As Walmart continues to battle Amazon on the ecommerce front, the retail behemoth launches its new Walmart+ membership program this month.
Similar to Amazon Prime, Walmart+ will give members free shipping for an annual fee. At $98, the price beats Amazon Prime’s $119 membership fee, but Walmart+ will require a minimum purchase of $35 for free shipping. Amazon Prime has no minimum requirement. The two services also differ in that Walmart+ membership will include a discount at participating gas stations, but unlike Amazon Prime, will not include streaming entertainment. Walmart exited that market earlier this year when it sold its streaming service, Vudu, to NBCUniversal’s Fandango division.
The thousands of items eligible for free shipping with Walmart+ will include produce and other groceries shipped directly from Walmart stores. This builds on Walmart’s massive success in online grocery orders, which customers pick up outside stores. The company hopes to gain a further edge in this category, reasoning that its expansive empire of stores in the U.S., many located outside metro areas and closer to customers’ homes, will keep food fresher and costs lower than those of its competitors.
Walmart has been among the many retailers to benefit from an explosion in online shopping during the pandemic. In the second quarter, its online sales grew 97%, more than double its average growth rate. Groceries have been a big driver of those sales. “Walmart+ is a bet that customers will be willing to pay a fee for the added convenience of having that food delivered to their homes,” The New York Times reports.
Analysts are divided on the significance of Walmart’s new offering. Some have eagerly awaited the launch of Walmart+, slated for September 15. Morgan Stanley predicted as many as 20 million people signing up in the first few months. Other analysts see little difference between Walmart+ and an ecommerce service the retailer already offers. As Craig Johnson, President of retail consulting firm Customer Growth Partners remarked, “For a $35 minimum and $98 annual fee, this is a thin gruel.”
“We are developing a product that is grounded in meeting customers’ needs,” said Janey Whiteside, EVP & Chief Customer Officer of Walmart, adding that more membership benefits are planned for the future. Regarding the $35 minimum, Whiteside explained that most customer orders are above $35. She also said that many other grocery delivery services have similar purchase requirements – worth noting, since groceries are the main focus of online shopping at Walmart.
Walmart has tried various ecommerce initiatives over the years, including the somewhat experimental Jet Black, a membership-based personal shopping service in New York that allowed consumers to order by text. Low adoption and lack of investment led to its demise in February.
Lessons learned have gone into the development of Walmart+. Studying consumer patterns during the pandemic has also been key. “We saw that customers’ needs and wants were rapidly changing almost on a daily basis,” said Whiteside.