|EcommerceBytes-NewsFlash, Number 3596 - June 05, 2015 - ISSN 1539-5065 2 of 3|
Walmart is working on a free-shipping membership program that looks like an attempt to combat the growing popularity of Amazon Prime. But it doesn't mean Walmart is chasing after a new type of shopper, according to one player in the industry.
The existence of the pilot program was revealed last month after users stumbled upon the test, and Walmart has now published a page on its website describing the program, still in pilot testing.
The program, called ShippingPass, costs $50 a year to receive free shipping. Unlike Amazon Prime, the delivery time frame is one day longer - it promises free 3-day shipping on eligible items rather than free 2-day shipping.
Tom Caporaso is CEO of FreeShipping.com, which offers free shipping at over 1,000 top online retailers for a monthly fee of $12.97. He said the $50 price point made sense for Walmart. "ShippingPass is basically a no-frills, pre-paid shipping program designed to appeal to its core audience of bargain shoppers, and a higher price point could turn them off."
He also noted that the ShippingPass fee is the same as the annual fee for using a soon-to-be-launched site called Jet.com. The founder of Jet, Marc Lore, had founded Quidsi, a company that Amazon acquired. As Bloomberg reported, "Lore stayed on at Amazon for more than two years; now he's preparing to assault it."
Caporaso said it's likely that Walmart is keeping an eye on Jet.com since it's getting a lot of media attention and appears to be aiming for the same audience as Walmart.
"The recent leak of the ShippingPass test website revealed that it will also offer free shipping on a variety of items that aren't eligible for 3-day delivery. That expanded free-shipping benefit may be, in part, an effort to keep Walmart's current customers from drifting toward Jet," he said.
Does Walmart's new program have a chance at competing with Amazon Prime?
"ShippingPass will definitely help Walmart compete for bargain shoppers, especially those who joined Amazon Prime simply for free 2-day shipping and don't use the other benefits." He cited data that showed 31 percent of Prime members never watch streaming video. "If these members are solely interested in fast, pre-paid delivery, the lower fee could help lure them from Prime to ShippingPass, depending on the range of items and prices that Walmart's program offers."
But Walmart's retail model focuses on budget-conscious shoppers, while Amazon is aiming for every shopper, according to Caporaso. "At least right now, ShippingPass isn't designed to compete with Amazon Prime for that larger universe of consumers; it's designed mostly to cater to Walmart's established demographic target."
He also said that as more and more companies offer grocery delivery services, Walmart ShippingPass will help it compete for grocery shoppers with Amazon Prime Pantry and with quicker services, on cost if not on speed.
Is Amazon worried?
"Amazon no doubt pays close attention to the moves that Walmart and other retailers make, particularly since competition in the subscription commerce field is growing substantially." He said subscription shoppers make more than three times as many purchases with a company as other shoppers do and are more likely to become repeat customers.
"Nevertheless," Caporaso said, "Amazon is unlikely to take any specific action solely in response to Walmart's new program. Amazon looks at all of the pieces on the chess board, and if and when it responds, it will do something to try to improve its overall standing, not just its position vis-a-vis Walmart."
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About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to email@example.com.
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