Dive Brief:
- Shipt is growing its same-day grocery delivery services from Target and Hy-Vee in select markets in Illinois, Iowa, Minnesota, Missouri and South Dakota.
- According to Supermarket News, this five-market expansion will reach approximately 820,000 new households. Also this month, Shipt made its entry in Connecticut and Oklahoma, with plans to expand in Wisconsin and debut in Maine, for a total of 2.65 million additional households.
- To support this growth, Shipt plans to hire about 60,000 new shoppers by the end of the year. The company currently has a network of over 40,000 shoppers, according to CNBC.
Dive Insight:
It’s full speed ahead for Shipt, as the company plans to expand its reach by more than 30 million new households and 30 new markets by year’s end – adding to its current portfolio of about 50 million households in more than 150 markets. This past week, the company made a sizable dent toward that goal, adding nearly 3.5 million new households in eight markets and also expanding throughout New York City’s five boroughs. It also inched the company ever closer to competitor Instacart, which currently exists in over 240 markets.
The success of Instacart — which was recently valued at $4.2 billion — along with the increased demand in online grocery shopping justifies Shipt’s aggressive growth strategy. The Food Marketing Institute and Nielsen estimate nearly half of Americans now buy their groceries online, and that number is expected to increase to 70% by 2022. Target’s $550 million acquisition in December is enabling Shipt to scale quickly to keep up with this trend.
Instacart and Shipt are price competitive with each other, offering comparable delivery fees along with membership deals that can offset them. Shipt’s differentiator, at least according to founder Bill Smith, is its customer service approach. He said that if a customer orders children’s cough syrup, Shipt’s shoppers will also pick up a balloon for the sick child. “The fact that [the shoppers] go above and beyond is really the key to this," he told CNBC.
The demand for speed and convenience is growing, but the desire to experience customer service isn’t going away. That is an important detail that could easily get lost in a hastened service like delivery. If Shipt continues to focus on this differentiator, it could provide an intangible advantage in delivery, especially as the market gets even more competitive and as retailers like Walmart test grocery-picking robots.
This approach could also provide a win for retailers who use Shipt’s services, since brands take a bit of a reputational risk by entrusting a third-party service to represent their brands. It will take a sharp focus on expansion to play catch-up to Instacart, especially as it continues to add partnerships with the top retailers in the country. But Shipt has a heavyweight — Target — in its corner, and other brands, like Hy-Vee, that entrust its services despite being owned by a competitor – which is a pretty powerful vote of confidence.
