Brief

Wal-Mart scraps Prime-like ShippingPass membership

Dive Brief:

  • Wal-Mart has ended its Amazon Prime-like ShippingPass membership program, which gave members free two-day shipping on most orders for a $49 annual fee. Current memberships will be automatically refunded in full, the company said in a press release.

  • In its place, the retailer will open up its free two-day shipping to all customers purchasing orders over $35 starting on Tuesday, while shipping to stores will be free on eligible orders.

  • "At this day and age, two-day shipping is table stakes, so we don't think we should charge membership for it," Wal-Mart U.S. e-commerce chief and Jet founder Marc Lore said in a call with reporters on Monday, according to Business Insider

Dive Insight:

ShippingPass was unlikely to win much business away from Amazon, as research shows more than 90% of Amazon Prime members renew their memberships for a second year. While Wal-Mart expanded its program nationally just last year, it’s now scrapped, and Lore’s statements to reporters Monday sounded like a challenge to Amazon Prime. But Wal-Mart's move to lower its free shipping minimum stands in direct contrast to Amazon's move to up Prime membership last year.

Of course, Prime members enjoy a host of perks beyond free two-day shipping on many items that Wal-Mart’s service never did, including: video streaming, music streaming, free photo storage and extra rewards for those that have Amazon’s credit card. That puts a different perspective on Lore’s contention that free two-day shipping is the least retailers can do.

Prime membership allows Amazon to have its shipping costs at least partially covered up front, and it’s a necessity, considering its fulfillment expenses practically wiped out its profits in its latest quarter. It remains an open question, though, whether Wal-Mart can contend with the higher expenses of e-commerce fulfillment, given the company won't be raising prices to protect its margins. "It won’t affect our pricing at all," Lore said, according to an account from Business Insider. "In fact, we are looking to get even more aggressive on the pricing side.”

But some analysts believe that will be a challenge for Wal-Mart, a highly efficient brick-and-mortar retailer. “Wal-Mart is the biggest retailer in the world, and their system is selling through bricks and mortar,” Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive last year. “[W]e know that they break that product down and put it on the shelves, and they do that very efficiently also, and then they’re done. And selling on the Internet is not efficient. The whole methodology of selling on the Internet is completely foreign to what it’s like selling at a Wal-Mart.”

Recommended Reading:

Follow on Twitter

Filed Under: E-commerce
Top image credit: Walmart Facebook page