Walmart is rolling out its newest and much-anticipated attempt to compete with Amazon Prime: a membership service that will give customers free shipping on tens of thousands of items, including produce and groceries.
The service, Walmart+, will cost $98 a year. That is lower than the $119 charged for Amazon Prime, which set the bar for e-commerce membership services, but Walmart+ will require an order of at least $35, while Prime does not have a minimum.
Walmart said many of the 160,000 items that would qualify for the free shipping would be delivered directly from its stores to customers’ homes. Walmart hopes, with its thousands of stores closer to customers, that the strategy will help keep food fresher and costs lower than competitors’. Walmart+ members will also receive a 5-cent-a-gallon discount at affiliated gas stations.
“We are developing a product that is grounded in meeting customers’ needs,” Janey Whiteside, Walmart’s chief customer officer, said in a conference call on Monday.
Unlike Amazon Prime, Walmart’s service will not include streaming entertainment. Walmart+ will offer an option to pay $12.95 per month instead of the annual fee.
Wall Street analysts have been eagerly awaiting details of Walmart+ since news of its development leaked out this year. In June, Morgan Stanley analysts predicted that as many as 20 million people could sign up for the new service within a few months of its launch.
But other analysts found details of the actual offering, which is very close to an e-commerce service that Walmart already offers, underwhelming.
“For a $35 minimum and $98 annual fee, this is a thin gruel,” said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm.
Ms. Whiteside said Walmart expected to announce additional perks for Walmart+ members in the future. She said most customers’ online orders were higher than the $35 minimum. The retailer expects most of the orders on Walmart+ will be made for groceries and said many competitive grocery delivery services also require minimum orders. The new service will be available on Sept. 15.
For years, Walmart has experimented with different e-commerce initiatives, including a high-end concierge service called Jet Black, which the retailer ultimately scuttled. On the conference call, Ms. Whiteside said Walmart+ was an outgrowth of some of those experiments and had been refined by studying customer behavior during the pandemic.
“We saw that customers’ needs and wants were rapidly changing almost on a daily basis,” she said.
Like those of many retailers, Walmart’s online sales during the pandemic have soared, as more people shun brick-and-mortar shopping. The company said its online sales grew 97 percent in the second quarter, more than double its average rate of growth, blowing away Wall Street estimates.
A big driver of those sales are groceries, which customers order online and pick up at Walmart parking lots. Walmart+ is a bet that customers will be willing to pay a fee for the added convenience of having that food delivered to their homes.