Will free two-day shipping give Walmart an edge over Amazon?

Discussion
Source: Walmart
Jan 31, 2017
George Anderson

Has Walmart finally found a way to gain an e-commerce advantage in its competition with Amazon.com? The world’s largest retailer announced earlier today that it will now offer free two-day shipping with no annual fee for orders placed on walmart.com.

The free two-day shipping options requires a $35 minimum purchase and covers more than two million items sold on the site.

Marc Lore, president and CEO of Walmart U.S. eCommerce, wrote in a blog post, “These items make up the vast majority of what customers buy online. In today’s world of e-commerce, two-day free shipping is table stakes. It no longer makes sense to charge for it. We believe this is the most compelling all-around value proposition for customers looking for low prices, a broad assortment and quick shipping.”

With the new program going into effect today, Walmart is discontinuing its ShippingPass program, which offered free two-day shipping for a $49 annual fee. Members in the program will receive a refund from Walmart.

“This is just the beginning. Now that we’ve checked the two-day shipping box, my focus is on leveraging our unique assets and network to serve customers in innovative ways that only Walmart can,” wrote Mr. Lore. “Stay tuned … you won’t be waiting long.”

DISCUSSION QUESTIONS: Will Walmart’s free two-day shipping offer substantially improve the company’s competitive position relative to Amazon? How will the move affect its brick and mortar business as well as those of its competitors? What do you think are the next steps that Walmart’s eCommerce operations will take in the U.S.?

Braintrust
"This could immediately draw a lot of online shoppers who haven’t already paid for Amazon Prime towards Walmart."
"Frankly, I can’t understand why they changed their program. It seems to me that the idea is to have the customer not think about shipping at all."
"While Amazon is a giant, Walmart is a force to be reckoned with. Watch your back, Amazon!"

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35 Comments on "Will free two-day shipping give Walmart an edge over Amazon?"

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Tom Redd
Guest

Smart move and it offers a real edge for Walmart — especially since almost any brand a shopper wants is available at Walmart and many shoppers that will not visit a Walmart store due to their “image” will gladly save money via online shopping.

Online Walmart has even more items and a very fast website. Try it — you will like it, and you will not suffer any difficulty with returns.

Al McClain
Staff

I agree, Tom. It instantly could make them a much bigger e-commerce player. For Prime members like me, it will make Walmart the retailer I compare to Amazon on prices, whereas I wouldn’t have bothered before. Prime members who use a lot of the ancillary services will probably stay loyal, but if they are paying the $99 mainly for the two-day shipping, this could be a game changer. At least it gets Walmart back in the game and they are promising more in short order.

Jon Polin
BrainTrust

Though Amazon’s simplicity (Dash buttons, etc.) and speed of delivery are diminishing the inherent advantages of brick-and-mortar retailers, Walmart does have the assets of 1.) a huge brand, 2.) perceived low price, 3.) stocked shelves and 4.) omnipresent physical locations. These assets should enable them to compete aggressively vs. Amazon. While many consumers are buying many categories purely online, there is still a big advantage for a brick-and-mortar retailer (Walmart) to be able to smartly equip customers to shop online, offline and in combination (click and collect).

Charles Dimov
BrainTrust

Excellent point that Walmart folk are using their head to combat Amazon. Leverage all the assets they have — brand, perceptions, omnichannel capabilities … and battle on aspects that customers are not happy about (paying for a service many perceive should be free). Walmart’s efforts are important to click and collect retailers. Breaking up the Amazon stranglehold on consumers’ minds means more opportunity for the smaller omnichannel chains, too.

Susan O'Neal
BrainTrust
6 months 22 days ago

It will help, but Walmart’s biggest hill to climb is consumer awareness and perception as an at-home delivery option.

Charles Dimov
BrainTrust

Walmart’s biggest challenge will be sticking with it.

Manmit Shrimali
BrainTrust

This would temporarily get traction because Walmart’s price optimization model is really weak. We recently revamped the price optimization at the SKU level for a retailer for whom we benchmarked Walmart vs. Amazon vs. client. Walmart won on only 13 percent of SKUs in terms of pricing. It will not take long for a consumer to compare the prices and weigh their options — even for quickly-consumed items. For example, Pampers Baby Dry diapers, size 5, 160 count, available for two-day free shipping from Walmart is priced almost 20 percent higher than that for Amazon’s Prime members. We did this type of analysis across 80,000 SKUs — Walmart really needs to reevaluate their pricing model.

