At the price of $50 a year, the world’s largest retailer is going to offer unlimited free shipping on items purchased from its online store. Will this service help Walmart catch up with Amazon in the online retail space?
As Walmart continues to significantly invest in e-commerce, this summer the retailer has plans to test an unlimited shipping program.
The service promises to deliver products within no more than three days for a yearly fee of $50, while Amazon Prime costs $99 a year for two-day or less shipping.
Although the program doesn’t provide video, music streaming and other benefits that Amazon Prime members have, Walmart’s enticing price is likely to switch consumers from Amazon, says Tom Caporaso, chief executive officer of Clarus Marketing Group.
“Amazon was $79 a year and bumped to $99 last holiday season, while Walmart offers nearly half the price. It would be interesting to see what comes out of the Walmart test,” he notes. “With Amazon Prime, consumers have many other benefits, but I think for the core benefit of shipping, Walmart is likely to give Amazon a run for its money.”
With 4,540 retail stores domestically, Walmart has been making significant investment in e-commerce. Its e-commerce sales grew approximately 22 percent in 2015, Doug McMillon, CEO for Walmart, told analysts, adding that in 2016, Walmart will keep accelerating e-commerce.
In spite of the heavy investment in e-commerce, Caporaso thinks that it will be a hard battle for Walmart to take down online retail giant Amazon.
“It’s not going to be easy,” he says. “In the past few years, Walmart hesitated to do any loyalty programs. They were heavily focused on everyday low price, so they weren’t trying to build additional perks for their customers. In that sense, it’s interesting to see them make a foray into subscription commerce.”
Subscription commerce, where a customer must pay a subscription price to have access to a product or service, like free shipping, is gaining popularity. More and more brands, including Jet.com and Sephora, are using this model as a common marketing tactic to stay competitive in the online retail space, according to Caporaso.
“It puts some skin in the game for consumers,” he explains. “The power of the subscription model is that consumers are making a purchase decision instead of just giving their email address to join a loyalty program that doesn’t ask them to put any skin in the game. Subscription changes that dynamic for consumers; they’re now invested in shopping with a retailer or company.”
Walmart is going to test the unlimited shipping program this summer by invitation only.
“This is a closed beta, and customer feedback will direct how the program evolves,” a company spokesperson says.
In a related move, Amazon introduced a new advertising platform that enables developers to advertise their wares.
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