(Bloomberg)—Walmart Inc.’s battle with Amazon.com Inc. is going Prime time.
The world’s largest retailer, No. 3 in the 2019 Digital Commerce 360 Top 1000, is developing a paid membership program to challenge the internet giant’s Prime offering—which has become the default online shopping option for millions around the globe. The service, called Walmart+, will expand on the retailer’s existing grocery-delivery subscription service, which it introduced last year. Chief customer officer Janey Whiteside will spearhead the service’s development and rollout.
A Walmart spokeswoman confirmed the plans but declined to provide any details. Additional perks could include discounts on prescription drugs and fuel, according to Recode, which first reported the existence of the program.
Developing a broad-based membership program illustrates Walmart’s deep-seated concern that shoppers who defect to Amazon don’t often come back. The idea also runs counter to the ethos of founder Sam Walton, who famously refused to introduce the shopper-loyalty programs that are now commonplace at U.S. retailers. He argued that Walmart needed to treat each and every customer the same.
That said, Walmart has tried to mimic Prime before, testing a program called ShippingPass that it shuttered in 2017 upon the arrival of Marc Lore, who now runs Walmart’s U.S. ecommerce business.
The latest move is more ambitious than previous efforts, though, and aims to counter Amazon’s vise-like hold on the loyal shoppers who pay for the perks associated with Prime, which include free shipping and video streaming. Prime members spend about twice as much as other customers, and their willingness to splurge is a big reason why Amazon captured an estimated 40% of all sales growth at U.S. retail in the holiday quarter.
Since its debut in 2005, Prime has helped Amazon compete on price with physical retailers, allowing it to grow from an online bookseller to the largest online merchant of a wide range of goods. The company has tried to keep Prime members, who pay $119 a year for the service in the U.S., hooked with goodies like streaming video and music, and, more recently, free grocery delivery.
Amazon (No. 1 in the Top 1000) has also taken steps to lure lower-income shoppers into Prime memberships by offering monthly membership rates rather than forcing members to pay annually. Like Walmart, it is also delivering groceries to food-stamp recipients. Such efforts show Amazon is looking to broaden its customer base from affluent shoppers craving convenience to making Prime membership an everyday necessity.
Whiteside, the Briton who’s heading Walmart+, has become a powerful player at Walmart since her arrival from American Express in 2018. CEO Doug McMillon has tasked her with courting more upscale shoppers and merging online and brick-and-mortar operations so that customers have a similar experience no matter where or how they shop. She’s also created a so-called product team, led by chief product officer Meng Chee, which is using technology to improve the customer experience.
Using Walmart’s existing grocery delivery service as the backbone of Walmart+ makes sense, as it’s the one business where Walmart has a clear advantage over Amazon, with more than 20% market share in the $800 billion category. Walmart already delivers groceries from more than 1,600 U.S. stores and is testing a service that sends employees right into customers’ homes to put the food away in their fridges.
Walmart’s Delivery Unlimited service currently costs $98 a year or $12.95 monthly, and uses a free 15-day trial to entice new members. Customers can also pay a per-delivery fee, with no membership.