Dr. Stephen Needel
BrainTrust

This absolutely will improve Walmart’s position vs. Amazon. The question will be whether it pays out — they may do more volume but what will the impact be on profitability? I’m not sure they should care much about what it does to their brick-and-mortar business.

Phil Masiello
BrainTrust

I believe this will have a positive effect on Walmart’s e-commerce business as a whole. But it won’t make a dent in the competition with Amazon.

Amazon has something that Jet.com and Walmart.com covet: customer loyalty and customer retention. Amazon has built trust with their customers over the years and that is not something that two-day shipping is going to break. Also, Amazon does not have a minimum purchase for Prime.

There is nothing on Jet.com or Walmart.com that you cannot already find on Amazon or many other websites. If Marc Lore thinks this is a game changer, he needs a refresher in consumer behavior 101.

So, is two-day shipping going to have an effect? Yes, a positive one for Walmart.com. Will it affect its Sales with Amazon? Not at all. I don’t think Jeff Bezos is even thinking about a response.

Paula Rosenblum
BrainTrust

I think it just leveled the playing field a little. Two-day shipping is becoming table stakes. No advantage … just an eliminated disadvantage.

Mark Ryski
BrainTrust

This move is just another salvo in the epic Walmart-Amazon battle that is sure to continue for years to come. Walmart is the only retailer that has the size, scale and resources to battle Amazon at its own game. The acquisition of Jet.com was Walmart’s declaration that it would not stand by and allow Amazon to eat its lunch, and two-day shipping is merely another step as Walmart evolves its e-commerce offering. There will be many more.

Meaghan Brophy
BrainTrust

Walmart’s free two-day shipping will help put them on a level playing field with Amazon, especially since Walmart is not charging an annual fee. This could immediately draw a lot of online shoppers who haven’t already paid for Amazon Prime towards Walmart. Amazon will have to respond by beefing up their other Prime benefits, such as their video streaming, Prime Now delivery and Prime Pantry to justify their $99 per year or $10.99 per month Prime fee.

Lee Kent
BrainTrust

A good move, however Walmart isn’t Amazon. Amazon is all about reputation and delivery, not just free shipping. Walmart has not proven themselves there yet IMHO. I wish them luck but I think they have a long way to go.

And that’s my 2 cents.

Ed Rosenbaum
BrainTrust

I agree with you, Lee. IMHO I do not think of Walmart and Amazon at the same level of customer satisfaction.

Max Goldberg
BrainTrust

Free shipping with a $35 minimum purchase will attract consumer attention and raise Walmart’s online profile, but it will not be enough to overtake Amazon. Amazon Prime members get free two-day shipping on far more than 2 million items, without minimum purchase, in addition to free content and a plethora of other services, all backed by great customer service.

Tony Orlando
BrainTrust

This will surely help Walmart, and if they can make money then it will continue to move forward. Retail today is evolving, and consolidation of e-commerce will start to grow quickly as smaller companies will merge or risk going under, just like brick-and-mortar stores have done. It takes a ton of capital to pull this off, and who better than Walmart? Only the few and very strong will survive in the retail industry as we move forward and you’ll see more and more tumbleweeds in many strip plazas and malls with this consolidation process. So buckle up folks — retail is going for a ride.

Gene Detroyer
BrainTrust

Frankly, I can’t understand why they changed their program. It seems to me that the idea is to have the customer not think about shipping at all. That is what Prime does (and much more). My last three amazon orders were single items, all under $20. I think, “oh I need X.” Open Amazon and order it. What could be simpler? How does the Walmart customer handle the $34.50 shopping basket? Buy something they don’t need or currently want? Walmart is a powerful company and has been dedicated to online for a long time. They understand that their U.S. business is flat and mature. But this is not the way to move forward.

Adrian Weidmann
BrainTrust

Walmart’s free two-day shipping won’t tip the balance. Free shipping has become the ante to simply play the game. It places Walmart on the playing field with Amazon. Given Walmart’s extensive logistics expertise and existing distribution center infrastructure, I would leverage Uber (or similar services) and go after home delivery. If Walmart could make that work it may give them a competitive advantage over Amazon.

