Photo: RetailWire
Walmart says Amazon’s grocery delivery fee will put a ‘Whole’ in customers’ wallets
Walmart wants everyone to know that, as of today, Amazon.com is adding $9.95 to grocery deliveries from its Whole Foods stores.
The retailer sent out an email today that read, “You may have heard that starting today, one grocery delivery service will start charging its customers $9.95 for every single delivery… That’s why, today only, Walmart is announcing that new customers who sign up for Walmart+, the membership that helps them save more time and money, will get $9.95 back. Because customers deserve a grocery delivery service that won’t leave a Whole in their wallet for delivery fees — whoops, typo.”
Consumers who sign up today for Walmart+ by 11:59 p.m. PT will be eligible to receive the $9.95 back. Walmart’s annual grocery delivery subscription program costs $98 a year. It includes free grocery delivery from local stores at the same prices as customers pay in-store. It also includes free shipping without a minimum purchase, discounts on fuel and prescription medicines. Members are also being given early access to Walmart’s three “Black Friday Deals for Days” events throughout November. Walmart’s cash-back deal today is part of the free 15-day trial it offers for customers considering a Walmart+ subscription.
Walmart is looking to give consumers who shop online at both Amazon and its site a reason to give its subscription service a try. The company is also looking to pick off some of the consumers who shop its rival’s site but not walmart.com. A recent Jungle Scout report found that 35 percent of U.S. consumers shop on Amazon, but not Walmart. Only nine percent shop on Walmart’s site but not Amazon’s.
Amazon-exclusive shoppers are more sensitive to delivery fee charges than even Walmart’s customers, according to the report. Seventy-six percent of shoppers who are “Amazon-exclusive” say they want products with the lowest shipping price when they shop online. Sixty-four percent of Walmart-exclusive shoppers feel the same way.
Walmart’s announcement today marks the latest back-and-forth between the two rivals. Amazon announced last week the rollout of in-store pickup and local deliveries for third-party sellers on its marketplace. Amazon Local Selling, as the program is known, seeks to address the perceived advantages of Walmart and others when it comes to physical store locations and convenient local fulfillment options. The service is now available from local independent stores, regional and national chains.
Discussion Questions
DISCUSSION QUESTIONS: Do you see Amazon’s delivery fee for Whole Foods as an opportunity for Walmart to convert some Prime members to Walmart+? How much of a threat is Amazon Local Selling to Walmart?
Poll
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This battle will continue to go back and forth, for years to come. I’m not surprised to see Walmart exploit what it sees as an opening with Prime members, but let’s not forget that Prime membership provides lots of benefits, and price is only part of the issue. Overall, tactically this is well played by Walmart, but the battle rages on. Amazon’s move to local selling is a more challenging threat to Amazon but, again, this will take time to gain traction, and it only will if the local retailers are able to execute effectively.
As much as this is an amusing campaign, in online grocery the customer and demographic overlap between Walmart and Whole Foods is minimal. Walmart is sensible to emphasize the value of its delivery service, but I doubt it will pick up a tremendous number of customers from this campaign. That said, Whole Foods may well lose some shoppers to other rivals because of its charges. The question is whether they are bothered given that online is still growing very rapidly for them.
The Whole Foods shopper is less sensitive to the price of product so it stands to reason they will be less deterred than a Walmart one. The report above cites Amazon-exclusive customers not their well heeled Amazon/Whole Foods brethren. They aren’t usually even in the same zip codes, and they can’t pay them to shop at Walmart! The “Whole” demographic may not like the move but they won’t be shopping for produce at Walmart.
I guess another way to interpret Walmart’s move is this: Walmart actually has to pay its customers to sign up for its food delivery. That might be their way of compensating customers for getting zero streaming content from their subscription service.
Personally, I think Walmart “won” the pandemic, period. Amazon is trying to gain Walmart customers (with a special Prime plan) but I think Amazon’s pandemic behavior and out-of-stocks will not serve it well for some time to come.
You just can’t beat those “store things” for stocking product. Even if you have your own planes (snort).
The fee for Amazon Prime membership was one of the best values in all of retail before they offered free grocery delivery. Free grocery delivery had to have turned that program into an unabashed money loser with the customers who used it. And it’s not like Walmart’s program is free. It’s not. It’s a subscription service. Oh, and then there’s content — product. If we were talking apparel we would be comparing Walmart and Nordstrom (OK, slight stretch). Pitching different product to different customers and trying not to lose money in the service process makes perfect sense to me.
This move may not put a dent into Amazon’s bottom line but it may entice the Whole Foods customer to give Walmart a go. The challenge will be for Walmart to keep these customers because loyal Whole Foods customer will simply switch from online to offline.
From a merchant perspective, Walmart will need to up its game in terms of a more elevated assortment and product mix to keep that Whole Foods customer interested and coming back for more.
Another way to look at this situation is that, whatever advantage Walmart may gain from Whole Foods charging for delivery, it will be short lived. Retailers will eventually wake up to the reality that shipping fees are perfectly justified.
Right now it’s a race for retailers to capture shoppers. It may be a race to the bottom as the financials of e-commerce for retailers are still expensive. Walmart is smart to use the fees from Amazon/Whole Foods as an opportunity to pounce and convert shoppers.
I do think the Walmart campaign is really clever, but I just don’t see enough overlap between Whole Foods grocery customers and Walmart grocery customers to move the needle all that much. I suspect most Amazon/Whole Foods shoppers will simply switch to in-store or curbside options rather than switch to Walmart.
