Why Walmart+ Is Kind of a Letdown

Key Insights:Walmart+ appears to be a defensive move to retain shoppers, not lure Amazon customers.Analysts say Walmart+ perks such as free shipping with an order minimum and stingy gas discounts fall flat. Walmart finally announced a Sept. 15 launch date for its Walmart+ membership program, along with benefits like free shipping, a checkout-free payment option and discounts on gas. During a conference call with reporters on Monday, chief customer officer Janey Whiteside deflected a number of comparisons to Amazon Prime, saying Walmart+ is intently focused on saving its own customers time and money. A defensive move to protect 2020 gains Allen Adamson, co-founder of marketing and activation agency Metaforce and a professor at NYU’s Stern School of Business, called Prime the “elephant in the room,” saying Walmart+ feels like a defensive move to lock in shoppers. That’s in part because he said Walmart+ doesn’t offer anything innovative, which prevents it from being more of a forward-thinking offensive play. “For a loyal Amazon Prime user, there’s no news here,” he said. “There’s nothing enticing to make people say, 'I have to try Walmart.’” The good news for Walmart, however, is because there’s “such a tidal wave of people doing their shopping online,” there are plenty of customers for both programs. Kyle Rees, director of research at Gartner, pointed to a report in which 80% of the CMOs surveyed said their primary strategy to fuel growth in 2020 is to focus on existing markets, so he agreed Walmart+ is something of a defensive strategy to retain consumers who have started shopping online because of the pandemic, not to lure in Prime members. Rees also said the $98 price tag, which is about a 15% discount from an annual Prime membership, could be appealing for rural and suburban consumers, who are more likely to shop at Walmart anyway. “Given the tumultuous environment that Covid [brought] and a variety of social challenges now, I think we see a world in which brands have to be much more protective of and do more to appeal to their core base of customers,” Rees said. The main problem: lackluster benefits Walmart+'s benefits include a $35 threshold for free shipping. So instead of simply ordering a single item they may have forgotten, members will have to wait to build bigger baskets to trigger free shipping. That, Rees said, may be OK for large weekly grocery baskets, but makes Walmart+ “a harder sell to the impulse shopper who relies on Amazon to complete orders of everyday basics.” Additionally, author and retail expert Bruce Winder asked why consumers would pay $98 a year when they can simply drive to one of the retailer’s 4,700 U.S. locations to avoid the $35 minimum and can opt for curbside pickup to retain the contactless experience. “Many retailers have already offered free delivery if you buy $35 worth of product with no fee, so this is not a great deal,” Winder said. Gas discounts, another benefit, could potentially be valuable to Walmart shoppers, but don’t go far enough. That’s in part because fuel perks are already part of membership warehouses such as Costco, which reportedly offers a discount of about 21 cents per gallon—and comes with a $60 membership fee. Walmart+ is offering one-quarter of that discount. “Honestly, I think if the gas benefits were more compelling, it would be a no brainer,” said Sucharita Kodali, vp and principal analyst at Forrester. “I don’t understand why the gas benefits are only 5 cents off a gallon—[Walmart-owned warehouse retailer] Sam’s Club already sells gas for 30 cents cheaper than other gas stations nearby.” Winder also said Walmart+ ultimately isn’t competitive with Costco either. “Walmart has always touted that they keep prices low for customers by avoiding costly loyalty programs,” he said. “Well, then comes Amazon and Costco who can sell for less than Walmart in part because they use these loyalty programs to generate revenue and drive switching costs.” Plus, Kodali noted Amazon still offers a free 30-day trial for Prime, which is twice as long as Walmart+. “The longer the free trial, the more you can lock people into a certain type of behavior,” she said. And then there’s the Scan & Go feature, which allows customers to scan items as they shop and bypass checkout, which a spokesperson confirmed will only be available to Walmart+ members. “This should be free to everyone,” Winder said. “Walmart is essentially getting their customers to do the work that is normally done by cashiers and getting paid by customers to do so. What a joke.” The loyalty program to come Kodali said she hopes Savings Catcher—a tool that allowed customers to scan their Walmart receipts to compare prices to local competitors and then reimbursed the difference until it was discontinued in May 2019—resurfaces as part of the loyalty program, saying it would be a "compelling" addition. Adamson said additional discounts, like Walmart subsidiary Jet.com used to offer in its early days, would help Walmart+ distinguish itself from Prime. Despite these challenges, Rees said the program reflects a retailer “that has proven itself to be consistent and pragmatic in a way that innovation enhances the shopping experience and the breadth of the offering it provides to customers.” Citing figures from Walmart’s last annual report, Rees said the retailer operates more than 780 million square feet of store space, which will be instrumental to the success of Walmart+. (During the call, Whiteside said most deliveries will come from these stores.) “We already know across the retail sector in aggregate … there’s much conversation and speculation about how to better use and position stores as part of this enriched omnichannel capability and the shift between online and offline with greater capability and ease,” Rees said. “That’s the thing Walmart has to get right here.”