David is taking on Goliath as Shipt, an online grocery delivery startup based in Birmingham, Ala., goes up against San Francisco’s grocery delivery champion Instacart, as well as AmazonFresh and Google Express, to become the U.S.’ number one grocery delivery brand.
Until now, the Alabama startup had not made any move to topple the reigning grocery delivery champs out of major coastal cities like New York and Los Angeles, but now that can finally change.
Shipt has raised $40 million in venture capital on top of last year’s funding as initial investors doubled down on their contributions. Supporters included Greycroft Partners, e.ventures and Harbert Venture Partners.
The Alabama startup eliminates grocery store trips for 20 million families in 47 metro areas. With the new funding, it plans to explode into 60 new cities, breaking out of the southeastern and Midwestern box where it’s been operating since its inception in November 2014.
What sets Shipt apart from Instacart, AmazonFresh, Google Express and other grocery delivery services is that it doesn’t deliver on demand; it offers customers a choice between several delivery windows. That enables it to better manage logistics to keep service tight and efficient.
The other difference is that Shipt uses an annual membership model like Amazon’s rather than a pay-to-play model where they are charged for each delivery. Customers pay $99 a year for unlimited free deliveries of groceries, household goods and even alcoholic beverages sold by Shipt’s retail partners.
Some of those partners include major grocery chains H-E-B, Miejer, Costco, Whole Foods, and ABC Fine Wine and Spirits.
So far, the Alabama startup is faring pretty well against Goliath. With an average cart size of $110, Shipt is booking sales that are about 40 percent of Instacart’s, its largest competitor, with just one-tenth the capital. It rivals AmazonFresh in size and is actually bigger than Google Express.
“Grocery shopping is one of those activities that everyone has to do but often feels like a chore,” said CEO and founder Bill Smith. “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.”