The Walmart+ Advantage: What it Takes to Beat Amazon Prime

The big box giant is ready to challenge the e-commerce behemoth Amazon Prime with its own value-added subscription service.

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Need to Know 

  • Walmart is working on a subscription model to compete with Amazon Prime, called Walmart+.
  • Amazon has more than 150 million Amazon Prime subscribers and accounts for nearly 40% of all online retail sales in the US, according to eMarketer.
  • Amazon Prime has over 10 million items available for same-day delivery, while Walmart has 1/50th of that scale online.
  • Walmart is number 2, with over 5%t of the US e-commerce market.
  • Walmart is the US grocery leader when it comes to order-online, pickup-at-store service, which is the main driver of Walmart’s e-commerce growth. 

Analysis 

For the past 18 months, Walmart has been working to innovate in a space that is screaming for some healthy competition: paid membership perks from big-box retailers.

Reportedly named Walmart+, the subscription would be a direct competitor to Amazon Prime, which already has more than 150 million subscribers. Walmart is trying to enter and dominate the e-commerce space by using its huge market share and supply chain mastery to its advantage.

eMarketer reports that Amazon accounts for 40% of all online retail sales in the US, while Walmart comes in second at a little over 5%. There’s a huge gap, and a huge opportunity for Walmart, which has spent billions trying to keep up with Amazon since 2005. 

While the retailer hasn’t set a fee for the service yet, it’s expected that it would be competitive with Amazon Prime’s $119 yearly price tag. Walmart currently offers unlimited same-day grocery delivery for $98 per year, and it is this program that would be expanded for public testing as early as March 2020.

Not only would customers be able to use the grocery delivery from 1,600+ Walmarts across the US that support the program, but the retailer is also considering the ability to order items via text messaging, discounts on pharmacy items or gas at Walmart gas stations, and others. However, no perks or price points are set in stone until further testing with the market is done.

It’s reported that there would be some Walmart membership benefits that Amazon simply couldn’t compete with, like gas, pharmacy, or grocery, however, Walmart has been trying to compete with Amazon for the past ten years and hasn’t come out on top quite yet. Walmart attempted to offer “free shipping” with its ShippingPass program in 2015, which cost half of AmazonPrime but only offered free 2-day shipping. The program was pulled only 2 years later, with executives claiming that free 2-day shipping was now “table stakes” for retailers and not a value add for customers. 

Walmart has been investing heavily in digital enhancements over the past few years, as well as testing out a new methodology for lowering labor costs and enhancing customer experience in-store, like creating cashier-less lanes.

While Walmart’s overall grocery business is larger than Amazon’s and comprises over 50% of Walmart’s store sales, more than half of Walmart’s top-spending families are Amazon Prime members. This and other challenges are being worked on as top priority by Janey Whiteside, Walmart’s chief customer officer, and other top Walmart leaders. Whiteside says the program needs to balance being valuable for their current customers while being different enough to not be a direct comparison to Amazon Prime.

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