Walmart Vies With Amazon Prime By Expanding Two-Day Delivery Service

  • July 6, 2016 at 4:37 PM EDT
  • By Glenn Taylor
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After a year-long wait, Walmart has finally made ShippingPass available to all U.S. consumers, setting up a fulfillment service to rival Amazon Prime. The unveiling amps up the competition at quite the appropriate time, since Amazon will host its second annual Prime Day on July 12.

A membership to Walmart’s two-day shipping service costs $49 per year, half that of Amazon Prime’s $99 per year fee. Members that sign up will get a 30-day free trial of unlimited shipping to start the subscription.

Products that can be ordered through the service include items in categories such as Baby, Clothing, Electronics and Health & Beauty. Marketplace items that are not directly sold by Walmart.com and items with freight charges are not eligible for ShippingPass. As of now, ShippingPass only has one million items available for two-day shipping, a fraction of the nearly 30 million Amazon Prime offers.

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Walmart does have the advantage of fulfilling from its network of thousands of local stores, something Amazon can only do from its centers. Walmart shoppers who don’t like products can simply return items to the stores on their own time.

Information about ShippingPass was leaked on a live link on Walmart.com as early as May 2015, but the program was initially available by invitation only, with consumers having to put themselves on a waiting list to sign up for the service. Although ShippingPass initially started as a three-day shipping service, Walmart began testing a two-day version earlier this year in efforts to bridge the gap between ShippingPass and Amazon Prime.

Amazon Prime’s High-Income Dominance Leaves Opening Among Lower-Income Consumers

A Piper Jaffray survey indicates that as many as 57 million to 61 million households use Amazon Prime, showing that there are plenty of people already satisfied with the service. But the highest penetration appears to be in upper income households: more than 70% of households with annual incomes topping $112,000 had a Prime membership in Spring 2016, compared to more than 50% of households with annual incomes between $41,000 and $68,000. Walmart may be able to leverage its program’s price differential to appeal to average-to-low income households.

Even at a lower price, Walmart will need to ensure that the ShippingPass product selection and customer service remain on par with Amazon. Otherwise it will be difficult to lure Prime subscribers into switching.

With Prime accounting for as much as 60% of Amazon’s gross merchandise value (GMV) — the total value of goods sold on the site — and its members spending double the amount compared to non-members, the membership model itself is clearly engaging consumers to not only shop on Amazon but to keep coming back. Since Walmart’s e-Commerce operations have underperformed in recent quarters even as consumers overall shift their gears online, the retailer may see ShippingPass as an opportunity to finally re-engage its own consumers in a new way, this time outside its brick-and-mortar stores.

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