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Can Walmart+ Compete with Amazon Prime?

Walmart launched its premium subscription Walmart+ on September 15. The service offers unlimited free deliveries on orders over $35, up to a five-cent per gallon discount on gas at Walmart and Murphy fuel stations (Sam’s Club stations will be added shortly), and scan-and-go purchasing at any of its physical stores.

Walmart+ costs $98 for an annual subscription or $12.95 per month. A 15-day free trial is available. While the annual fee is less expensive than Amazon Prime’s $119, Walmart+ does not offer the array of benefits of Amazon Prime, such as access to the Prime Video streaming, Amazon Music, and free books to read via Prime Reading.

Furthermore, Walmart+ does not offer the range of goods that Amazon Prime supplies. Walmart+ offers same-day delivery for 160,000 items versus roughly 3 million for Amazon Prime, although Walmart+ will be much more grocery-oriented than Amazon Prime. Nevertheless, Walmart has made it clear that it intends to compete with Amazon Prime.

Walmart+ does not yet offer the range of goods that Amazon Prime supplies, although Walmart+ will be much more grocery-oriented than Amazon Prime.

Walmart+ does not yet offer the range of goods that Amazon Prime supplies, although Walmart+ will be much more grocery-oriented than Amazon Prime.

Amazon’s Prime subscription revenue climbed 28 percent year-over-year in the first quarter of 2020 to $5.6 billion, propelled by house-bound consumers who increased their online purchases. In the second quarter, Prime subscription revenue grew 29 percent year-over-year to just over $6 billion.

In 2016 Walmart acquired Jet.com to jump-start its ecommerce effort. Jet.com appealed to a higher income group, not the core Walmart shopper, and it struggled. In a previous article, I addressed Jet.com’s problems reaching Walmart’s customers. In 2019 Walmart closed Jet.com and to focus on its own ecommerce site.

Physical Stores

With 4,753 stores in the U.S., Walmart’s physical presence allows it to do things Amazon cannot, such as deliver perishable food items the same day. Currently, same-day delivery is an option in about half of its stores. In contrast, Prime members in a few larger cities get two-hour delivery from Whole Foods Market and, in limited locations, free grocery delivery through Amazon Fresh, which fulfills orders through Amazon’s warehouses.

Where Walmart’s same-day delivery is available, customers can track a driver’s location in the Walmart+ app once the order has left the store. Delivery is contact-free, requiring no signature.

Walmart will likely benefit from launching Walmart+ in the midst of the pandemic when many consumers prefer to have their groceries delivered with no contact. The company has hinted that new features will be added over time, post-Covid.

To have a credible competing subscription service, Walmart+ presumably has to:

  • Convince upscale consumers that the grocer-retailer has the goods and brands they want.
  • Expand its customer base without alienating its core customers who tend to have lower incomes.
  • Poach a percentage of Amazon Prime’s customers.

In an interview with Cnet.com, Janey Whiteside, Walmart’s chief customer officer, said, “What makes Walmart+ a different membership program is … we would never take anything away from the core Walmart shopper who may not or cannot afford to enroll in Walmart+. And so we worked to make sure that everything that we put in Walmart+ was additive and never took anything away from somebody who wasn’t able to enroll in the program for any reason.”

What gets into that additive mix will be important. For instance, Amazon last month introduced “Luxury Stores,” a place for upscale brands to present their products to customers on Amazon’s mobile app.

A Good Start

A recent survey conducted by market research firm Piplsay estimates that roughly 36 million people signed up for Walmart+ from September 15-30. This includes those who are taking advantage of the 15-day free trial. Thus not all are likely permanent subscribers.

According to Amazon, Prime has about 150 U.S. subscribers. Piplsay’s research found that of the consumers surveyed who signed up for Walmart+, 45 percent also subscribe to Prime. Thirty-six percent stated that Walmart+ is their first subscription. Nineteen percent said they canceled a Prime subscription when they signed up for Walmart+.

Prime Day 2020 will occur on October 13-14. The event will test how well Walmart+ can compete. Walmart has announced a “Big Save” event from the evening of October 11 through October 15, providing discounts on thousands of items from both Walmart and its marketplace sellers. Walmart is offering deals on Roku Ultra LT, IonVac Robot Vacuum, JVC 55-inch Roku smart TV, and Super Mario Party for Nintendo Switch — among other goods.

If Walmart via Walmart+ can sell big-ticket items to its core customers during the pandemic, it has a shot at giving Amazon some competition.

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