The fight for grocery share is getting feistier than a UFC match. Yes Walmart will add more Walmart+ members, yet Amazon’s Prime services are embedded into our habits, making it hard for us to leave.
Overall, Whole Foods shoppers have the disposable income and flexibility to keep both Prime and Walmart+ memberships.
As for competitive threats, Amazon Local Selling is a masterful move of strategic stealth.
It’s like the Game of Thrones scene in the arena where the Sons of the Harpy pulled on gold masks and started to attack: they were there all along, waiting to pounce. Similarly, Amazon has been quietly selecting partners to build a national physical presence to complement its e-commerce leadership in time for the holidays. Kaboom!
2021 retail strategy is the new Netflix.
With Amazon’s ability to invest (lose money) in expanding market share, just think of the inroads they can make with Amazon Local. Market by market. And here I was thinking what a great opportunity for local merchants and service providers. I hope they don’t get muscled out by Amazon.
The twist on “Whole” is fun but I don’t see Walmart getting much traction from it.
It’s tough to put Whole Foods and Walmart grocery shoppers in the same group because the perception is so different. One consumer shops only for high-end, natural, and organically grown products, the other for quality product as well, but at a low price.
$9.95 is steep for every grocery delivery, but I also think the delivery fee has been set to match the Whole Foods experience: Quality costs money. Amazon must be secure that its Whole Foods customer will be willing to pay it.
Walmart’s campaign is clever, and they may peel away some shoppers who were only buying Whole Foods groceries because of the convenience of free delivery. However I don’t think they will convert many regular Whole Foods shoppers.
Whole Foods is a pricey grocery store, with a different product selection and price point than Walmart groceries.
I expect that instead of switching brands, many Whole Foods customers will switch their behaviors. Instead of paying for delivery, shoppers will use the free pick-up option. Or instead of getting frequent deliveries, shoppers will do larger orders less frequently to justify the delivery fee.
Let the games begin! Free delivery really isn’t free. Someone pays for it, and it is usually the customer, but it’s disguised or hidden in the pricing. Nothing wrong with that. Walmart is taking advantage of what some might see as a negative for Amazon. Amazon knows what they are doing. I’m sure they recognize there will be some fallout. Let’s see what happens.
I recently signed up for Walmart+ on a two-week trial just to realize they don’t have a ship-from-store option in my area. Whole Foods does.
Neither Walmart+ nor Amazon Prime will come out ahead. The winner will be local grocers (including Walmart) who will have customers that seek to avoid the regular and high delivery charges. If a convenience is overpriced, most will forego it altogether. Grocery is a regular, ongoing purchase, albeit with variation from week to week. The convenience of home delivery will be outweighed by the 10 percent+ increased costs for the delivery (for a $100 basket) in addition to the other reasons that people hesitate with online grocery.
This is a great exercise for Walmart’s marketing folks to prove they are coming up with ideas. After that, it’s going to have practically zero effect.
It’s a clever campaign for Walmart that will sway some new subscribers — ones who shop both brands and potentially a few net-new who want to lock-in for free delivery.
This is like watching two heavyweight fighters go toe to toe. I applaud Walmart for responding to Amazon’s continued dominance of the online marketplace. However, Walmart’s response is simply price oriented, namely free delivery. I assume Walmart has looked at the pro formas for free delivery. Amazon Local Selling on the other hand, cannot be easily matched by Walmart price concessions. Marketing is a race with no finish line and in this battle, Amazon has been controlling the races that make a difference.
While the last-mile grocery delivery battles continue, this competition between Walmart and Whole Foods is somewhat amusing. There is little to no overlap between the customer segments that shop Walmart with Whole Foods. Walmart is capitalizing on this, and it’s always a well-played strategy to pit yourself against your main competition.
Considering Whole Foods’s targeted consumer personas, price elasticity and incremental delivery costs may have much of an impact. Whereas Walmart’s more price-sensitive consumer segments may be somewhat more concerned with the rising delivery costs. It’s clear that both Amazon and Walmart are experimenting in the fulfillment space, between cost and value levers. It will be interesting to see how this plays out.
By my reckoning, if anyone has less than nine grocery deliveries a year, they would still be better off paying Amazon’s $9.95 charge than Walmart’s $98 per year. Now I accept that many customers will also be paying Amazon Prime fees, but to get people to transfer or add Walmart to their shopping list will be a big ask given the extra costs. Good PR from Walmart as it is a shot at Amazon and shows people that they are doing this. But as a winning formula for new customers, it’s not a big deal.
Being both convenient and lucrative is difficult for any retailer. The additional costs of fast last-mile delivery eat into merchants’ profit margins. Convenience is never free, and it’s fantastic that Whole Foods is emphasizing this to its customers. Non-urgent customers can directly go to the store, pick their orders at the curb, opt for late delivery or increase order value to 35$ to avail free delivery. A consumer who requires urgent delivery can easily afford to pay more and will not mind doing so.
A Walmart+ customer is very different from a Whole Foods customer in terms of demographics. A Whole Foods customer expects high-quality service and is willing to pay a premium for it. As a result, I’m not sure if this campaign will persuade Walmart’s target audience. However this will serve as an excellent reminder to their Walmart+ consumers that their $98 is well spent. Because the consumer receives discounts on fuel and prescription medications, as well as free delivery without a minimum cart value.