Digital orders have soared in the course of the coronavirus pandemic as consumers have increasingly favored online shopping over visiting stores and having to mask up or grapple with crowds. At the same time, consumers want the convenience of being able to access their purchases quickly without having to wait days for their orders to arrive in the mail.
In 2017, Target acquired the same-day delivery service for $550 million, and since then, the company has been looking for ways to expand its reach. The pandemic, meanwhile, has certainly fueled that need. Not only have Target customers been able to benefit from Shipt's rapid service, but in October 2020, Bed Bath & Beyond enlisted Shipt and Instacart to execute same-day deliveries for its namesake stores as well as its BuyBuy Baby.
Now, Shipt is making plans to target (no pun intended) even more customers, and that could end up being very good news for real estate investors.
A major expansion
Shipt recently announced that it's adding 1,000 stores and 2 million households to its delivery area. It's the company's most substantial expansion effort over the past three years. Now,
CVS, Bed Bath & Beyond, and Party City are increasing the number of stores that offer Shipt as a same-day delivery option.
This expansion buys customers a lot more flexibility on the delivery front. Just as importantly, it could also give physical retailers more staying power and help them remain competitive in an age when digital orders have grown so popular.
Even before the pandemic began, consumers were increasingly turning to e-commerce, leaving real estate investors worried about an eventual retail apocalypse. And given the speed at which online giants like Amazon can ship out orders, it's easy to see why so many shoppers would fall back on it at a time when store visits may land outside a lot of people's comfort zones.
But if there's one area where Amazon doesn't rule all on the delivery front, it's same-day service. The retail giant's network of warehouses and fulfillment centers may be extensive, but many of its facilities aren't located in close enough proximity to customers to facilitate same-day delivery. Shipt, on the other hand, allows physical retailers to edge out Amazon in that regard. And so the fact that it's broadening its service area could be great news for investors -- particularly those with shopping center REITs (real estate investment trusts) in their portfolios.
A shift in focus
Physical retailers used to put a lot of emphasis on the in-store customer experience. And while that's still important, we could see a shift toward efficiency on the product distribution front. That could mean allocating more in-store resources and space for storage and sorting to better partner with companies like Shipt. Whether that means less inventory for in-person customers, though, is yet to be determined, and that's a balance retailers will need to learn to strike.
It'll be interesting to see how much growth same-day delivery enjoys in the coming year. But the fact that Shipt is reaching more markets is something real estate investors should be happy about.