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Costco Wholesale expands test of home grocery delivery through new third-party service

A customer unloads a cart at a cash register at a Costco Wholesale store in Naperville, Illinois.
Daniel Acker | Bloomberg | Getty Images
A customer unloads a cart at a cash register at a Costco Wholesale store in Naperville, Illinois.

Costco is ramping up its home grocery delivery efforts by teaming up with a third-party service.

Shipt, an online grocery delivery service, said Tuesday that it was adding Costco to its delivery service in the Tampa metro area. The service is available to consumers using the Shipt app.

Costco already has home grocery deliver service available in the San Francisco market through Instacart, another third-party delivery service. Costco didn't respond to requests for comment.

Up to now, Costco has focused on delivery to businesses, said Zachary Fadem, a Wells Fargo analyst covering the grocery segment. He said the Shipt service represents part of Costco's "experimentation" in the home grocery delivery market.

Shipt, which is a venture capital-backed company founded in 2014, previously partnered with Whole Foods and Kroger's Harris Teeter division for grocery delivery in certain U.S. markets. Shipt home delivery of groceries is available for an annual membership fee of $99, which gives members unlimited free deliveries, according to the company.

Costco Wholesale is offering grocery delivery service in Florida through a third-party delivery service known as Shipt.
Source: Shipt
Costco Wholesale is offering grocery delivery service in Florida through a third-party delivery service known as Shipt.

In Tuesday's release, Shipt said it plans to offer its services to 50 markets and over 30 million households by the end of the year. Shipt already operates in more than 35 cities and has grown in part by offering what some observers perceive as a more flexible model than some of its service competitors.

Last year, Shipt raised more than $20 million in a new funding round through group of VCs. Participants included Greycroft Partners, Harbert Growth Partners and E.ventures.

"Shipt's profile is getting bigger very quickly," said Diana Sheehan, director of retail insights for Kantar Retail.

Uber also is "ramping up" its efforts as a third-party grocery delivery service and working with more brick-and-mortar chains experimenting in the e-grocery segment, including Kroger, Sheehan said.