Will free two-day shipping give Walmart an edge over Amazon?

Discussion
Source: Walmart
Jan 31, 2017

Has Walmart finally found a way to gain an e-commerce advantage in its competition with Amazon.com? The world’s largest retailer announced earlier today that it will now offer free two-day shipping with no annual fee for orders placed on walmart.com.

The free two-day shipping options requires a $35 minimum purchase and covers more than two million items sold on the site.

Marc Lore, president and CEO of Walmart U.S. eCommerce, wrote in a blog post, “These items make up the vast majority of what customers buy online. In today’s world of e-commerce, two-day free shipping is table stakes. It no longer makes sense to charge for it. We believe this is the most compelling all-around value proposition for customers looking for low prices, a broad assortment and quick shipping.”

With the new program going into effect today, Walmart is discontinuing its ShippingPass program, which offered free two-day shipping for a $49 annual fee. Members in the program will receive a refund from Walmart.

“This is just the beginning. Now that we’ve checked the two-day shipping box, my focus is on leveraging our unique assets and network to serve customers in innovative ways that only Walmart can,” wrote Mr. Lore. “Stay tuned … you won’t be waiting long.”

DISCUSSION QUESTIONS: Will Walmart’s free two-day shipping offer substantially improve the company’s competitive position relative to Amazon? How will the move affect its brick and mortar business as well as those of its competitors? What do you think are the next steps that Walmart’s eCommerce operations will take in the U.S.?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This could immediately draw a lot of online shoppers who haven’t already paid for Amazon Prime towards Walmart."
"Frankly, I can’t understand why they changed their program. It seems to me that the idea is to have the customer not think about shipping at all."
"While Amazon is a giant, Walmart is a force to be reckoned with. Watch your back, Amazon!"

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35 Comments on "Will free two-day shipping give Walmart an edge over Amazon?"


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Tom Redd
Guest

Smart move and it offers a real edge for Walmart — especially since almost any brand a shopper wants is available at Walmart and many shoppers that will not visit a Walmart store due to their “image” will gladly save money via online shopping.

Online Walmart has even more items and a very fast website. Try it — you will like it, and you will not suffer any difficulty with returns.

Al McClain
Staff

I agree, Tom. It instantly could make them a much bigger e-commerce player. For Prime members like me, it will make Walmart the retailer I compare to Amazon on prices, whereas I wouldn’t have bothered before. Prime members who use a lot of the ancillary services will probably stay loyal, but if they are paying the $99 mainly for the two-day shipping, this could be a game changer. At least it gets Walmart back in the game and they are promising more in short order.

Jon Polin
Guest

Though Amazon’s simplicity (Dash buttons, etc.) and speed of delivery are diminishing the inherent advantages of brick-and-mortar retailers, Walmart does have the assets of 1.) a huge brand, 2.) perceived low price, 3.) stocked shelves and 4.) omnipresent physical locations. These assets should enable them to compete aggressively vs. Amazon. While many consumers are buying many categories purely online, there is still a big advantage for a brick-and-mortar retailer (Walmart) to be able to smartly equip customers to shop online, offline and in combination (click and collect).

Charles Dimov
Guest

Excellent point that Walmart folk are using their head to combat Amazon. Leverage all the assets they have — brand, perceptions, omnichannel capabilities … and battle on aspects that customers are not happy about (paying for a service many perceive should be free). Walmart’s efforts are important to click and collect retailers. Breaking up the Amazon stranglehold on consumers’ minds means more opportunity for the smaller omnichannel chains, too.

Susan O'Neal
Guest
5 years 5 months ago

It will help, but Walmart’s biggest hill to climb is consumer awareness and perception as an at-home delivery option.

Charles Dimov
Guest

Walmart’s biggest challenge will be sticking with it.

Manmit Shrimali
Guest

This would temporarily get traction because Walmart’s price optimization model is really weak. We recently revamped the price optimization at the SKU level for a retailer for whom we benchmarked Walmart vs. Amazon vs. client. Walmart won on only 13 percent of SKUs in terms of pricing. It will not take long for a consumer to compare the prices and weigh their options — even for quickly-consumed items. For example, Pampers Baby Dry diapers, size 5, 160 count, available for two-day free shipping from Walmart is priced almost 20 percent higher than that for Amazon’s Prime members. We did this type of analysis across 80,000 SKUs — Walmart really needs to reevaluate their pricing model.

Dr. Stephen Needel
BrainTrust

This absolutely will improve Walmart’s position vs. Amazon. The question will be whether it pays out — they may do more volume but what will the impact be on profitability? I’m not sure they should care much about what it does to their brick-and-mortar business.

Phil Masiello
Guest

I believe this will have a positive effect on Walmart’s e-commerce business as a whole. But it won’t make a dent in the competition with Amazon.

Amazon has something that Jet.com and Walmart.com covet: customer loyalty and customer retention. Amazon has built trust with their customers over the years and that is not something that two-day shipping is going to break. Also, Amazon does not have a minimum purchase for Prime.

There is nothing on Jet.com or Walmart.com that you cannot already find on Amazon or many other websites. If Marc Lore thinks this is a game changer, he needs a refresher in consumer behavior 101.

So, is two-day shipping going to have an effect? Yes, a positive one for Walmart.com. Will it affect its Sales with Amazon? Not at all. I don’t think Jeff Bezos is even thinking about a response.

Paula Rosenblum
BrainTrust

I think it just leveled the playing field a little. Two-day shipping is becoming table stakes. No advantage … just an eliminated disadvantage.

