Walmart's response to Amazon's loyalty program is underwhelming. There are at least three reasons why Jeff Bezos shouldn't feel threatened.
Walmart (NYSE:WMT) is on the verge of unveiling a $98 membership program. It will be called Walmart+. The loyalty program is the big-box retailer’s answer to Amazon Prime.
Going by the details revealed so far, there is no reason for Amazon (NASDAQ:AMZN) founder Jeff Bezos to lose sleep over it. Amazon Prime’s 15-year head start has given it a lead that will be hard to undo.
Here’s why Walmart+ will struggle to dent Amazon Prime’s hold on online shoppers.
The beauty of online shopping is the wide variety of available products without having to step foot in a store.
Walmart’s e-commerce operation is nowhere near Amazon on scale and sophistication. This gives Amazon an advantage over Walmart as it has a vastly more extensive selection of products. Amazon’s third-party marketplace is bigger, too.
The big-box retailer has made efforts to grow its third-party marketplace by entering into a partnership with Shopify (NYSE:SHOP). It is still vastly outdone by Amazon.
In offering a loyalty program to its online shoppers, providing expedited shopping and discounts is a good start. But it doesn’t help when the choice is limited. Until Walmart’s e-commerce operations get to Amazon’s level, Amazon Prime can rest easy.
Besides expedited shipping and exclusive deals and offers, Amazon Prime gives subscribers access to music, movies, TV shows, books, and unlimited photo storage. Walmart+ simply cannot compete with this proposition just yet.
Walmart realizes this and plans to add video entertainment. The big-box retailer is currently building its content library, so it will take some time before that becomes a selling point.
Meanwhile, Amazon won’t be sitting idly by waiting to lose its hard-fought customers.
Currently, Amazon Prime enjoys a membership of over 150 million people across the globe. By the time Walmart+ gets to such a number, Amazon Prime could be reaching billions.
The pandemic drove a surge in online shopping. Still, Walmart’s membership program coincides with reduced purchasing power due to the recession.
The U.S. economy is expected to contract 4.6% this year, unemployment remains in the double digits, retail sales are down by over 6% annually, and the rich have drastically cut back on spending.
Under such circumstances, Walmart+ will find it hard to compete with Amazon Prime, which has subsidized rates for those relying on government assistance.
One silver lining for Walmart+ is that the pandemic overwhelmed Amazon. Customers who were disappointed by Amazon’s waiting times might be in a position to consider alternatives. That gives Walmart+ a slight opening. Don’t count on this undoing Amazon Prime’s 15-year advantage, though.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.
Last modified: September 23, 2020 2:03 PM