Walmart delivery plan to undercut Amazon Prime

Discussion
May 14, 2015
George Anderson

If you can’t beat ’em, lower the price. It’s the Walmart way and the retailer undoubtedly has Amazon and its Prime $99 annual program in mind with its new test of a new unlimited shipping service with a $50 annual fee.

Unlike the Prime program, which offers guaranteed two-day delivery on purchases, Walmart’s offer will guarantee delivery within three days or less. The initial test, codenamed Tahoe according to a report by The Information, will be offered to select customers by invitation only.

"One of things that we’ve heard from customers is that they want shopping that’s predicable and they want it to be affordable," Ravi Jariwala, a Walmart company spokesperson told TechCrunch. "[This test is] really to understand is this yet another new way that we can serve customers?"

While Amazon Prime involves program elements such as free Kindle books and streaming videos, the Walmart test will be strictly limited to the shipping offer, at least initially. Walmart may choose to add other options such as its Vudu streaming video service.

Walmart fulfillment

Photo: Walmart

Do you think Walmart.com management is looking at its Tahoe program primarily as a means to cut into Amazon’s business or does it view the initiative in different terms? How do you think consumers will react to Walmart’s new delivery option?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Walmart once again finds itself playing catch-up in the digital world and resorts to a time-tested technique, cutting prices. The difference is that this time it won’t work and Walmart will not be able to catch Amazon."
"Based on what I’ve seen of Walmart’s DNA, it’s solely an attempt to undercut Amazon. I think Walmart customers MIGHT bite, but there is nothing about this program that would make someone like me switch."
"It will be interesting to see if Amazon is pressured into introducing tiered Prime membership levels with a scale of value-added benefits, similar to the membership warehouse clubs."

Join the Discussion!

22 Comments on "Walmart delivery plan to undercut Amazon Prime"


Sort by:   newest | oldest | most voted
Max Goldberg
Guest
4 years 5 months ago

Walmart once again finds itself playing catch-up in the digital world and resorts to a time-tested technique, cutting prices. The difference is that this time it won’t work and Walmart will not be able to catch Amazon. Amazon has intentionally packed Prime with multiple benefits beyond two-day shipping and Walmart can’t match that, not at $50 a year.

Yes the new Walmart offer will spur some sign ups, but it will not threaten Amazon’s digital dominance.

Paula Rosenblum
Guest
4 years 5 months ago

Based on what I’ve seen of Walmart’s DNA, it’s solely an attempt to undercut Amazon.

I think Walmart customers MIGHT bite, but there is nothing about this program that would make someone like me switch. On the most basic level, their assortment isn’t as broad. Then there are all the extras (which for me are really “extras”) and Prime Now, which I don’t use often, but really comes in handy once in a while.

Walmart may roll it out, but I don’t see huge uptick.

Keith Anderson
Guest
4 years 5 months ago

As noted, one benefit of membership programs like Prime is the consistent experience, especially as it relates to shipping fees and speed.

Amazon Prime has long faced competition from alternatives like Shoprunner, usually with serious gaps in service or selection. Now Jet.com and Walmart are getting more serious about membership programs, both of which are undercutting Amazon’s $99 Prime membership fee by about half.

Beyond price, selection and convenience are key to the value of Prime. My first impressions of Jet are that it’s challenged in those areas, at least in the near-term. Walmart has sophisticated logistics capabilities, but its warehouses and stores are still optimized for brick-and-mortar distribution, not online order fulfillment.

The no-frills approaches that Walmart and Jet seem to be pursuing certainly could impact Prime membership, but only if they offer comparable value on the fundamentals of price, selection and convenience.

It will be interesting to see if Amazon is pressured into introducing tiered Prime membership levels with a scale of value-added benefits, similar to the membership warehouse clubs.

Camille P. Schuster, PhD.
Guest
4 years 5 months ago

Walmart has been trying to improve its digital offering and experience for a while and this is one more step. Tahoe does not offer all the current benefits of Prime. Walmart is still in the process of proving to customers that its digital shopping works efficiently. Walmart will find out what level of trust consumers have in Walmart’s ability to deliver on Tahoe and the process and whether the lower price is worth the lower benefits. Current loyal Walmart shoppers who do not often use Prime are likely to be interested in trying this service.

Mohamed Amer
Guest
Mohamed Amer
4 years 5 months ago
No doubt that Amazon’s success with Prime is motivating Walmart to test the Tahoe program. In addition to ease of use and the aesthetics of a commerce site, inventory and order management and supply chain execution become the rest of the story in delivering on the brand promise. Predictability of performance and exclusivity of the program will drive adoption for Walmart. However, a three-day delivery promise may not be sufficient to draw Amazon Prime customers to Walmart even at half the fee. Lack of additional services tied to the Tahoe program are not likely to reduce its attractiveness — it unbundles the value of the delivery portion from additional digital services and may serve as an actual differentiator. It makes sense for Walmart to test the waters to better understand the trade-off consumers make between delivery window and program fees. Amazon has created a standard on large-scale delivery speed and customer service and for those already on Amazon Prime, Tahoe may not be attractive. So Walmart’s success with this pilot will be determined by how well… Read more »
Ed Rosenbaum
Guest
4 years 5 months ago

When it comes to competing with Amazon, Walmart is always competing from behind. This is no different. Walmart’s Tahoe program might be interesting to Walmart customers, but not to many others. Other than the size of the two companies, I don’t see much in common between them, especially their differing customer base. Given the choice, most would prefer Amazon.

