Photo: Walmart
Will Walmart’s best shoppers ditch Amazon Prime for Walmart+?
More than half of Walmart’s top customers have Amazon Prime memberships. Walmart wants them all to itself.
Vox’s Recode reports that the nation’s largest retailer is getting set to officially launch Walmart+, a rebranding of its Delivery Unlimited Grocery service with additional perks. The service, expected to go live this month, was originally set to launch in March or April but was pushed back due to the novel coronavirus pandemic.
The annual subscription program will cost $98, which covers unlimited same-day deliveries of groceries and general merchandise goods from the retailer’s supercenters. Subscribers will be able to reserve delivery time slots and receive notifications of open availability. As a Walmart+ member, they will also have limited access to the retailer’s Express two-hour service, which offers delivery of more than 160,000 products — from grocery and general merchandise to electronics and toys — a perk that costs non-members $10 tacked onto the chain’s standard $7.95 to $9.95 fee.
Other perks of the program will include discounts on fuel purchased at Walmart gas stations, early access to promotional deals on products and a Scan & Go service that would allow members to check out when shopping at the chain’s stores without having to wait in line. Subscribers are also expected to eventually be able to make use of a Walmart+ branded credit card with additional rewards.
The Walmart+ initiative is said to be a priority for the retailer’s chief customer officer Janey Whiteside. The company’s CEO Doug McMillon, Recode reports, has been actively engaged in the project’s planning.
Walmart’s image has been burnished by its ability, primarily in grocery, to keep American household pantries stocked during the pandemic, even as Amazon’s vaunted supply chain was seen to slip up.
Research by Activate Consulting found that page views on Walmart.com were up 91 percent in April, with unique site visitors up nine percent during the month. Walmart posted a 10 percent gain in U.S. same-store sales during its fiscal first quarter as online revenues jumped 74 percent.
- Walmart’s Amazon Prime competitor will launch in July – Recode
- Will a new subscription program be Walmart’s winning answer to Amazon Prime? – RetailWire
- Will Walmart’s customers pay $10 more to get deliveries in two hours? – RetailWire
- Has the pandemic transformed Walmart into an unstoppable force? – RetailWire
- Amazon’s traffic is way up, but others are doing even better during the pandemic – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: How important is it for Walmart’s business to attract the 50 percent of its most important customers who have Amazon Prime memberships to the Walmart+ plan? Do you think Americans will likely choose between Prime and Walmart+ or join both?
Poll
BrainTrust
Stephen Rector
Founder, President, Bakertown Consulting
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
It is important for Walmart to get consumers into its ecosystem and, given the penetration of Amazon, that means poaching some customers from Prime. However from the details released about the Walmart+ program, it does not look all that compelling. Amazon offers way more benefits with Prime, including access to digital content like movies and TV shows. It also allows accounts to be integrated with devices such as Echo. Walmart is doing none of that. It’s just a glorified delivery subscription with some fringe benefits. In my view, Walmart is headed in the right direction but it needs to work much harder to outsmart Amazon. That means innovating and doing its own thing, not just trying to emulate what Amazon does.
Agree. One way Walmart can do their own thing is to offer lower prices with more bundle deals. It’s much harder for Amazon to create bundle deals with thousands of vendors. Ultimately, Walmart needs to beat Amazon on price to win.
I do think Walmart has a much larger product mix available for same-day delivery to many households due to the nature of its physical stores being so close to so many customers. There is that — that is a benefit. You cannot go on Amazon for a cart full of pantry groceries and have same day delivery in most areas of the US because Amazon does not have local grocery locations.
This will be another hit at poorly run and/or overpriced large publicly traded US grocery chains more than anything else.
This is another critical move in Walmart’s battle with Amazon. The easiest customers to convert should be your existing customers, and Walmart’s move to minimize these valuable customers “straying” with Amazon is smart. Shoppers want choice, so having both Amazon Prime and Walmart+ is having the best of both worlds. I think existing Walmart online customers will be very attracted to Walmart+, and some additional sales will be made that would have otherwise been lost to Amazon. For the die-hard Amazon Prime customers, I don’t think the new Walmart+ will change their behaviors.
My Prime membership pays for itself by multiples over the course of a year’s worth of free deliveries. So Walmart doesn’t have to steal me away from Amazon, it just needs to offer the same value on a range of products that might now work with Amazon. Like groceries. Like discounted gasoline. Like two-hour delivery in an emergency. Both are doing back flips to earn the customer’s business. They can co-exist, but Walmart has its work cut out for itself.
