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Walmart's $ 98 delivery subscription can take on Amazon and Target



Walmart (NYSE: WMT) currently offers unlimited grocery delivery for a $ 98 annual fee in four markets, and this fall it expands to 200 markets covering 50% of the US population. Delivery Unlimited takes advantage of Walmart's massive physical footprint to take on competing services such as Amazon (NASDAQ: AMZN) Prime Now and Target & # 39; s (NYSE: TGT) Shipt. Prime and Shipt cost $ 119 and $ 99 annually, respectively.

Walmart has established itself as a leader in grocery shopping, and Delivery Unlimited is the next step to strengthen that leadership. But Walmart's head of US e-commerce noted in a recent interview with Recode that Delivery Unlimited will eventually expand beyond grocery to include everything sold in Walmart's Supercenters. It could be the factor that is pushing more consumers to choose Walmart over Target's same-day fulfillment options or Amazon Prime Now.

  A man with a child on his back receiving a grocery bag from someone at the front door.

source: Walmart

Gaining competition

Walmart's focus on grocery shopping has put it ahead of Amazon and Target, but it has fallen behind the rapid fulfillment of general merchandise sales. The company recently made moves to speed up delivery, launching the NextDay program to 75% of the country well in advance of schedule. Still, it has some to take back.

The goal has doubled on the Shipt delivery service over the past year. First, it expanded its service to include more general merchandise in December, giving subscribers access to more of Target's store inventory. In June, the company gave Target.com buyers the opportunity to pay for one-time delivery instead of subscribing to the service for a full year. It also integrated Shipt more closely with Target.com, creating a dedicated same-day delivery section of the site. In the previous quarter, Target noted that the same-day fulfillment options ̵

1; which include pickup at the store, DriveUp pickup and delivery of Shipt – accounted for nearly three-quarters of the growth in digital orders.

Similarly, Amazon's management pointed to the shift to one-day Prime shipping as a cause of acceleration in its online retail sales last quarter. In the meantime, it continues to expand Prime Now into new markets, leveraging its footprint from Whole Foods Market.

Walmart has the potential to reach many more customers than Amazon, and even more than Target thanks to the huge number of stores. There is a Walmart store within 90 kilometers of 90% of the US population. And if Walmart can extend its same-day deliveries or pickup on the street to include the average 144,000 items available in Supercenters, it will quickly overtake both Amazon and Target in terms of choices. By comparison, Amazon says Prime Now customers can order "tens of thousands of items" through the offer.

Takes on Prime

The major challenge for Walmart with Delivery Unlimited is taking on Amazon Prime. There are already over 100 million US consumers with access to a Prime membership, and the idea that they will pay Walmart another annual fee for access to another delivery program seems unlikely. That's the same challenge Target has faced as it has been trying to grow Shipt over the past two years.

Walmart e-commerce manager Marc Lore believes consumers will see the value of Delivery Unlimited, and it will first pull customers away from their local supermarket and then replace Prime over time for many consumers. But if that were the case, Target would look at how fast Shipt subscriptions are growing. Shipt delivers from Target, local supermarkets and several national chains, but it has still not captured the market share Lore predicts for Walmart's more limited delivery options.

When Walmart tried to take on Prime lately, it failed. It offered an unlimited two-day shipping service for $ 50 per year before scraping it and offering faster shipping to all customers without payment.

It is difficult to sell consumers, especially consumers who are already subscribed to Prime, to get more money for another delivery service. That said, the general trend in demand for fulfillment on the same day could push more customers to Walmart if it can achieve Lore's vision of offering everything in Supercenters with same-day delivery. It will be a long, tough road, but Walmart needs to decide its next step in digital, because online grocery sales won't continue to grow at the same pace indefinitely.


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