Ryan Mathews
Guest
4 years 5 months ago
To really answer this question you would first have to know the overlap between Amazon Prime shoppers and Walmart customers. Without knowing that the conversation will quickly dissolve into marketing babble about abstract customer wants and speculation as to strategy. That said, the programs are clearly different. Amazon Prime isn’t just about delivery efficiency and/or lower delivery costs. You have to be a decent customer to recoup that $99, especially year in and year out. As mentioned in the article, Prime offers lots of extras including video and audio streaming. It’s also strengthened by those tricky little Amazon algorithms that suggest purchases. So … since that’s the case, at least for now, we need to think about Tahoe on its own terms. And maybe the best way to do that is to see it as a logical extension of the ongoing Walmart brand practice — creating lower-cost access to goods and services for budget minded shoppers. To answer the last question one once again needs more facts and less speculation and the first of those facts… Read more »
Richard J. George, Ph.D.
Guest
4 years 5 months ago

Obviously Walmart has been negatively affected by Amazon. I think the $50 cost is Walmart’s online equivalent to its 19-year-old slogan “Always Low Prices.” Their new slogan, “Save Money, Live Better,” also works well with this new online shipping service.

I do believe this service at this price will resonate with Walmart, as well as with Amazon shoppers. While I am an Amazon Prime customer, I believe the attraction is free shipping. I do not think the potential of an extra day in transit is significant. Amazon recently raised its membership fee by $20. Walmart’s shipping service price of half of Amazon’s may have real traction.

David Biernbaum
Guest
4 years 5 months ago

Amazon’s Prime program offers a lot of comprehensive benefits that Walmart will not be able to offer anytime soon. Plus, the product selection at Amazon is not limited. Walmart “Prime” will carry only what Walmart carries, and believe it or not, that selection is fairly limited to mostly commodities, basics and every day pantry items.

Richard Layman
Guest
4 years 5 months ago

I am not a member of Amazon Prime, but I have spent a bunch of time thinking about it vis-a-vis Barnes & Noble and other offerings, and some of my past experiences doing software development and marketing.

For example with Nook, I thought that Barnes & Noble had a big enough scale to be successful with an online reader. I was wrong.

Amazon has taken Kindle, delivery, online movie streaming and a big database of online books and created a platform which they continue to augment. Free delivery on purchases is only one element.

Price isn’t enough to compete against the platform when you don’t offer any of the other elements.

Compare writings on the “product-service system.”

Nothing prevents Walmart from competing with regular delivery services such as Peapod. They’ve been testing various iterations for a while. But they still aren’t competitive in that dimension.

It would be interesting to know how much of Walmart’s customer base is already online shopping. The people who are members of Amazon Prime aren’t likely to be big Walmart shoppers.

Dan Raftery
Guest
4 years 5 months ago

Go back and read Ryan Mathews’ post on this page if you missed it. He raises good points, as usual. Add this to his question about the shopper overlap: Within that subset, I’d wager that only a few are more interested in price and many more are interested in convenience. For the latter, it is less convenient to shop multiple locations even in the digital marketplace.
Wise on Walmart’s part to run a pilot test by invitation. It would be very interesting to see the price vs. convenience breakout in the test cohort.

Shep Hyken
Guest
4 years 5 months ago

This is interesting … a price war between Amazon and Walmart.

The first thing is to realize that Amazon isn’t the only one who ships to the home or office. Walmart is jumping in, and doing it with an annual subscription model. Furthermore, the Walmart and Amazon Prime programs, other than shipping, are vastly different. For the extra money with Amazon you get a lot of value. The comparison needs to be focused on just the shipping, and once you do that you find that there are other companies out there that both of these retailers compete with.

Tony Orlando
Guest
4 years 5 months ago

Walmart hates nothing more than being outsold on anything, which is why this is happening. Amazon really does well with Prime, and when you add in the streaming and free book service, it is hard to beat. However, if Walmart can deliver on its promise in three days, with their low prices on staples and HBA, they will cut into Amazon on those products, as they have the lowest prices for these items. Other than that, Amazon can up the ante anytime they want as well and let the consumer enjoy the battle of the giants, which will give them more ways to save.

Online, like brick-and-mortar, will feel the pinch as the smaller players will get hurt. No one is immune from competition. The UPS trucks will be quite busy, as this will bring more business and attention to the online giants.

Tim Caton
Guest
4 years 5 months ago

Amazon is now about selection and simplicity, not so much price, as David Biernbaum points out above.

I might be able to save a couple bucks with a shipping subscription to Walmart.com, but with only like 150,000 SKUs to choose from — versus 40,000,000 at Amazon (in my particular category alone), there’s no good reason to switch.