Walmart has done a remarkable job of converting previously non-Walmart shoppers into Walmart shoppers. It is not reasonable to expect Amazon Prime members to drop their Prime membership and switch to Walmart+. Many Amazon Prime members may opt to add the Walmart+ subscription as it supplements the value they receive from Amazon with free same-day delivery on some merchandise and especially for groceries. Amazon Prime’s additional services like streaming video are too great of a value to give up. Similar to Costco, Walmart’s hope should be to capture supplemental subscriptions not replace Amazon Prime. I don’t see Walmart+ displacing Amazon Prime.
I do not think the true blue Amazon customer will ditch their Prime membership for the Walmart+ membership. While I understand the need to be competitive and stand up to the giant, there will need to be a lot more advantages other than delivery to have a majority of Prime customers to make the switch. I think this is a to-be-determined until Walmart has the advantage to make customers choose them over Amazon.
The two critical facts that most marketers miss: 1.) your best customers, the heaviest top third of buyers for many brands, buy others more than they buy you; 2.) heavy buyers are the most responsive to advertising in terms of ROAS (absolute increase in sales divided by absolute increase in ad spending).
Putting these facts together, this type of program — with heavy-up advertising weight against your best customers — is exactly the right play for Walmart. Now is the offer exactly right? I’m not sure, but the targeting certainly is on point.
It’s hard to imagine how significant numbers of Amazon’s truly best customers would migrate if there are not truly compelling reasons to do. While switching costs in the traditional sense are not high, once you’ve paid for Prime and regularly use its strong features, what would be the motivation to switch? Better service? Not likely. Greater assortment? Hardly. Lower price? Well that’s a race to the bottom.
Walmart’s advantage with such a program is its ability to leverage its physical assets in concert with its improving digital capabilities. This might convince shoppers that having both plans are additive. But the dilemma for driving significant membership is you’d have to believe that there are enough consumers who can afford both programs and spend enough annually to get an ROI. It’s hard to imagine Walmart has those type of customers in the kind of numbers they would need.
Walmart+ looks to be a good deal, but it’s not likely to convert Prime customers. The digital (movies, music) aspect is missing, and is a major benefit for Amazon subscribers. Walmart is heading the right way but until it can launch a streaming service or partner with one, this is just another delivery option.
I would think any business would want to attract 50 percent of its most important customers to such a program and Walmart should be no different in wanting that spend and the membership fees, but at what cost? It will be tough to beat Amazon head to head so it’s best for them to go after their most loyal shoppers and the long tail; pulling them further into the ecosystem to increase their CLV with fuel, credit card, etc. Incidentally, I was surprised to see some heavy cross use and wonder what unmet needs Amazon is filling for the Walmart shopper (general merchandise?) and what unmet need Walmart fills for the Amazon shopper (grocery?). I think people who can afford it will do both in order to maximize their benefit. This is an exciting development and it would be fun to see the scenarios they are running on whom to target.
They will co-exist I suspect — due to the rest of the perks that come with Prime. I think Walmart’s edge will be groceries and then other products. Amazon’s is other products and then groceries. As long as online with delivery keeps growing for grocery, there’s plenty of room for two.
Thanks to a long list of failures and mistakes during the pandemic, Amazon Prime customers are indeed primed to be poached by Walmart. Walmart has out-executed Amazon at seemingly every turn these past few months, and a direct appeal to overlapping Prime customers is, on its face, a great idea. However the offer just is not all that compelling. Amazon’s music, TV, gaming, photo storage and integrated device perks far outweigh the shopping perks that Walmart is offering. It’s time to get more creative if Walmart really hopes to extract another hundred bucks a year from people for free shipping. RetailWire recently hosted a discussion of the new drive-in movie offering coming from Walmart, priced at $26 a carload. Why not entice people to Walmart+ by including free admission to those movies? If a household loaded up the car and went to those movies just four times it would pay for the membership.
Walmart+ is a smart option for the retailer and will continue to grow the business but Amazon Prime customers are not necessarily Walmart customers and the fee may not be worth it for many. Plus, as many others have mentioned, where is the digital benefit?
I think this program needs to have a substantially lower fee than Amazon Prime (like 50% lower) given the lack of a digital benefit. Most who I talk to who use Amazon Prime cite the digital benefit as one of the justifications for “why they pay for Amazon Prime.”
The measure of success for Walmart+ should not be whether it compels consumers to ditch Prime – that is an unreasonable goal, given the breadth of perks that come with Prime. The more interesting dynamic will be the impact of this program, if it gains widespread adoption, on grocery competitors such as Kroger.
Spot on Ken – this is focused substantially on the grocery sector.
In December, I predicted 2020 would be the year of loyalty. The Walmart+ program proves even the pandemic can’t derail retailers’ desire for long-term consumer devotion.
It’s vital for Walmart to directly target Prime members to earn their loyalty with groceries, one of its greatest strengths. Investing in fast home delivery immediately makes Walmart more enticing by giving shoppers convenient choices beyond BOPIS.
