Alabama-based Shipt raises $40 million to challenge dominant grocery delivery startups

Shipt, the Birmingham, Ala.-based online grocery delivery marketplace, has raised another $40 million in its quest to rise above its southeastern roots to become the dominant grocery delivery brand in the U.S.

From its home southeast, Shipt is challenging companies like Instacart, Amazon, and Google with a strategy that had, to date, ignored many of the biggest coastal cities in the U.S. (like New York and Los Angeles) in favor of large cities in the southeast and midwest.

With the new $40 million in funding coming from the company’s previous backers, Greycroft Partners, e.ventures, and Harbert Venture Partners, Shipt is looking to aggressively expand beyond the 47 metro areas and 20 million families it currently serves to roughly 100 cities within the next year.

Astonishingly, the original crew of investors is essentially doubling down their $20 million investment from a little less than a year ago.

Rather than charge customers per-delivery, Shipt uses an annual membership model modeled after Amazon’s where customers pay $99 per year. Shipt also doesn’t focus on deliveries on demand, but instead provides customers with several delivery windows from which to choose.

By setting up those windows for delivery, the company can better manage logistics and improve the efficiency of its entire delivery system.

Shipt has already partnered with big grocery chains including H-E-B, Miejer, Costoc, Whole Foods and ABC Fine Wine and Spirits, according to a statement from the company. And its average basket size per-order of $110 is more than three times the in-store average for purchases.

“Shipt set out to transform the way people think about grocery shopping, and in the process they turned a service that was previously available to only a small subset of the population into an affordable luxury for millions of households,” said Ian Sigalow, co-founder and partner at Greycroft, in a statement.

Shipt is actually well on its way toward meeting its 100 market target. The company is on track to expand to 60 new cities by the end of the year and is booking sales that are about 40% of its largest competitors’ (Instacart), off of one tenth of the amount of capital that its competitor raised.

Indeed, Shipt is roughly the same size as AmazonFresh and is bigger than Google Express (for the moment), a spokesperson said.

Unlike other on-demand services, Shipt offers a membership fee and unlimited free deliveries for its service. Through the Shipt app, members are able to shop for groceries, household goods and booze sold by the company’s retail partners.

“Grocery shopping is one of those activities that everyone has to do, but often feels like a chore. Shipt’s goal is to give people back the hours they would normally spend at the grocery store so that they can focus on the things that matter most to them,” said the company’s chief execuitve and founder, Bill Smith.

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