Aside: Statistically invalid research from my n=1 universe: If a free subscription to Shoprunner can’t get me to change my shopping habits, why would $50 at Walmart be any different?

Kris Kelvin
Guest
4 years 5 months ago

Regardless of their motives, Walmart is posing a competitive challenge to Amazon’s Prime. Bezos lack of focus—er, “diversification”—is about to become his Achilles’ Heel.

Now, if Walmart could partner with Redbox…say, 1 rental per week for an extra $10/year, they’d have 90% of Prime’s offerings covered. (You’re welcome.)

Herb Sorensen
Guest
4 years 5 months ago
This is all good, but Walmart is missing a beat—as everyone else is, too. Getting people to buy online is a no-brainer: just copy Amazon, period. Using those sales to build in-store traffic and sales is being ignored—wholesale. Gotta wait for Amazon to buy bricks stores in order to show you how to use online sales to build bricks sales? So I went to Walmart to pickup my order, and was directed to a remote (obscure?) location in the far back of the store. When I got there, there was a line of about 3 parties—maybe 6-8 people, with couples and children included. I waited about five minutes, and heard the person first in line say they had been there about 20 minutes. So I go out into the store and find a supervisor/manager, and told her what was happening. She hustled straight back and got the order for #1 and had an assistant working on #2’s order and in 5 minutes I was served and headed into their vast rat-maze store in hopes of… Read more »
Gordon Arnold
Guest
4 years 5 months ago

The focus of this discussion should debate whether or not Walmart has the ability to market this service successfully. Walmart’s attack on this market is likely to go largely unnoticed because of poor rollout performance. I have no doubt that an exit survey of Walmart store customers would disclose little or no awareness that this “new and improved service” is available. A keenly insightful marketing and sales outfit would offer it as a 30 day free trial at the store(s) point of sale via and email push elective opportunity. Kind of like asking for credit card enrollment with different customer benefits. But that’s just what I think.

Fred Blanton
Guest
4 years 5 months ago

Walmart has been forced into this as they see too much business eroding away to Amazon. Price matching and losing to the competition. The other reality that Walmart has realized is that they can make more money on directly shipping products rather than running a brick and mortar store. No stocking, no security, less shrinkage, and higher profits are realized from lower overhead. This is what the major restaurants woke up to 20 years ago when they found that they could do twice the business out of the same space without having to have as many personnel, as much seating and overhead, plus many actually charged a carry-out fee of 10% and literally doubled their profits.

Kenneth Leung
Guest
4 years 5 months ago

Amazon Prime offers a complete media and shopping solution for consumers, which differentiates it from other retail offerings. I think for people who are already Walmart.com shoppers, this would improve stickiness, but I don’t see enough there for an Amazon Prime member to switch. The target demographics for the Amazon shopper are no longer just the low price book buyer, but the cost efficient and convenience driven media and consumer goods buyer. Walmart is playing catch up on this one.

Arie Shpanya
Guest
4 years 5 months ago

I think that Walmart’s Tahoe program is a direct reaction to Prime’s success. When shoppers pay for a membership, they feel locked in and are much more likely to stay loyal to that retailer. The issue Walmart will have is assortment. They sell a wide variety of products, but I don’t think they can offer the breadth of products that Amazon does currently.

It makes sense that it’s cheaper because it doesn’t offer the same services that Amazon does. Prime subscribers pay more to get more. Walmart will probably have to rethink this one to make it a success.

Joleen Wroten
Guest
4 years 5 months ago

Following Amazon and Walmart’s long-standing pricing battle racing to the bottom; this move comes as no surprise. It definitely appears to be an attempt by Walmart to cut into Amazon prime subscriptions. Additionally by offering up a secondary pricing model they compete with up and comers like Jet.com.

On the broader scale, this is another major retailer shifting to support the long time demand by consumers for a simplistic online pricing model (sans shipping costs). For Walmart to successfully compete in this game they will need to unlock in store inventories, utilize brick and mortars as ship points, and explore external partnerships for added benefits.

Brian Numainville
Guest
4 years 5 months ago

While Amazon Prime creates stickiness with customers due to all of the other value offered through the membership, this is a “shipping only” value proposition at this point. Even at half price, there isn’t enough extra value to make it worth jumping ship from Amazon to Walmart’s offering.

wpDiscuz
Braintrust
"Walmart once again finds itself playing catch-up in the digital world and resorts to a time-tested technique, cutting prices. The difference is that this time it won’t work and Walmart will not be able to catch Amazon."
"Based on what I’ve seen of Walmart’s DNA, it’s solely an attempt to undercut Amazon. I think Walmart customers MIGHT bite, but there is nothing about this program that would make someone like me switch."
"It will be interesting to see if Amazon is pressured into introducing tiered Prime membership levels with a scale of value-added benefits, similar to the membership warehouse clubs."

Take Our Instant Poll

How likely is Walmart.com to expand its Tahoe test nationally?

View Results

Loading ... Loading ...