New Shipt CEO sees plenty of growth ahead for grocery deliveries

Soon after becoming the new leader of Target's delivery business Shipt, Kamau Witherspoon learned what it was like to be one of its shoppers.

Things went pretty smoothly as he rushed through a Winn-Dixie grocery store in the Birmingham, Ala., area, where Shipt is based. His next shop at a Target store didn't go quite as easily. The battery nearly ran out on his phone, which carried the customer's order, as he searched around the big store for items.

"It was not a piece of cake," Witherspoon said. "I left that experience with even more gratitude and appreciation for the work that our shoppers do each and every day."

After four months as CEO of Shipt, Witherspoon is still learning, but he says he has a game plan to continue to grow the grocery delivery business.

In an interview with the Star Tribune, he said Shipt will expand by diversifying the stores it delivers from including places such as local ethnic grocers. The business unit can build its last-mile delivery service further, including more packages from Target sortation centers.

Witherspoon, a former Target executive, took the helm at Shipt after the business experienced two years of pandemic-fueled growth and rapid customer adoption of online shopping. Conditions are more volatile now, but Witherspoon remains positive on Shipt's odds.

"I'm incredibly excited about the future of the company and the work that we do," Witherspoon said. "There's tremendous amount of room for additional growth in our space not only in our traditional shop-and-deliver model, which is our [Shipt] Marketplace, but also new product lines."

Since the start of the pandemic, Shipt tripled its national network of personal shoppers.

But more recently, there are signs that grocery delivery demand may be slowing. Instacart, which dominates the grocery delivery platform market, saw sales decline 4% during the first quarter of 2022. Target doesn't break out Shipt's performance in its quarterly results.

According to recent data by Coresight Research, 54% of U.S. consumers have bought groceries online in the last 12 months. That's up from 37% in 2019 but down from the around 60% in 2020 at the height of the pandemic.

Shipt, which was purchased by Minneapolis-based Target in 2017, has also faced heightened competition. The company's consumers, meanwhile, are contending with rising grocery prices and shortages of some staples, such as baby formula and peanut butter.

But there are have also been some larger trends working in Shipt's favor, Witherspoon noted.

"So, many of our customers are working from home permanently or they're working some sort of hybrid working arrangement," Witherspoon said. "For those customers, they are even more likely to order groceries online."

Research shows younger shoppers are also more likely to pay a premium for convenience, he said.

Since 2018, Witherspoon had worked as senior vice president of operations at Target where he helped with the national rollout of Shipt.

To continue to grow, Witherspoon said the company is adding smaller, local stores and ethnic grocers. It recently added Lunds & Byerlys in the Twin Cities, for instance.

"We have to make sure we have something for everybody available on our platform so that's why we are so hyper-focused on just diversifying our mix of retailers through ethnic grocers, Black-owned businesses, other diverse-owned businesses, as well as small, local and regional groceries," Witherspoon said.

But it also recently added two national heavyweights, Walgreens and 7-Eleven, which expanded the number of locations Shipt delivered from by more than 40%.

The second growth area that Witherspoon said he was excited about was Shipt's advertising partnerships with consumer packaged goods brands that are recommended to customers. In 2021, more than 25% of Shipt orders included items that were promoted.

The third area of growth that Witherspoon centered on was Shipt Driven, which includes the last-mile delivery, in which case Shipt shoppers don't actually shop in store and instead just deliver for retailers. Shipt shoppers are delivering brown boxes from Target's growing network of new sortation centers.

The company will also continue to focus on personalization and improving the customer experience. Last year, it added personalization features such as a way for customers to indicate their dietary restrictions.