Target deal for Shipt showcases Birmingham’s dynamic tech sector

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The vibrant entrepreneurial tech scene in Birmingham is once again in the national spotlight, as Target plans to buy local grocery delivery service Shipt for $550 million in a blockbuster deal.

The retail giant, which announced the acquisition in December, said it will have a major impact on efforts to increase convenience for Target shoppers through affordable, same-day delivery across a variety of product categories.

For Birmingham, the move is the latest win for the city’s burgeoning innovation sector, which has attracted millions of dollars in new investment for tech-based startups.

“Birmingham is a center for innovation and this agreement highlights the type of cutting-edge industry that is emerging here,” said Jon Nugent, vice president for innovation and technology for the Birmingham Business Alliance.

“Through the success of companies like Shipt, Birmingham continues to reinforce its presence as a destination for entrepreneurs looking for a smart, modern city where they can build and launch the next generation of technology companies.”

Vibrant scene

Shipt has grown rapidly since its founding in Birmingham in 2014. Members of the service use an app to connect to a network of more than 20,000 personal shoppers, who fulfill orders from various retailers and deliver within hours in more than 72 markets.

Nugent credited Shipt’s leadership for recognizing what Birmingham has to offer startups.

Bill Smith and Jeff Smith are truly visionary business people who recognized the incredible value in Birmingham’s people, community and commitment to its entrepreneurs,” Nugent said. “Their investment in Shipt’s employees, their neighborhood and their corporate headquarters represents a standard of excellence that continues to be recognized across the United States and internationally.

“They continue to be an integral part of this vibrant community that, through the twin discovery engines of UAB and Southern Research, are launching new and innovative companies at an incredible pace.”

Opportunities

Innovation Depot is a hub of much of the activity. The downtown Birmingham business incubator is home to more than 100 companies, which recorded $126 million in gross sales in 2016.

The five-year economic impact of the facility is estimated at more than $1.4 billion.

Meanwhile, other technology-based startups have turned heads among major investors, and shepherding more firms like them is a priority in Birmingham and across Alabama.

Innovation Depot’s Velocity Accelerator is designed to accelerate development of idea-stage companies, while Alabama Launchpad, a program of the Economic Development Partnership of Alabama, has invested $4 million in companies that have created more than 500 jobs and go on to raise $50 million in follow-on funding.

“It’s a great time to be an entrepreneur in Birmingham and Alabama, especially a technology-based entrepreneur,” said Greg Canfield, secretary of the Alabama Department of Commerce.

“With a skilled and creative workforce, growing funding and mentorship opportunities, and a history of advanced research and developments, the city and the surrounding region have all of the ingredients to help startups thrive.”

Ambitious goals

As for Shipt, it will be a wholly owned Target subsidiary and will continue to run its business independently.

Target will look to Shipt to help achieve ambitious goals set last year that focus on giving customers a number of convenient ways to shop, said John Mulligan, executive vice president and chief operating officer for the retailer.

“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,” he said.

“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.”

Shipt founder and CEO Bill Smith said the company is excited to partner with Target and is eyeing additional expansion.

“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,” he said.

“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.”

This story originally appeared on the Alabama Department of Commerce’s Made in Alabama website.

Republished with permission from the Alabama NewsCenter.

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