Is Shipt the Sleeper in the Battle for Online Grocery?

Is Shipt the Sleeper in the Battle for Online Grocery?

Like many in the industry, we were intrigued when Target acquired Shipt and speculated what it would mean for both Target and Shipt.  We wrote that at the time of acquisition, Shipt reached 22% of US Consumers.  Then in February, Brian Cornell, CEO of Target, laid out an aggressive plan to expand Shipt to all major Target markets by end of 2018.  We did a mid-year update in June and found that Shipt had indeed grown to reach 42% of US Consumers.

As we head into the holiday season, we decided to check in on where things stand.  We were intrigued by two findings.  First, according to our research, Shipt now reaches 67% of US households.  Looking at the map below and comparing to what we saw in the summer, we can see that the growth came from California, Pennsylvania, Connecticut and New York.  Additionally, we can see broader expansion in the Midwest.

Shipt Reach, November, 2018

To put that reach into perspective, below are the top 6 full assortment Online Grocery providers.  In the last 10 months, Shipt has increased their reach from 22% to 67%!

Retailer Reach (*20 mile radius for pickup)
Walmart 84%
Instacart 74%
Shipt 67%
Kroger (inc. banners) 38%
Amazon Fresh 18%
Peapod 18%

Shipt’s Marketplace

As we dug deeper into the data, we found another, even more intriguing finding.  Shipt has not only grown their reach with Target stores (that was expected, given the directive from Target), they have also continued to the grow their third party partnerships with retailers like CVS, Safeway, Publix, Meijer, and Kroger.  Below, you can find Shipt’s top 10 retailers along with their reach and number of stores in service.

Retailer Reach
Stores Shopped
Target via Shipt 63% 1496
CVS via Shipt 11% 501
Safeway via Shipt 10% 434
Publix via Shipt 10% 672
Meijer via Shipt 8% 224
Kroger via Shipt 8% 359
Vons via Shipt 7% 149
Winn-Dixie via Shipt 6% 245
ABC Fine Wine & Spirits via Shipt 5% 110
H-E-B via Shipt 4% 194

What’s surprising about this list is that many of these retailers (Safeway, Publix and Kroger) are also partnering with Instacart.  Additionally, these retailers aren’t just carving out a few stores for Shipt, but are giving them a large percentage of their business.

At the time of Target’s acquisition of Shipt, we were quiet skeptical of Shipt’s ability to retain and grow third party partnerships.  So far, we have been wrong.  Our skepticism was primarily based on the fact that the retailers above often compete with Target and wouldn’t want drive growth for a competitor, much less provide access to their consumers and their purchase data.

Thinking through it, it seems we underestimated a few factors.  First, these retailers want to balance the power they abdicate to Instacart by having another viable provider (Shipt).  Second, these retailers appear to be more afraid of Walmart (which has no agreements with Shipt or Instacart, even for delivery), Kroger, and yes, Amazon than they are of Target.  And finally, it appears that many are waiting out internal investment into online grocery and hedging their bets with Shipt and Instacart.

As we think about strategy for eCommerce Grocers, one of the key questions is whether to continue to partner with Instacart and Shipt, whether to go it alone, or whether to go hybrid.  We believe the question isn’t if, but when. Some retailers like HEB, Meijer, and Hyvee have already started down the hybrid path.  They have invested in building or buying (from providers like Unata and GrocerKey) the consumer facing capabilities allowing them to retain the consumer relationship & data, while continuing to partner with Instacart and Shipt for delivery.  Such a strategy allows them to change out fulfillment partners without changing the consumer experience. We expect more retailers to go down this path in 2019.

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