Walmart’s reported $98 annual subscription service could fuel the chain’s explosive e-commerce business

July 8, 2020, 6:30 PM UTC

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Walmart is reportedly planning to debut an Amazon-rival subscription service later this month, allowing customers to get their groceries and home and health products delivered to their door. 

The service, called Walmart+, will cost consumers $98 a year—$21 less than an annual subscription for Amazon Prime—and is expected to include discounts at its gas stations and unlimited same-day delivery, according to Recode. The company declined to confirm the report.

Robert Ohmes, analyst at Bank of America Merrill Lynch, has also not received any official confirmation that Walmart+ will soon roll out. But he said the service makes a lot of sense, given Walmart’s strategy of providing people with more ways to buy the products sold in its stores.

“This is the natural extension of what Walmart’s already been doing,” he said. “Walmart’s constantly trying to improve the level of omnichannel services of its stores.”

The company, which boasts approximately 4,756 U.S. Walmart stores, announced last year that it was expanding its Delivery Unlimited service, a $98 grocery membership, to 1,400 stores in the fall. Then in April it “accelerated the development” of Express Delivery, a two-hour delivery service for food and general merchandise, in light of the coronavirus pandemic. The service costs consumers $10 plus the original delivery charge. In May, Walmart combined its general merchandise app with its grocery app.

Walmart+ is the next evolution in giving customers more bang for their buck, Ohmes said. 

The reported development of the service comes as consumers buy more items online while sheltering in place during the coronavirus pandemic. Meanwhile, Walmart has been rapidly growing its market share of the e-commerce industry, given the popularity of grocery delivery and pickup during the pandemic.

Amazon reported that its first-quarter sales jumped 26% compared to the same quarter last year. That’s nearly 10% more growth than last year’s first quarter. Meanwhile, Walmart said its first-quarter sales increased 8.6%, with e-commerce sales jumping a whopping 74%

“There are a lot more people engaging Walmart digitally than they have before,” Ohmes said. “Walmart and Target are some of the biggest winners in a COVID environment, just looking at the significant growth rates.”

Amazon has long dominated e-commerce, and with its Prime membership, which debuted in 2005, it’s only gotten bigger. In addition to delivery, the $119 annual membership gives customers access to Prime Video, Amazon’s streaming library, exclusive shopping deals, and free access to Prime Reading’s 1,000 e-books and magazines. 

Walmart+ may also include video entertainment, according to Recode, and Morgan Stanley analyst Simeon Gutman said the retailer likely would consider including discounts or services related to its optical department and pharmacy. It could also consider adding special offers through Sam’s Club, its bulk retailer. Walmart also has a wider reach when it comes to grocery delivery, as it has thousands of stores across the nation. Amazon is dependent on Whole Foods, which has only about 500 stores in the U.S., for its Amazon Fresh grocery delivery service.

In order for Walmart to successfully take a bite out of Amazon, Walmart will have to prove that it can consistently deliver. It also will have to appeal to Amazon’s somewhat “wealthier” customer and change the perception that Amazon is the go-to for delivery, Gutman said. 

“It’s going to take time to change that perception,” Gutman said. “But there’s definitely room for two.”

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