Walmart Is Finally Ready to Take On Amazon Prime
Everyone knows Prime by now, Amazon's flagship offering where customers pay $99 a year for unlimited two-day shipping on Amazon-warehoused goods at no cost. Amazon also includes a ton of digital goodies in its subscription plan. The company doesn't reveal the actual number of Prime memberships on its rolls, but it has announced that its subscriber base numbers in the tens of millions.
In other words, there are at least 20 million folks paying Amazon $99 a year to be a part of the loyalty shopping club. Many analysts and researchers feel that the reach of Prime is closer to 40 million in the U.S. alone.
That's a pretty big captive audience. Once you sign up for a buffet of subsidized shipping, you're likely to find yourself turning to Amazon.com first when you're looking to buy something, and studies show that Prime members spend two to three times as much on Amazon as non-Prime shoppers do over the course of a year.
That's a pretty big incentive to take on Amazon, and now Walmart is ready to give it a shot.
Walmart.com accidentally leaked a signup page last week. It was only supposed to be part of an internal test, but now that the cat's out of the bag, the company has rolled out a page allowing folks to be added to a waiting list for what the world's largest retailer is calling ShippingPass.
There are some pretty big differences between ShippingPass and Prime. For starters, Walmart's service is offering three-day shipping instead of two-day turnarounds. Orders also have to be placed by noon, several hours earlier than Amazon's typical cutoff. However, Walmart is sweetening the deal by pricing its plan at just $50 a year, with no minimum order requirements.
Given Walmart's historically low pricing, this will certainly make things interesting. If the selection and pricing is competitive, Amazon Prime may finally have a worthy adversary on its hands. At the very least it will keep Prime's pricing in check. The e-tail giant raised the price of its annual memberships by 25 percent to $99 last year.
Amazon learned that physical goods aren't enough to sway shoppers into subscriptions. It's been adding compelling digital features to Prime -- including a Netflix-like streaming platform, a growing catalog of digital music, monthly Kindle e-book rentals, and unlimited photo storage -- making it that much harder for members to cancel as they start relying on these online platforms.
Walmart's ShippingPass isn't making any initial promises on digital perks, but it will be interesting to see if it follows suit if it fails to drum up enough interest to its rival offering. Time isn't on Walmart's side. Prime's membership user base continues to grow. Then again, Walmart realizes that it's going to have to make a big splash as a way to pick up its otherwise stagnant sales. There's an online battle about to take place, and consumers could be the real winners as Amazon and Walmart bend over backward to line up members.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com and Netflix (NFLX). Try any of our Foolish newsletter services free for 30 days. Want to make 2015 a winning investment year? Check out The Motley Fool's one great stock to buy for 2015 and beyond.