Richard J. George, Ph.D.
BrainTrust

I am not convinced that this latest move is enough. First, Amazon has the most customer-centric website and Prime simply enhances the customer’s experience. Second, while I support Walmart’s experiments to get customers to think of them in the same vane as Amazon, the Walmart free two-day shipping still requires a $35 minimum and applies to two million products. Amazon Prime offers more than 40 million products for free two-day delivery, many of which are priced well below the Walmart minimum purchase of $35. As noted, it’s an experiment — not the answer.

Jeff Sward
Guest

Walmart is making up lost ground — better and faster than a lot of other retailers. If shipping is a leveling of the playing field or table stakes, then it’s not an edge or advantage. It’s going to get really interesting when Amazon makes some kind of slam dunk into brick-and-mortar. I semi-joked the other day about Amazon taking over Sears and reinventing that space into something mall shoppers would actually visit. Now I’m going to say, “Amazon, what are you waiting for?” Sears’ market value has been plummeting in the last couple of days to multi-year lows. Pretty soon they will be very affordable. Will Amazon wait for them to go bankrupt?

Shep Hyken
BrainTrust

This is a competitive move, but also a catchup move. First, Amazon offers free shipping of books over $25 and almost anything else over $49. So Walmart has a lower free shipping minimum, which Amazon can choose to match or not. So Walmart is catching up and getting competitive. But, beyond two day shipping, Amazon is also setting up distribution centers (already in some areas) that will allow customers to receive items in two hours. Plus their Prime program is far more than a free shipping program. It has music, movies, TV shows and more. So does free two-day shipping from Walmart make them more competitive? Yes, but that doesn’t mean they have caught up.

As for how this will impact the brick-and-mortar business … Walmart will learn the formula or percentage of the impact to their in-store sales compared to online sales. As they offer free shipping, it will change the formula. The best retailers, and Walmart is one of them, recognize the importance of the online/in-store mix.

David Biernbaum
BrainTrust

Two-day shipping will definitely expand customer options for Walmart shoppers, expand e-commerce for Walmart and, if well executed, it will drive new business and create more dollars and profits for Walmart. However Amazon will feel no pain, because Amazon is extremely well-developed, established and will continue to offer an extensive depth of assortment, variety, quality, price points and brand names. Amazon is a well-established way of life and, much like a big shopping plaza, it is loaded with third-party variety and competition on each item.

Carol Spieckerman
BrainTrust

Walmart is smart to cast a wider net and depart from delusions of mass loyalty to its shipping program. However, as Manmit pointed out, price optimization will be critical to Walmart’s success with this strategy. The end game is to put Walmart in the decision set, right up there with Amazon, for purchases over $35. If Amazon beats Walmart on price, no sale. It really is that simple.

Christopher P. Ramey
BrainTrust

This will be beneficial to Walmart for a while. By this time next year it will be insufficient.

Lee Peterson
BrainTrust

The free shipping gives Walmart an edge over other brick-and-mortar retailers, like Target, but Amazon has Alexa which trumps any mere shipping ploy. Think of it: Amazon has someone in at least 5 million homes taking commands on purchases and then giving other pieces of “advice” that will actually help people’s lives. And wait until they sell 20 million more of them! THAT is an edge.

It’s a good move, but it’s not an Amazon-esque move.

Joan Treistman
BrainTrust

For sure the free two-day shipping offer brings Walmart into the consideration set for online purchases. But I think long-term it can bring people into the store, those who otherwise wouldn’t go there. With a good shopping experience comes a more positive image and the reduction of a negative stereotype for Walmart or its customers, especially if you now are a customer.

gordon arnold
Guest

I’m not so sure the two-day shipping is aimed to put Amazon Prime in any jeopardy. There simply is not enough return for an effort like that. Walmart is a warehouse distribution company that sells from its warehouses. They now own 25% or more of the grocery market nation wide. The next step to grow this business is home delivery. Adding 2 day free delivery will supply ample financial information to use for a successful delivered grocery plan including purchase, order pulling, packaging, delivery, return/replacement, missed item issues and total breakdown of cost of goods sold. Information like that will make decisions and planning realistic. This completed successfully will lead to expansion into the food preparation small businesses with independent caterers, restaurants and privately owned hotels and spas.

