Target is Building Volume for Shipt
One of those under the radar strategies from Target is to build volume for their last-mile network via Shipt.
This is a page right out of Amazon's playbook. Using them for their own last-mile deliveries, but offering the same service to other retailers too to increase density - improving their network and allowing them to reduce their per-transaction cost over time.
One thing I didn't notice: an eagle-eyed reader of mine pointed out that Best Buy was now using Shipt too. This is despite a widely publicized partnership with Instacart.
Sure enough, Best Buy is a logo on Shipt. Is this just a typical multi-channel marketplace strategy for Best Buy? Or does it signal a weakness in Instacart?
John Peterson weighed in on this, saying “I'd suspect this is about Best Buy using a multi-vendor strategy for the last mile services. They might not want to become beholden to one vendor (Instacart). Long term, Instacart is increasingly going to have the opportunity to convert to a full-fledged retailer. One with amazing final-mile capabilities. Best for those using their services to start now in delaying Instacart from reaching that point and hedging against such a risk.”
Anne Mezzenga provided further clarification on Best Buy’s strategy: “Shipt is doing white-label fulfillment for them, go on the BBY site, order, and choose one-hour delivery (through Shipt, but from the consumer's POV, from Best Buy directly.) Whereas Instacart is more of the marketplace strategy you mention above, customer orders from Best Buy's store on Instacart marketplace and fulfilled through Instacart, not Best Buy directly. I think they're smartly putting bets on both, (and don't forget moving stores to fulfillment centers) during the highest traffic times possible.”
Dan Bourgault is thinking bigger: “On the Target front, Shipt would need to evolve in a very big way to compete against Amazon and Walmart, and maybe even Shopify, Facebook and others coming. Gig drivers delivering a few orders an hour is adorable for quick same day delivery, but not the last mile solution compared to what Amazon, and possibly soon, Walmart can offer. This is a race based on density and scale, for their retail brand. For true scale Target is still very reliant on FedEx and UPS. The complexity and the number of gig drivers it would take compared to an efficient single Amazon, FedEx or UPS driver is massive. They have to think of Shipt in a much much bigger [way].”
