Everything CPG Brands Need to Know About Walmart+
After months of delays, the king of rollback pricing finally rolled out its new Walmart+ subscription service. For just under one Benjamin Franklin per year, Walmart+ members have access to a number of benefits from the largest retailer in the world. While Walmart would never mention a competitor in its press release, Walmart+ is seen by most as a direct challenge to Amazon Prime, which now boasts more than 150 million members. With the importance of e-commerce at an all-time high, Walmart hopes there are copious amounts of “meat left on the bone” for two membership services in the market, even with Amazon Prime getting close to legal driving age.
While early critics of Walmart+ say they’re getting an Amazon Prime copycat vibe, anything great in life that’s overlooked usually comes from misunderstanding its nuance. As Walmart’s Chief Customer Officer stated at launch, “We are developing a product that is grounded in meeting customers’ needs,” and it’s hard to bet against the largest retailer in the world knowing its customers frontwards and backwards.
Since it has been one of those unrelenting, whirlwind type of years, this article serves as a strategic breakdown of the new Walmart+ membership program that will get you up to speed on its most important attributes.
Walmart+ is a paid membership program that gives subscribers access to a number of benefits, including unlimited free shipping and same-day delivery on orders of at least $35, member pricing at select gas stations, and the ability to use Scan & Go technology in Walmart stores. The cost of a membership is $12.95 a month or $98 annually.
Third Time’s a Charm?
Although Walmart+ offers so much more than just free shipping, my fellow retail nerds might remember that Walmart has attempted to challenge Amazon Prime before. The first time was in 2015 with a program called Shipping Pass, which cost subscribers $50 annually for free three-day shipping from Walmart’s website. After Walmart shuttered that program in 2017, it launched Delivery Unlimited, which primarily focused on the rising popularity of the retailer’s online grocery business. Delivery Unlimited will now be rolled into Walmart+, which also offers free shipping on non-grocery items that are wholesaled by Walmart and those sold by select third-party sellers.
Room for Two?
The biggest question surrounding the success of Walmart+ is if consumers will be willing to accept another competitor into a market that has long been dominated by Amazon Prime. Walmart has been putting significant marketing muscle towards promoting Walmart+ as a problem-solving mechanism for a diverse set of busy households. This has resonated early with consumers, as over half of those surveyed by research platform Piplsay have heard of the Walmart+ service.
With many Americans facing economic hardships from the coronavirus pandemic, Walmart has had to balance puts and calls when determining the pricing strategy of Walmart+ compared to Amazon Prime. The Walmart+ membership is cheaper on an absolute basis, but it requires members to reach a $35 order minimum to unlock free shipping or same-day delivery from stores. While Amazon requires the same $35 order minimum for same-day delivery, there is no purchase minimum required for one- or two-day shipping. Walmart leadership isn’t concerned with this minimum order hurdle, however, as they expect most Walmart+ orders will be made for groceries, and many competing grocery delivery services also require order minimums – including Amazon.
With grocery delivery catapulting into greater importance because of human adaptions to COVID-19, it’s no surprise that approximately 48 percent of weekly online shoppers say they are somewhat or very likely to join Walmart’s membership program. How many of those interested consumers will actually convert into Walmart+ members is still yet to be seen, but analysts at Morgan Stanley have predicted that 20 million people could sign up for the service in the first few months.
Walmart’s Flywheel Strategy
Unlike the Amazon Prime flywheel, Walmart’s version will not include (at least not initially) flashy perks like a streaming service. Instead, Walmart+ will take a more practical approach that leans on its deep understanding of Walmart customers’ needs. Outside of housing costs, the average American’s next two biggest expenditures are transportation and food. The most noticeable perks of Walmart+ are positioned squarely at the intersection of these large annual cost items, as members receive a discount at affiliated gas stations and free delivery on thousands of grocery products.
Additionally, a major concern for anyone right now is their health, and with Walmart+, members have access to mobile Scan & Go technology that can be used at its almost 5,000 physical locations. This technology allows members to shop and check out with their phones in stores, offering a more streamlined shopping experience and completely contact-free checkout process.
Walmart+ Future Predictions
Walmart expects to announce additional perks for Walmart+ members in the future. As more of the right perks are added, the value will start to supersede the cost in the average consumer’s mind. When that happens, Walmart+ will become extremely sticky and drive massive long-term value for the retailing giant. So what future perks could a Walmart+ membership include?
- Personal Insurance and Health Care: Outside of transportation and food, this is the next biggest expense for American families. Walmart is already opening its own health centers, so it would not be surprising for the company to add associated perks for Walmart+ members.
- Entertainment: Instead of a streaming service, I’d expect Walmart+’s entertainment perks to align more with its efforts to support the local communities surrounding their store locations. This past summer’s Walmart Drive-in experience, which converted the parking lots of 160 stores into drive-in movie theaters, could be an early test of this concept.
- Education: These perks could come in the form of childhood education resources, such as Walmart’s virtual summer camps, or adult education resources, such as training programs for Americans who are facing long-term unemployment as a result of the pandemic.
Though consumers are still in the honeymoon phase with Walmart+, the long-term prospects of success are brightest if the retailer stays grounded to serving its customers’ needs. If Walmart is able to sustain that focus towards its brand promise, it can further strengthen its value to the everchanging, ultra-competitive retailing landscape.