Craig Sundstrom
Guest

People shop based on price and selection (and a few other things that are harder to define), so yes, if you make the price less, you’ll likely gain market share. How much is hard to say. The people who buy from Amazon in a Pavlovian manner aren’t likely to switch, but there are plenty of other shoppers out there … believe it or not.

Ken Morris
BrainTrust
Dropping its $49 annual fee for free shipping will certainly help Walmart attract more online customers and increase e-commerce sales. While it makes shopping Walmart.com more appealing, I don’t think it will draw a significant amount of business away from Amazon.com. It is a smart move by Walmart, if it doesn’t sacrifice too much margin. It would be to Walmart’s advantage to leverage their stores as distributed order management points to decrease the shipping costs. However, the demographics of Amazon customers are different than Walmart shoppers and it is difficult for any retailer to convince shoppers to leave the Amazon cult. Amazon has much more to offer than Walmart and that is why more than 60 million prime customers are paying annual membership fees of $99. Beyond free shipping, Amazon Prime offers members a wide variety of perks that keep them hooked on Amazon — unlimited streaming of movies and TV episodes, access to free music, unlimited photo storage and much more. In addition to the value-added services, the product breadth of Amazon far exceeds that of Walmart, as they offer more than 400 million products compared to Walmart.com’s 16 million products. Walmart.com has started to invite third-party merchants to… Read more »
Adrien Nussenbaum
BrainTrust

It is an interesting competitive move that may show other retailers that it is possible to copy Amazon and be successful. It will be key to build more of a community aspect like Prime, rather than just sticking to 2 day free shipping. But it certain shows that Walmart believes the Amazon model works and will work for more than just Amazon.

Cynthia Holcomb
BrainTrust

This is going to be good. Walmart vs. Amazon. Stuff for the history books. Marc Lore is the person to move hearts and minds to Walmart.

Kai Clarke
BrainTrust

This is a big move for Walmart, but it doesn’t fit their model. ELP requires that Walmart give great pricing in all of their stores, and online, for all products. Where are the monies going to come from that will compensate for the 2-day freight on all of these products? How long will the shareholders “pay” for this? Walmart needs to make good business decisions for all of their products as a whole….

Larry Negrich
BrainTrust

Profitability is the issue in the short-term. Will Wall Street give Walmart a pass in the quarter this is implemented? This policy will definitely have a margin-eroding effect on purchases made on Walmart.com. Once Walmart weather’s the margin issue, this will have a positive impact on its online competitiveness.

Mark Price
BrainTrust

Amazon will not be strongly affected by the Walmart offer because the brand positioning of each organization is radically different. The Walmart positioning is, of course, highly price oriented. Amazon, while maintaining a very broad audience, has a core audience that is customer experience and simplicity focused. Until Walmart is able to successfully address customer experience on the site, the company can not expect to steal Amazon share.

Dave Nixon
Guest
Dave Nixon
6 months 20 days ago

Free two-day shipping without an annual fee is a step forward for Walmart, but it is fighting an uphill battle against Amazon, who has a solid method, web presence and reputation in place.

Walmart’s move should yield a temporary spike in sales and perhaps attract niche customers who 1) traditionally shop brick and mortar, 2) don’t have Amazon Prime and 3) are not frequent online shoppers. The move also nicely complements Walmart’s entry into online grocery shopping with free pickup. If you’ve ever been in the grocery-pickup line, you’ll see many people who publicly profess they’ll never set foot in a Walmart. Both models may help attract a new customer, including “closet” Walmart shoppers, but Walmart has to be able to compete with Amazon’s prices.

It’s a quick-fix move, but Walmart and Amazon continue to be very different animals, and Amazon is the lion of the e-commerce market.

wpDiscuz
Braintrust
"This could immediately draw a lot of online shoppers who haven’t already paid for Amazon Prime towards Walmart."
"Frankly, I can’t understand why they changed their program. It seems to me that the idea is to have the customer not think about shipping at all."
"While Amazon is a giant, Walmart is a force to be reckoned with. Watch your back, Amazon!"

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