Target acquires delivery technology firm, beefs up grocery team

Target Corp. began to reveal more Monday about how it plans to address two key question marks hanging over it: how it will compete with Amazon on delivery and how it plans to fix its grocery department.

In response to the first, the Minneapolis-based retailer announced the acquisition of Grand Junction, a 13-employee firm in San Francisco, to help it expand its same-day delivery and other supply-chain capabilities. As for the second, it has hired two senior grocery leaders, one from Walmart and one from General Mills, to focus on improving its selection of prepared foods as well as its roster of private-label brands that now include Archer Farms and Market Pantry.

The flurry of announcements came as Target is preparing to report its second-quarter results on Wednesday. While the company's sales have been declining for a year, Target raised its guidance last month, saying it now expects moderately positive sales for the May-to-July quarter instead of a single-digit drop.

Target did not disclose terms of the deal with Grand Junction. But the company said its employees will work out of Target's San Francisco office and its CEO, Rob Howard, will become a vice president of technology at Target.

The retailer has been working with Grand Junction on a small same-day delivery pilot out of its Tribeca store in Manhattan. In that program, once shoppers pick out their items in-store, they can opt to have them delivered to their apartment instead of lugging them back on the bus, subway or by foot.

Arthur Valdez, Target's chief supply chain and logistics officer, said Target will use Grand Junction's expertise to roll out that service to other New York-area stores this fall and to other cities next year. Down the road, he said, Target could also offer services such as product assembly and installation.

"Grand Junction's technology and algorithms will help Target deliver to guests faster and more efficiently," Valdez said in a statement. The acquisition will help "strengthen Target's supply chain to provide greater speed, reliability and convenience for guests."

Founded in 2014, Grand Junction is a software company that manages local delivery for retailers and distributors through a network of more than 700 carriers.

Target has dabbled with same-day delivery. In 2014, a pilot program called "rush delivery" rolled out in Minneapolis, Boston and Miami, but it did not last. In 2015, the company partnered with Instacart and now has same-day grocery delivery available through that third-party provider in the Twin Cities, Chicago and San Francisco.

The retailer has begun accelerating in this area since it hired Valdez last year from Amazon. Amazon, of course, has set the bar in the retail world not just for fast delivery but also delivery within two hours with its Prime Now service.

In June, Target launched a next-day delivery service of household items in the Minneapolis area called Target Restock. It has also begun testing a curbside pickup service at a handful of stores around the Twin Cities among Target employees.

While other retailers have dipped their toes into same-day delivery, most have used third-party companies such as Instacart, Deliv and Postmates to handle the technology and delivery. Richfield-based Best Buy, for example, partnered with Deliv last year and now offers same-day delivery in 13 markets. Meanwhile, Walmart has focused mostly on its curbside grocery pickup service, which it has rolled out to hundreds of stores.

Target's move comes amid a lot of recent acquisition activity in the retail world, with Amazon buying Whole Foods and Walmart buying a number of its own, including Jet.com, Bonobos and ModCloth. Target made a $75 million investment in online mattress company Casper but had mostly sat on the sidelines until this deal.

Meanwhile, Target is also sharpening its leadership team as it looks to improve its grocery sales, which have been struggling in a more competitive environment with, for example, Aldi expanding and Walmart lowering prices.

In March, Target hired Jeff Burt from Kroger's Fred Meyer division to be its grocery chief.

New additions to the grocery team, who will start next month, include Liz Nordlie, a General Mills veteran who was most recently president of its baking division. She will take on the newly created role of vice president of product design and development in food and beverage with a focus on private-label brands.

Mark Kenny, who was in charge of private labels in deli and bakery at Walmart, is joining Target as a vice president in charge of meat, seafood, deli, bakery and prepared foods. Prepared foods, which have been a growing trend in the grocery market, have been an area of increasing focus for Target as it looks to add more grab-and-go items to its fresh foods area.

"We have been making positive progress with our assortment, presentation and operations in food and beverage this year," said Mark Tritton, Target's chief merchant. "With Jeff Burt's leadership, and the investment we're making to bring on two new seasoned executives, combined with our already talented team, I'm confident we'll be able to go even further, faster, delivering both an experience and assortment that's uniquely Target."

Kavita Kumar • 612-673-4113