Target Corp. has reached agreement to acquire Shipt, Inc., an online same-day delivery platform, for $550 million in an all-cash transaction. Birmingham, Ala.-based Shipt will become a wholly owned Target subsidiary and will continue to run independently while bringing same-day delivery of groceries and other products to customers at approximately half of Target stores by early 2018. The service is expected to expand to most Target stores in major markets before the 2018 holiday season.

“We laid out an ambitious strategic agenda in early 2017, which included a focus on giving our guests a number of convenient ways to shop with Target, whether it’s ordering online and picking up in one of our stores, driving up to pick up an order, or taking advantage of services like our new Restock program,” said John Mulligan, executive vice-president and chief operating officer for Target. “With Shipt’s network of local shoppers and their current market penetration, we will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country. By the 2018 holiday season, we will be servicing every major market across the country with same-day delivery, and Shipt’s service-oriented approach aligns well with Target's commitment to delivering an exceptional shopping experience for our guests.”

Founded in 2014, Shipt leverages a network of more than 20,000 personal shoppers to fulfill orders from various retailers. Upon completion of the transaction, Shipt will continue to expand partnerships with other retailers and will retain its current employees and offices in Birmingham and San Francisco. The business will continue to be led by Bill Smith, founder and chief executive officer, who will report to Mr. Mulligan. In addition to same-day delivery capabilities, Target will use Shipt’s expertise in enhancing and strengthening its supply chain.

“We are very excited to partner with Target, one of the most loved retailers in the country with a reputation for supporting local communities,” Mr. Smith said. “Partnering with Target and the national scale they provide allows Shipt to further accelerate our growth, bringing our service to more people, in more markets across the country. We’ll continue growing our marketplace and membership base, working with a variety of retailers to drive scale and efficiencies. We look forward to introducing Target guests to the convenience of our same-day delivery services, with the level of personal attention only Shipt can provide.”

The deal, which remains subject to customary closing conditions, is expected to close by the end of the year. The acquisition is expected to be modesty accretive to Target’s earnings per share in 2018, while accelerating digital and total sales growth.