Walmart+ membership 'the first of 10 steps' needed to ramp up heavyweight Amazon rivalry
WMT) is directly taking on its fiercest competitor Amazon (AMZN) — and its wildly popular Prime membership service — by launching a subscription called Walmart+ that officially debuts on Tuesday.
The world’s largest retailer’s highly-anticipated membership program, which costs $98 per year or $12.95 per month, is set to offer unlimited free delivery on more than 160,000 items, from groceries to electronics and gas. The items will be delivered to their doorsteps as soon as the same day; to qualify, orders must be at least $35.
Also, members can access the Scan & Go feature in the Walmart App, allowing customers to pay on the spot and avoid the cashier lines. The retailer, which is offering a free 15-day trial for the membership, intends to add more perks in the future.
Given Amazon’s seemingly relentless dominance, the subscription service from Walmart has been anticipated for some time now by retail watchers and Wall Street analysts.
DealNews.com, told Yahoo Finance.” data-reactid=”24″>“When 100 million U.S. households are paying money to your biggest competitor, you have got to do something,” Dan de Grandpre, the CEO and cofounder of DealNews.com, told Yahoo Finance.
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59% of U.S. households.
And on the surface, at least for now, Walmart+ appears lighter on the perks than Amazon’s pricier $119 per year, or $12.99 a month, membership. Prime features an array of benefits, including access to a vast streaming library, and expedited delivery options.
Amplify ETFs CEO Christian Magoon, who runs the Amplify Online Retail ETF (IBUY), expects to see current Walmart customers sign up, rather than current Prime users making the switch or adding another membership program. ” data-reactid=”44″>Amplify ETFs CEO Christian Magoon, who runs the Amplify Online Retail ETF (IBUY), expects to see current Walmart customers sign up, rather than current Prime users making the switch or adding another membership program.
“This is definitely a positive step forward for Walmart, but it’s probably the first of ten steps they need to take in order to be a viable alternative for people considering both,” Magoon told Yahoo Finance.
“I think this captures some subscription revenue primarily from core Walmart shoppers, but I don’t think it’s going to put a dent into Amazon Prime members or cause people to convert,” he added.
Magoon’s view is that it’s more of a “foundational move” to convert existing Walmart customers. Over time, Walmart+ will have to add more bells and whistles to bolster its offering.
Comparing the two retail juggernauts to basketball teams, Magoon said that Walmart couldn’t just “sit on the sidelines” as Amazon continues to entrench itself with consumers.
“Walmart has to grow their online presence because the majority of their revenue comes from brick-and-mortar,” he added. “I think they’re going to have to be more aggressive going forward and have more add-ons.”
Formation, an artificial intelligence marketing platform that helps companies with personalized offers, said that the new subscription is a “great start” from a customer adoption viewpoint for Walmart. ” data-reactid=”50″>Christian Selchau-Hansen, the CEO of Formation, an artificial intelligence marketing platform that helps companies with personalized offers, said that the new subscription is a “great start” from a customer adoption viewpoint for Walmart.
“But it’s very much a start, and I think it will be a platform they will need to invest in to see the kind of customer adoption they are really hoping for,” Selchau-Hansen added.
Formation recently conducted a brand loyalty study, interviewing 2,000 consumers. According to Selchau-Hansen, 73% said they’re more likely to engage with a brand that offers a loyalty program. Yet of the respondents, 63% indicated that they belong to one and three loyal programs.
“I do think there’s a bit of tension consumers will feel if they are already members of Prime, and ‘Why do I need another one?” Salechau-Hansen added. He noted that Walmart will have to prove itself on relevance and value to differentiate itself from Prime.
‘Very compatible’ with Prime
Yet DealNews’ de Grandpre believes there’s plenty of room for both subscription services, and that some Amazon Prime users will add Walmart+ to Prime. He lauded Walmart’s strategic focus on areas where Amazon is “weak,” like fuel, in-store shopping — and even groceries.
Those are three things Amazon does not do, for all intents and purposes, with no disrespect meant to Whole Foods,” de Grandpre said, adding that Walmart+ is “very compatible” with Amazon Prime.
And while Amazon continues to gain more market share, Walmart can start to play catchup in the space by penetrating the same households paying for Prime, because of its differentiated offering.
explosive growth during the COVID-19 pandemic.
has seen incredible growth in its closely-followed comparable store and e-commerce sales, driven by record sales in its online grocery pickup and delivery business.
In some ways, Walmart+ is one battle in a multi-front war that allows the company to take on “a major competitive threat to Walmart, which is Instacart and the rest of the grocery competition,” de Grandpre added.
reportedly accounts for less than 10% of the retailer’s net sales. ” data-reactid=”86″>The Walmart-Amazon fight is indicative of just how integral online sales have become in the current environment. During the pandemic, e-commerce skyrocketed across the board, helping boost Walmart’s own web sales during the second quarter by 97% year-over-year. However, e-commerce still reportedly accounts for less than 10% of the retailer’s net sales.
While Walmart has remained dominant in brick-and-mortar, it’s a smart move to capture subscription-based revenue that’s been a boon to Amazon’s business, Magoon explained, while enhancing its own omnichannel experience.
“This is Walmart…recognizing that Amazon Prime is a great revenue generator for Amazon. That subscription is a decent part of their earnings and its reoccurring each year,” Magoon said.
2018 report from CIRP found that Amazon Prime members spend an average of $1,400 per year on the site, versus $600 for non-members. ” data-reactid=”89″>It might be another way to capture more wallet share from loyal customers, he added, referencing a 2018 report from CIRP found that Amazon Prime members spend an average of $1,400 per year on the site, versus $600 for non-members.
‘The sky’s the limit’
140 million customers each week. ” data-reactid=”91″>One area where Walmart had an edge is its competition is its expansive retail footprint. Approximately 90% of the U.S. population lives within 10 miles of a Walmart store. With a fleet of more than 4,700 stores in the U.S., the retail behemoth also serves more than 140 million customers each week.
Brooks Bell, said it’s “short-sighted” to compare Walmart+ to Amazon Prime, noting that Amazon Prime is a “way broader play” than just free shipping or e-commerce. ” data-reactid=”92″>Gregory Ng, CEO of North Carolina-based web optimization consultancy firm, Brooks Bell, said it’s “short-sighted” to compare Walmart+ to Amazon Prime, noting that Amazon Prime is a “way broader play” than just free shipping or e-commerce.
Unlike Amazon, Walmart has “built decade- generation-long relationships with the majority of the country and consumers, and so it is way easier for an organization to move from building that in-store commerce relationship to a digital one,” Ng told Yahoo Finance.
With an expansive store footprint, Walmart has an advantage for last-mile logistics, and can capture real store-level data that can result in better logistics and supply chain. That includes knowing what types of products to stock, and in what quantities to better and quickly serve on a store or local neighborhood level.
Ng, who works with enterprise retail brands to better understand their customers, said the “huge opportunity” for Walmart is understanding consumer psychology. However, the company also needs to do what Amazon has done — which is understanding the “tipping point” that gets a consumer to justify adding another subscription service.
He added that with Walmart customers filling their carts more than ever, the retailer needs to focus on individual pain points for online shopping behavior to generate more signups for the membership.
“Those are how they are going to chip away at their hardcore dedicated customer base into this new service. And then from there, the sky’s the limit,” Ng added.
Twitter. ” data-reactid=”98″> Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.
