Hey Amazon Prime, meet your new membership neighbor – Walmart+.
Walmart’s new paid membership program is a direct shot across the bow at e-commerce competitor Amazon Prime and it should provide some interesting competitive benefits for online shoppers. While Walmart is not yet releasing details, industry analysts expect it could launch testing as soon as this month.
With more than 150 million global members, Amazon Prime isn’t shaking in its boots, but Walmart does have a substantial buy-online-pickup-in-store (BOPIS) advantage with its 4,769 stores across the US.
The Amazon advantage
The Amazon Prime advantages are well documented and for a $118 annual membership include occasional same-day, often next-day or guaranteed two-day free delivery for many millions of products. But it’s in the extra benefits that Amazon Prime has set a high bar for competitors.
Amazon has been hugely successful bundling additional benefits for Prime members that include streaming of movies, TV shows, and music; exclusive shopping deals, discounts, member-only selections; unlimited reading, and cashback and payment cards.
Other Amazon shopper benefits include special pricing at Whole Foods markets, member prices at Amazon 4-Star and bookstores, Amazon Fresh groceries, Prime Wardrobe to try clothing before you buy, Prime Reading (borrow e-books, magazines), Amazon Photo storage, and several other supplemental membership benefits
What’s Walmart’s offer?
First, Walmart is going to have to compete with free delivery and other intensely competitive features and pricing.
“The thing to anticipate is that they will go in at a dramatically reduced price because that’s really in many ways when you look at the potential features they can offer, the only one they can go in with,” said Stephen Beck, managing partner at management consulting firm cg42.
Although it’s made great strides to blend channels, Walmart’s retail and online businesses still tend to operate as silos according to some analysts. Many believe the new program will replace Walmart’s Delivery Unlimited service, which charges $98 per year for unlimited, same-day delivery of groceries compared to Amazon’s $118 feature-rich membership.
Sucharita Kodali, retail analyst at Forrester said, “Walmart’s messaging was always that you didn’t need to pay a fee for fast shipping, right? Jet had a membership program and then killed it very early on, didn’t it?” Kodali says it doesn’t make much sense for Walmart to simply replicate Amazon Prime. They’re going to have to come up with something different.
Walmart showed it is willing to do what’s needed to compete, evident in the closure of its premium Jetblack shopping service and finally absorbing and integrating Jet.com which it purchased in 2016 for $3.3 billion.
Walmart’s target market is typically a lower income bracket with many customers that don’t own credit cards, making e-commerce somewhat more challenging. Walmart could get some early wins by offering innovative finance and purchasing programs including mobile payments.
Katrin Zimmermann, managing director of TLGG Consulting, said Walmart can win new customers with a mix of its strongest offerings including grocery, delivery, prescriptions, and fuel discounts. Free samples and early access to new products could also be part of Walmart’s appeal.
Walmart’s biggest challenge?
Walmart’s biggest challenge, however, is the sheer size of Amazon Prime membership. Analysts ask two key questions. Will consumers feel compelled to have two memberships? Unlikely. Will Amazon Prime members switch to a more downscale Walmart offer? Unlikely again unless it’s incredibly feature-rich and uniquely different from Amazon Prime.
Walmart reported 2019 US e-commerce sales growth of 40% but Morgan Stanley estimates Walmart will lose as much as $2.1 billion on an operating profit basis this year, up from $1.9 billion in losses in 2019.
That’s the price of competing online although it will pay off in the long run.
So, the road ahead for Walmart+ is to launch with its most compelling and differentiated offer targeted at a slightly different demographic than Amazon. Stay tuned to see if Walmart puts its management muscle behind the new membership offer and stays the course.
LET’S CONNECT