Walmart’s bid to battle Amazon
WALMART announced yesterday that it is now offering free two-day shipping on millions of items on its website when they’re combined into orders that total at least $35, an aggressive play to snatch business away from Amazon.com.
One of the cornerstones of Amazon’s online shopping dominance has been its Prime programme, in which members pay $99 per year for twoday shipping on many purchases. Walmart is pledging to match that promise on speed, but appears to be trying to outshine Amazon by doing it without a membership fee.
“In this day and age, twoday shipping is really just table stakes,” said Marc Lore, Walmart’s US chief executive for e-commerce, on a conference call with reporters.
The rollout of free two-day shipping is the first high-profile, customer-facing digital strategy to debut under Lore, who assumed leadership of Walmart’s online offerings after the retail behemoth bought his startup, Jet.com, for $3.3 billion. Lore suggested that more changes are on the horizon, telling reporters on Monday that “things couldn’t be moving any faster than they are”.
Walmart has a lot of ground to make up. In the last full fis- cal year, Walmart pulled down $13.7 billion in online sales worldwide, only a tiny fraction of its $499.4 billion in currencyadjusted revenue.
Whether speedy, free shipping will prove enticing enough to woo new shoppers remains to be seen. Amazon’s Prime programme has grown into something much more expansive than just a shipping deal. Membership also includes services like TV streaming, digital photo storage and a programme for borrowing e-books. And so begins an important experiment: Can Walmart now compete better for shoppers who haven’t already been lured into the Amazon ecosystem? And can it pick off some of the ones who have stuck with Amazon purely for its shopping experience, not for its service offerings?
Walmart’s free-shipping policy will only apply to 2 million of the 30 million products in its digital assortment, including items such as baby gear, pet supplies and cleaning products. Lore said the 2 million items comprise the “vast majority” of what people typically buy on Walmart’s website. However, the selection is still dwarfed by the 40 million items that are eligible for twoday shipping under Prime.
Prime, too, does not require a minimum purchase size. Walmart says the majority of orders placed on its website clear its $35 threshold to get free two-day shipping, so plenty of shoppers might not find it limiting. But it’s possible others may find it to be a hindrance: Amazon, after all, has been conditioning them for years to place orders however they want, perhaps firing off multiple orders of single items in a matter of minutes.
In rolling out free two-day shipping, Walmart also announced it was doing away with a membership pilot programme called Shipping Pass. The company first dipped a toe in the water on this concept back in 2015, offering unlimited three-day shipping for $49 per year to a limited group of customers. Later, the programme was opened to more shoppers and switched to two-day shipping.
In moving away from the Shipping Pass model, Walmart seems to have concluded that a membership programme is not the right approach to attracting more customers online in today’s shopping landscape. This decision may reflect Lore’s experience at Jet.
Jet’s website opened to the masses in July 2015 with a membership-based model, initially pledging it would win the online price wars by taking its profits only from membership fees. By October, it had reversed course and dropped the membership fee, effectively conceding the model didn’t work. Jet still exists as a standalone shopping site, offering free shipping on orders over $35.