CHICAGO (Reuters) - Target Corp (NYSE:TGT) said on Tuesday it has partnered with Instacart Inc to deliver groceries for as little as $3.99 per order, as it overhauls its food business and competes with Amazon.com (NASDAQ:AMZN) Inc's grocery delivery service.
The discount retailer will launch a pilot to test the offering in its hometown of Minneapolis and customers in some areas will be able to order online for food, pet products and baby items from two Target stores and have them delivered to their homes.
Target has been revamping its grocery department after customer complaints about freshness and product quality, and the business has been a key priority for Chief Executive Brian Cornell. The company's grocery division accounted for more than 20 percent of revenue last year, with approximately $18 billion in sales.
The push expands online order options for Target customers, who can get free delivery within five days on a $25 minimum order.
At $3.99 per order, Target customers would have to place 75 orders to match the cost of Amazon's annual $299 delivery fee for groceries.
Online groceries are a $10.9 billion industry in the United States, and the market is expected to grow 9.6 percent annually through 2019, according to a December report by market research firm IbisWorld. One of the largest players in the segment is Amazon Fresh, which delivers in Seattle, New York, Philadelphia, and northern and southern California.
Target's grocery delivery pilot follows on a recent expansion of its curbside pick-up test, which started in San Francisco.
With the partnership, Target joins an increasingly long list of companies using Instacart for last mile delivery, including Whole Foods Market Inc (NASDAQ:WFM), Costco Wholesale Corp (NASDAQ:COST) and most recently the H-E-B grocery chain in Texas.
Instacart does not hold inventory but picks up orders from the store and brings them to a customer's home in as little as one hour. The company said it was exploring plans to expand Target deliveries beyond Minneapolis.
