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Monday, August 31, 2020

Walmart+ will finally launch in September. Can it compete with Amazon Prime?

Two Walmart+ bags filled with groceries and other merchandise sit in front of the front door of a house The Walmart+ membership program launches September 15. Can it offer an alternative to Amazon Prime? | Walmart

One Walmart executive says the new program is “the ultimate life hack”

Walmart’s much-anticipated membership program, Walmart+, will finally launch nationwide September 15, the company announced today, about six months after the Covid-19 pandemic pushed the retailer to delay its original timing. The brick-and-mortar retail giant needs the program to be successful to stop top-spending customers from fleeing to Amazon Prime.

Walmart+ will cost $98 a year, or $12.95 a month, and focus mainly on unlimited delivery of groceries and other general merchandise from Walmart stores that will be delivered as soon as the same day they are ordered. Members also get fuel discounts at Walmart gas stations and those of partners, as well as access to “Scan & Go” technology which allows shoppers to use smartphones to scan goods at Walmart stores and exit without stopping to pay a cashier. The company says it will add more perks in the future. Recode previously reported these may include a branded credit card, early availability on product deals, and potentially access to a popular streaming video service.

Walmart wants the membership program to be “the ultimate life hack” for customers, Walmart Chief Customer Officer Janey Whiteside told Recode in an interview on Monday, arguing that its perks will save customers both time and money.

At the same time, Walmart+ will undoubtedly attract comparisons to Amazon’s Prime program, the ultra popular delivery and entertainment membership program that boasts more than 150 million members worldwide and has developed into a retail industry wrecking ball since its launch in 2005. Amazon Prime includes express delivery of millions of products (including groceries), video streaming of a large library of TV shows and movies, music streaming, and other perks. It now costs $119 a year, and Prime customers spend more and shop more frequently than non-Prime members.

And, most importantly for Walmart, more than half of Walmart’s top-spending families are now Prime members, as Recode previously reported. Which begs the question: Will they really subscribe to both membership programs?

When asked about comparisons to Prime on Monday, Whiteside told Recode that “we didn’t necessarily launch Walmart+ to compete with anything else.” And that answer makes sense; the head-to-head comparison between the services does not look great for Walmart when considering online customers who value the widest selection of goods or the longest list of perks.

In addition to the unlimited delivery perk — which is basically just a rebrand of Walmart’s existing Delivery Unlimited membership — Walmart+ only features two other benefits at launch. One is fuel discounts of up to 5 cents per gallon at Walmart, Murphy USA, and Murphy Express gas stations (Sam’s Club gas stations are slated to be included soon). The other perk is access to Walmart’s “Scan & Go” technology for in-store shopping, which allows shoppers to scan items with their phone, scan their phone at a self-checkout kiosk, and walk out of the store without stopping to pay. Walmart briefly tested, but discontinued the tool, two years ago. Walmart’s bet is that the mix of online, in-store, and on-the-go perks, like fuel discounts, will carry unique appeal. Whiteside said that “deepening a relationship further will mean we will get an even greater share of wallet from those customers.” Of course, some Walmart shoppers will also value the $21 difference between the annual fee of Walmart+ and Amazon Prime.

Amazon has made moves in recent years for Prime to appeal to households with less disposable income that historically have favored shopping at Walmart. Amazon added a monthly payment option for Prime fees in 2016, a 45 percent Prime fee discount for those on government assistance in 2017, and most recently, ways for Prime customers to pay for orders with cash. By early 2017, Amazon Prime membership growth was strongest in the US for households making less than $50,000 a year, according to a study by Robert W. Baird & Co.

The success of Walmart+ will likely hinge on how many customers are attracted to the core grocery delivery component of it. While Walmart’s overall grocery business is larger than Amazon’s and its prices are often cheaper, one fear is that top Walmart customers could eventually turn to Amazon for groceries as they get sucked further into the Prime suite of perks. Sources previously told Recode that some Walmart execs believe that top-spending Walmart families that subscribe to Amazon Prime will still be attracted to Walmart+ because its fresh grocery prices are often lower than those Amazon offers.

In the past, some Walmart executives have opposed a paid membership program, seeing Walmart’s competitive advantage as giving shoppers everyday low prices without the need to splurge on a membership fee. Whiteside promised that the low prices will remain even for those who don’t splurge for the bonus services.

“In no way does this membership program take anything away from customer who don’t choose to, or can’t afford to, engage with this,” he said.

On the company’s earnings call earlier this month, CEO Doug McMillon stressed the flexibility of Walmart’s customer offerings.

“We’re going to have multiple ways to serve them, and those families will decide in that moment how they want to shop,” McMillon said. “And sometimes they’ll be in the store, and sometimes they’ll do pickup, and sometimes they’ll do delivery, and many of them will buy a membership, and when they do they’ll get benefits from that.”



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