Can Wal-Mart's ShippingPass compete with Amazon Prime?
Amazon Prime, the $99 per year service that offers subscribers free two-day shipping on eligible items, has become a formidable asset for online retail’s biggest name.
According to a research report published earlier this year by Consumer Intelligence Research Partners, the ranks of Amazon Prime subscribers in the U.S. grew by 35% last year to 54 million, a figure that represents nearly half of U.S. households.
In an effort to stay competitive, offline retail giant Wal-Mart began testing its own free two-day shipping program. Last week, the company announced that the program, ShippingPass, which costs $49 per year after a free 30-day trial, is now available to all customers.
According to Fernando Madeira, the president and CEO of Walmart.com US, “ShippingPass is about half the price of similar programs out there at just $49 a year, and customers who are using it, love it. They shop on Walmart.com more often to take advantage of our low prices, fast shipping and added benefits of no minimum order requirements and free online or in-store returns.”
Wal-Mart says that millions of items in its bestselling categories are ShippingPass eligible. Many other items that aren’t ShippingPass eligible are also shipped free for ShippingPass subscribers via standard shipping. Items sold by third parties in the Walmart.com Marketplace, or items that have freight charges, are not part of the ShippingPass program.
Given how important free shipping is – it frequently ranks as a top purchase consideration in consumer surveys – the full launch of ShippingPass is an important milestone in Wal-Mart’s online strategy. A 2015 survey by Prosper Insights suggested that, while ShippingPass is almost certainly not an overnight Amazon Prime killer, it could win millions upon millions of consumers over.
To do that, Wal-Mart will probably need to expand the number of items that are ShippingPass eligible. While a million-plus is a good start, more than 30 million items on Amazon, including items sold by third-parties that use Amazon’s fulfillment services, are Prime eligible. That’s a huge difference. Amazon Prime also offers free two-hour and same-day delivery in select markets for select products.
But even if Wal-Mart eventually comes close to matching Amazon Prime in the shipping department, ShippingPass could face an uphill battle because Amazon Prime isn’t just a free shipping service anymore.
Prime subscribers receive access to a number of Amazon services, including Prime Video, a movie and TV streaming service, Prime Music, a digital music service that offers more than a million free songs, and Prime Photos, a photo storage service that offers unlimited storage space. Prime subscribers in the U.S. also get to borrow ebooks through the Kindle Owners’ Lending Library, and get a free ebook each month through Kindle First.
Subscribers receive discounts, such as 20% off new release physical video games during select periods, and get Prime Early Access, which gives them early access to Lighting Deals. There’s also Prime Day, a one-day only shopping event for Prime members that takes place on July 12.
Finally, Amazon gives Prime members have exclusive access to purchase its private label Elements products and new technology like Dash buttons.
While some observers suggest that Prime might be less compelling than it seems – Prime Video isn’t necessarily a must-have for a subscriber who also has access to Netflix, for instance – Prime has enough to make it a very sticky service for many subscribers. Wal-Mart and others hoping to take some of Prime’s shine away will ultimately need to address that if they intend to compete head-to-head.