Yet Amazon is a global leader in investing in consumer intimacy, entwining its offerings with our everyday habits. Personally, I would find it hard to quit a retailer that enables my lazy introversion and lets me cocoon with magnificent media like Fleabag.
That’s why I expect Americans who can afford to do so will join both.
We are dealing with apples and oranges here. Walmart+ is about shopping. Amazon Prime is about so much more — maybe even lifestyle. Every day I interact with Amazon Prime, and I surely am not shopping every day. Movies, TV, reading, even “Words with Friends.” And I am likely finding new ways to us it without even thinking about it.
Walmart must do what they are proposing in order to stay in the game. But the reality is Amazon can do it all as well.
An Amazon Prime membership has some social cachet, which Walmart can’t match. Prime subscribers who value that cachet won’t abandon their membership. Furthermore Prime’s proposition may be different; an Amazon membership also provides access to original content. Walmart would have some serious catching up to do in that area.
However despite all this, for many shoppers, the choice will come down to price and convenience. Walmart can compete on those measures. So we could see a price war, which could be good news for shoppers in these turbulent times.
I’ve been a Prime member since it began. Until Walmart gives me free one-day shipping on a broader range of products and adds TV, I’m not even considering it. I think it’s always the #2 option for Amazon shoppers and there is little reason to change that.
This is a step in the right direction, but I’m not sure if it’s attractive enough for Amazon Prime members to switch. What if they threw in a Sam’s Club membership as well? Would that be more enticing?
For Walmart, this is a protection mechanism against a potential shift towards same-day delivery – especially with the Express delivery capabilities. It is exciting to see the Walmart/Amazon battle but this case is a competitive counter-move more than an attempt to completely switch customers. The number one perk that Amazon Prime offers remains free shipping, followed by fast (same-day/two-day) delivery. Most of the other benefits fall by the wayside. Walmart is getting deeper into the shipping game and it will be exciting to see the results. Customers will continue to buy from both retailers. What will be interesting to see is how Walmart starts to use their data — identifying their most loyal online customers who are now willing to pay $98 and recognizing their buying habits. The best part of the deal is unlimited same-day delivery of groceries – a real attraction that will put Walmart ahead of Amazon in a key category.
You have to ask: what took so long? Walmart is usually the best at being a fast second or even a bleeding-edge first, but not in this case. To answer the question, I’m sure there’s some overlap but we’re mostly talking about two different customers and, even if we weren’t, why not have both? This should be a boon for Walmart, but slower to take hold than when Prime came on the scene.
Amazon’s customer obsession, in tandem with the tenure, value proposition and integration of Prime makes it hard to see any kind of sizable migration of members to Walmart+. While Walmart has the physical footprint and is making great progress on a number of fronts – from its brand to its localization partnership with Nextdoor and its growing digital capabilities – Amazon is a truly customer-centric and data driven machine.
While there’s a clear Venn diagram here, the only reason this is even a discussion is the formidable lever that Amazon has with Prime. Still the law of large numbers applies, so Walmart will succeed here regardless. As will Amazon. This is not good for Target and others, however.
If all a shopper was looking for was grocery delivery, Walmart+ might be enough as their growth in online grocery has clearly outpaced Amazon as of late. However, Amazon Prime has many ancillary benefits that offer much more value than Walmart+. Won’t be enough extra value here for many Amazon Prime shoppers to defect!
I think this is the wrong question. The biggest and nearest opportunity for Walmart is not Amazon Prime customers, but everyone else. Traditional grocers should be much more concerned about this than Amazon.
This doesn’t seem to quite have the benefits and features that Amazon Prime has. This looks more geared toward a busy family with two working adults, kids/teenagers, and “no time to stop at the store.”
I am curious if they tinkered this plan at all as a result of the pandemic and changes in consumer demand resulting from it, or just simply delayed roll out of what they were planning pre-pandemic.
We will see how this goes. I don’t think it will impact Amazon much. It may potentially hurt grocers with these curbside pick-up programs or grocers with delivery programs that gouge the customer (looking at Safeway NorCal who prices any center store or flat priced perishable item via their .com program up 10% above the already outrageous store prices PLUS charge a service fee).
The focus should be on the Walmart customer and providing more value to them (vs. a concern about whether they’re also part of Amazon Prime or not). As an Amazon Prime member myself, considering joining Walmart+ would be in addition, since I’m already so integrated with Echo, Amazon video etc., which I imagine is the case for many.
Amazon has done a very good job adding a lot of value around Prime that has made it very sticky. Walmart is headed in the right direction, they just have a long way to go. As they come up with more, better and different ways to add value to Walmart+, it will become a massively important program for them.