Walmart (WMT, Financial) has scrapped its ShippingPass subscription program, which offered an unlimited number of free deliveries for $49 a year, and replaced it with free two-day shipping on selected items.
Walmart says that millions of items sold on Walmart.com are eligible for the two-day free shipping offer. For items that are not eligible, you still get free three- to five-day shipping on orders over $35.
"Effective Jan. 31, 2017, ShippingPass is no longer available. Now, all Walmart.com customers can enjoy Every Day Low Prices with the convenience of fast, free two-day shipping on eligible orders without a membership fee. Two-day shipping covers more items than ShippingPass. Click here to learn more about our two-day shipping offer."Â –Â Walmart
This is possibly the best move to date from Walmart to boost its e-commerce business. Walmart was terribly late to the subscription game even as its chief rival Amazon (AMZN, Financial) Prime has raced ahead to add so many different types of perks to the Amazon Prime program, which costs $99 per year.
Walmart clearly failed to attract customers to its $49 unlimited free shipping deal. What’s worse is that Amazon continues to add freebie after freebie with every additional perk always just a few weeks or few months away.
Amazon has been relentless when it comes to adding more value to its Prime program, and any subscription program that doesn’t add differentiated value is definitely not going to work in the long run.
Now, by taking the two-day free shipping route for a large number of items without a membership fee, Walmart is doing the only thing it knows how to do – find a retailer offering a deal and undercut its pricing. What Walmart has done is take Amazon’s model of free shipping for orders over $35 (non-Prime), combine it with the free two-day shipping deal from Prime and offer it free of cost without a membership plan and, of course, without all the additional perks.
In doing this, Walmart has positioned itself as a hardcore e-commerce player ready to compete with Amazon. The company will have to forgo some amount of margin to subsidize the cost of shipping, but that’s the cost of doing business if it wants to stay in the game against Amazon and other e-tailers.
Interestingly, despite the plethora of services and offers that come along with Amazon Prime, more than 75% of users have said that they signed up for Amazon Prime due to its free two-day shipping program. Clearly, it brings the most value to them.
With Amazon, you still need to pay the Amazon Prime subscription fee to get the benefit, but now Walmart is offering it for free. That’s a clear value differentiator for any price-conscious customer – the kind of audience that Walmart targets anyway.
It’s a small start but it clearly shows that Walmart is not going to be the company that is worried about its margins for the next quarter or even the short term but ready to look over the long term and prefer market share over everything else.
Whether or not the decision to roll out this benefit is based on the possible failure of ShippingPass is not known. One thing is certain: Walmart is going all out to give its customers the equivalent of what Amazon Prime customers are really after. But is it already too late?
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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