Walmart (WMT) is dropping a membership program aimed at competing with Amazon.com’s (AMZN) wildly popular Prime service after less than a year, opting instead to offer free two-day shipping on a lower minimum order size.
On Tuesday, Walmart started offering free two-day shipping on orders from an assortment of 2 million items, with a focus on every day items like baby products, dry foods, pet products and electronics, for orders of $35 or more. That is down from the previous minimum threshold of $50. There is no minimum for orders shipped to a store rather than a home.
Walmart started testing an unlimited free delivery program called “ShippingPass” in May, charging customers $49 a year, just about half the cost of an Amazon Prime membership. The company declined to say how many customers had signed up for ShippingPass, or whether it had missed its goals, and a spokeswoman said ShippingPass had simply been a test on the way to refining its two-day shipping offering. The company will offer refunds for ShippingPass membership fees.
Walmart U.S. eCommerce Marc Lore said in a media briefing that fast shipping has become the expectation for shoppers, obviating the need for such a program.
“In this day and age, two-day shipping is really just table stakes- people shouldn’t have to pay for it and certainly not a membership,” said Lore in his first talk with reporters since he joined Walmart in August after selling e-commerce startup jet.com to the big box giant.
Lore is probably right that two-day shipping is the new norm for customers, but Amazon Prime has moved well beyond free shipping as it looks to justify the $99 a year cost. Prime has emerged the key pillar of Amazon’s e-commerce and streaming business, offering members access to streamed movies, TV shows and the company’s orginal productions: last month, Amazon expanded its video-streaming services to include HBO and Cinemax for $15 and $10 per month respectively. And earlier this month, Amazon announced a credit card just for Prime members giving 5% back on all Amazon purchases. These have added up to make Prime extremely sticky and more apt to lock shoppers in. By some estimates there are 60 million Prime members in the U.S.
Though Walmart offers some 30 million items online, the 2 million available for two-day free shipping represent the “vast majority”of what people order most frequently, Lore said. He added that many products can in fact be delivered in one day.
The Jet.com acquisition was intended to re-accelerate Walmart’s online sales, which are far behind Amazon’s and whose growth had been slowing for eight quarter through summer of 2016. Walmart expanded its marketplaces business last year, helping Walmart.com sales get back on track, rising 20.6% in the third quarter. Parent company Wal-Mart Stores will report fourth quarter results in February.
