retail news in context, analysis with attitude

Walmart announced yesterday that it will launch a subscription shipping service designed to compete with Amazon Prime, charging customers just $50 a year for unlimited deliveries in three days or less of qualified products.

Amazon charges $99 for its Prime service, offering two-day delivery.

The Associated Press writes that "Wal-Mart offers a grocery delivery and pickup service in five markets. But the unlimited shipping program marks a substantial commitment and underscores how serious the retailer is about accelerating the growth of its online business, which has seen a slowdown."

Walmart says that "the service will be available by invitation only for now and it will offer more than one million top-selling items, from toys to electronic gadgets. Wal-Mart's online site sells more than seven million products."

Part of Amazon's Prime service includes video and music streaming, features not included currently in the Walmart offering.

CNet frames the story this way:

"The test highlights Walmart's efforts to grab a larger share of the online sales market from Amazon, one of the Internet's largest retailers. The test appears to challenge Amazon Prime, the two-delivery service launched 10 years ago.

"The program has proved lucrative for Amazon. At the end of 2014, Amazon Prime had 40 million US members, up from an estimated 29 million at the end of the third quarter, data from Consumer Intelligence Research Partners shows. CIRP estimates that the average Amazon Prime customer spends $1,500 per year on the e-commerce site, compared with $625 for nonmembers."

And Bloomberg writes that "the move ratchets up competition in e-commerce, where Wal-Mart has been trying to make inroads. While the company is the world’s largest retail chain, Amazon dominates online shopping. Prime has emerged as a key weapon for Seattle-based Amazon because it keeps customers loyal, making it ripe for imitation."
KC's View:
Right on all counts. Competition is getting ratcheted up, it is Walmart's effort to be better positioned against Amazon, and starting up such a program is a great way to generate customer loyalty and repeat business.

Again, this is just the beginning. Walmart knows that it has lost valuable ground to Amazon, and it has to move fast to make it up. Next step, I think, is a big investment in click-and-collect.