America’s largest retailer Wal-Mart Stores Inc. WMT recently announced the expansion of its ShippingPass membership program that promises free, two-day, no-minimum deliveries of products purchased on Walmart.com. Members pay an annual cost of $49 after a free 30-day trial for new users.
Well, that’s because it’s an almost exact rip-off of America’s largest online retailer Amazon.com Inc.’s AMZN popular membership program Amazon Prime. With Prime, members also get free, two-day, no-minimum deliveries on its products but at a price of $99 per year, or $10.99 per month.
A Long Time Coming
In a press release, Walmart is already claiming that the “customers who are using it, love it.” Now, these customers “shop on Walmart.com more often to take advantage of our low prices, fast shipping and added benefits of no minimum order requirements and free online or in-store returns. Once you start using it, it’s hard not to notice the everyday low prices on the stuff you need and want.”
ShippingPass’s official launch has been years in the making. It was initially rolled out last summer, and the service offered subscribers in specific areas three-day delivery. In May, however, the company cut that down to two days, matching Amazon Prime, and now covers almost all of the continental United States.
The program is a huge step for Walmart’s e-commerce business, where it has invested a desperately needed $2 billion in its expansion. According to Fortune, Walmart’s digital growth has been dropping steadily over the past two years, with 20% growth rates in 2014 down to 10%, 8%, and 7% in the past three quarters.
More and more, consumers are expecting quick, efficient delivery on any product from any retailer they order online. Walmart, it seems, is finally beginning to understand this, but is struggling to fulfill such high demand in a cost effective manner. And it’s not easy, as retailers who take on such a task must invest time and money in warehouses, inventory, and transportation management technologies.
Since ShippingPass’ initial rollout, Walmart has continually shifted inventory to seven huge online warehouses across the U.S., as well as signed partnerships with regional carriers to deliver more of its packages to its customers.
ShippingPass is also telling of Walmart’s unwavering belief that the service will be able to successfully compete with Amazon Prime. No company as big as Walmart takes on a business venture without believing it can bring positive results. But trying to compete with Prime? That just seems like a disaster waiting to happen.
In addition to the free two-day shipping, Amazon offers its members other services like Prime Photo, Prime Music, Prime Video, Prime Pantry, Amazon Dash for Prime, and the Kindle Owner’s Lending Library, among others. Besides free, two-day shipping, the only thing ShippingPass offers its members is saving them the dread and embarrassment that comes with shopping at Walmart.
Amazon has also figured out a way to make up for high shipping costs. The e-commerce giant can subsidize the cost of shipping from its low-margin retail business by using cash from its high-margin businesses like its cloud-computing venture Amazon Web Services and its “Fulfillment by Amazon” service for third-party sellers.
ShippingPass is no game changer. I bet very few Prime members would switch to the program. Because even at half the price, ShippingPass only offers about 10 million products, according to the Wall Street Journal. In comparison, Amazon.com has roughly hundreds of millions of products.
There is just no fair comparison between the two programs. Amazon Prime is arguably the best online shopping option for consumers today. It will be a long time before ShippingPass even comes close to Prime’s power and influence.
A Different Route
Instead of a Prime competitor, Walmart should have taken a different route. While its efforts to expand and improve its online presence were much needed, the retailer should have taken the time it has put into ShippingPass and funneled it towards bettering and increasing its Walmart Grocery Delivery service.
The grocery industry is going through a dramatic change. New formats and new attempts are popping up everywhere in order to get product to shoppers, but many of them can put a huge dent in your wallet. For example, Instacart, a popular grocery delivery service that lets you shop from local grocery stores online, may be a convenient way to shop for groceries, but it sure isn’t cheap. Instacart prices are their own, meaning that sometimes, their prices are lower or higher than the stores’ prices. So, if you are a dedicated Whole Foods Market WFM shopper, and decide to use Instacart, there is a good chance your total bill could be even higher than the small fortune you would pay in-store.
Right now, there is no clear winner in the evolving grocery space. And with its already large presence in the industry, Walmart could potentially come through as a leader in efficient, cheap grocery delivery, as well as crafting winning strategies to increase their market dominance. The company has even partnered with ride-hailing giants Uber and Lyft to test an expanded delivery network.
But instead, Walmart gave us ShippingPass, a poor imitation of something we already have, know, and love.
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