought of, too.

For those who aren't aware, KMart had a commercial with that line in it:

[https://www.youtube.com/watch?v=2xwUuSM06xQ](https://www.youtube.com/watch?v=2xwUuSM06xQ)

~~~
seattle_spring
I know. Still felt like it was worth the downvotes.

------
LeifCarrotson
I disagree that this is awesome news for the team at Shipt. The best exit is
not always a buy-out; they seem to have been doing great as an independent
company. Now they're tied to Target.

I'm mostly worried about what will happen to their existing stores:

> Our shoppers fulfill orders from your favorite local stores in the cities we
> serve! It varies by market, but we currently shop at your favorite local
> stores:

● ABC Fine Wine and Spirits

● Central Market

● Fry’s

● Harris Teeter

● H-E-B

● Kroger

● Meijer

● Publix

● Western

> More stores will be offered as we grow! [1]

Given that, I don't see a good reason for Target to have bought Shipt. Why not
just sign up with them like these other retailers? Unless they plan to cut
these partnerships.

I certainly hope that they follow through on their claim from the article that
"It will continue to operate independently and plans to expand its business
with other retailers" and not have Target attempt to cut these partnerships.

[1]: [http://help.shipt.com/how-shipt-works/what-stores-are-
suppor...](http://help.shipt.com/how-shipt-works/what-stores-are-supported-
through-shipt)

~~~
khc
They have 20000 customers so that's $2M of membership revenue. There maybe
other delivery revenues but surely that can't be more than a small multiple of
that. How does 500M price tag make sense?

~~~
ovrdrv3
My guess is infrastructure

~~~
ktta
Half a billion worth of infrastructure?

~~~
Hasz
Might be more like "we'd lose more than 500M while we build our own" so a 500M
price tag makes sense to have it now.

~~~
ktta
Would they really? They already have a good amount of developers working on
their apps and websites. Now this app will be consolidated as an extra feature
on the Target app. I really seem to be missing something here. Jet acquisition
made (atleast some) sense because it had much bigger employee count and showed
it can run okay.

What I know for sure is that the investors are super happy with their returns.