Mark Ryski
BrainTrust

This move is just another salvo in the epic Walmart-Amazon battle that is sure to continue for years to come. Walmart is the only retailer that has the size, scale and resources to battle Amazon at its own game. The acquisition of Jet.com was Walmart’s declaration that it would not stand by and allow Amazon to eat its lunch, and two-day shipping is merely another step as Walmart evolves its e-commerce offering. There will be many more.

Meaghan Brophy
BrainTrust
Meaghan Brophy
Senior Retail Writer
5 years 5 months ago

Walmart’s free two-day shipping will help put them on a level playing field with Amazon, especially since Walmart is not charging an annual fee. This could immediately draw a lot of online shoppers who haven’t already paid for Amazon Prime towards Walmart. Amazon will have to respond by beefing up their other Prime benefits, such as their video streaming, Prime Now delivery and Prime Pantry to justify their $99 per year or $10.99 per month Prime fee.

Lee Kent
Guest

A good move, however Walmart isn’t Amazon. Amazon is all about reputation and delivery, not just free shipping. Walmart has not proven themselves there yet IMHO. I wish them luck but I think they have a long way to go.

And that’s my 2 cents.

Ed Rosenbaum
Guest

I agree with you, Lee. IMHO I do not think of Walmart and Amazon at the same level of customer satisfaction.

Max Goldberg
Guest

Free shipping with a $35 minimum purchase will attract consumer attention and raise Walmart’s online profile, but it will not be enough to overtake Amazon. Amazon Prime members get free two-day shipping on far more than 2 million items, without minimum purchase, in addition to free content and a plethora of other services, all backed by great customer service.

Tony Orlando
Guest

This will surely help Walmart, and if they can make money then it will continue to move forward. Retail today is evolving, and consolidation of e-commerce will start to grow quickly as smaller companies will merge or risk going under, just like brick-and-mortar stores have done. It takes a ton of capital to pull this off, and who better than Walmart? Only the few and very strong will survive in the retail industry as we move forward and you’ll see more and more tumbleweeds in many strip plazas and malls with this consolidation process. So buckle up folks — retail is going for a ride.

Gene Detroyer
BrainTrust

Frankly, I can’t understand why they changed their program. It seems to me that the idea is to have the customer not think about shipping at all. That is what Prime does (and much more). My last three amazon orders were single items, all under $20. I think, “oh I need X.” Open Amazon and order it. What could be simpler? How does the Walmart customer handle the $34.50 shopping basket? Buy something they don’t need or currently want? Walmart is a powerful company and has been dedicated to online for a long time. They understand that their U.S. business is flat and mature. But this is not the way to move forward.

Adrian Weidmann
BrainTrust

Walmart’s free two-day shipping won’t tip the balance. Free shipping has become the ante to simply play the game. It places Walmart on the playing field with Amazon. Given Walmart’s extensive logistics expertise and existing distribution center infrastructure, I would leverage Uber (or similar services) and go after home delivery. If Walmart could make that work it may give them a competitive advantage over Amazon.

Richard J. George, Ph.D.
BrainTrust

I am not convinced that this latest move is enough. First, Amazon has the most customer-centric website and Prime simply enhances the customer’s experience. Second, while I support Walmart’s experiments to get customers to think of them in the same vane as Amazon, the Walmart free two-day shipping still requires a $35 minimum and applies to two million products. Amazon Prime offers more than 40 million products for free two-day delivery, many of which are priced well below the Walmart minimum purchase of $35. As noted, it’s an experiment — not the answer.

Jeff Sward
BrainTrust

Walmart is making up lost ground — better and faster than a lot of other retailers. If shipping is a leveling of the playing field or table stakes, then it’s not an edge or advantage. It’s going to get really interesting when Amazon makes some kind of slam dunk into brick-and-mortar. I semi-joked the other day about Amazon taking over Sears and reinventing that space into something mall shoppers would actually visit. Now I’m going to say, “Amazon, what are you waiting for?” Sears’ market value has been plummeting in the last couple of days to multi-year lows. Pretty soon they will be very affordable. Will Amazon wait for them to go bankrupt?

Shep Hyken
BrainTrust

This is a competitive move, but also a catchup move. First, Amazon offers free shipping of books over $25 and almost anything else over $49. So Walmart has a lower free shipping minimum, which Amazon can choose to match or not. So Walmart is catching up and getting competitive. But, beyond two day shipping, Amazon is also setting up distribution centers (already in some areas) that will allow customers to receive items in two hours. Plus their Prime program is far more than a free shipping program. It has music, movies, TV shows and more. So does free two-day shipping from Walmart make them more competitive? Yes, but that doesn’t mean they have caught up.

As for how this will impact the brick-and-mortar business … Walmart will learn the formula or percentage of the impact to their in-store sales compared to online sales. As they offer free shipping, it will change the formula. The best retailers, and Walmart is one of them, recognize the importance of the online/in-store mix.

David Biernbaum
BrainTrust

Two-day shipping will definitely expand customer options for Walmart shoppers, expand e-commerce for Walmart and, if well executed, it will drive new business and create more dollars and profits for Walmart. However Amazon will feel no pain, because Amazon is extremely well-developed, established and will continue to offer an extensive depth of assortment, variety, quality, price points and brand names. Amazon is a well-established way of life and, much like a big shopping plaza, it is loaded with third-party variety and competition on each item.

Carol Spieckerman
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
5 years 5 months ago

Walmart is smart to cast a wider net and depart from delusions of mass loyalty to its shipping program. However, as Manmit pointed out, price optimization will be critical to Walmart’s success with this strategy. The end game is to put Walmart in the decision set, right up there with Amazon, for purchases over $35. If Amazon beats Walmart on price, no sale. It really is that simple.