Walmart tweaks ‘Shipping Pass’ offering during its pilot phase, hopes to better compete with Amazon

Walmart is going to use its own expansive e-commerce distribution network and employ several regional carriers to help it shave one day from its 3-day home delivery guarantee for Shipping Pass subscribers, while also lowering the annual fee to $49 from $50 previously charged.

While Walmart would not disclose how many markets are involved in this ongoing pilot test, Northwest Arkansas is among the markets where shoppers are routinely asked via email to subscribe to the service akin to Amazon Prime. Subscription is by invitation only.

“This is a pilot test and we’re not providing all of the details around how we’re conducting the test and future plans,” said Bao Nguyen, spokesman for Walmart.com. “Marketplace items are not included in Shipping Pass. One million of the most common Walmart-owned items that customers buy are eligible, however.”

Most analysts say Walmart’s Shipping Pass is a step toward what Amazon has already mastered in its Prime subscription, which offers 2-day guaranteed delivery as well as access to media, movies, documentaries, television series and other media via streaming devices. It’s important to note that Walmart’s Shipping Pass does not include media downloads. Basic Amazon Prime costs $99 or $9.99 per month which is twice the cost of Shipping Pass.

Keith Anderson, vice president of strategy and insights for Profitero, told Talk Business & Politics that Walmart has been known as a fast follower in all of its other success stories over the years. He said when it comes to e-commerce it’s the first movers who will likely win the gold. He said Amazon was the first mover in e-commerce and continues to invest aggressively which has garnered it an accelerated growth over Walmart.com.

Last year Walmart.com sales growth declined from about 17% in the first quarter of 2015 to 8% in the fourth quarter. Meanwhile, Amazon’s sales growth improved from 14% to start 2015 and up to 19.9% at year end. The entire U.S. e-commerce market had sales growth ranging from 14% to 14.85% throughout last year, according to Cleveland Research.

The Wall Street Journal reports that Walmart has deals in place with LaserShip on the East Coast, OnTrac on the West Coast, United Delivery Service and FedEx in other areas of the country to help with the shorter 2-day delivery. Walmart would not confirm that information.

Anderson said the billion-dollar answer for Walmart is to figure how to get into the mindset of the online shopper. Bearing in mind that nearly half of the U.S. households are already dialed into Amazon’s ecosphere, do consumers need subscriptions to both retailers? That’s the question to be determined.

Also, with 90% of the U.S. population living within 15 minutes of a Walmart store that offers online order pickup for no extra charge, will consumers see value in the Shipping Pass. Experts say remains to be seen, but not everyone views Walmart’s physical reach as a hurdle.

That reach is an advantage for the simple reason that Walmart must maintain a robust portfolio of convenience options in order to remain competitive with Amazon, according to Carol Spieckerman, CEO of Spieckerman Retail. She said membership fees are one part of the equation but even more important will be ensuring that a wide selection of products are eligible for Shipping Pass – product and category depth is job one. Walmart’s recent decision to ramp up the number of third-party sellers and reinvest in its online marketplace present major opportunities in that regard, she added.

“In order to compete with Amazon, Walmart must also become a digital destination for shoppers who may not normally visit its stores. Walmart will need to continually promote and reinforce the breadth of assortment that it offers online, particularly higher-quality products and brands not normally carried in its stores,” Spieckerman said.

Seeking Alpha contributor Josh Arnold, who also works as a senior analyst at Capital One, recently noted in a blog about the Shipping Pass changes that “Walmart’s initiatives are merely watered down copies of exactly how Amazon is winning the retail battle. To say it another way, Walmart is trying to compete with Amazon by simply copying some version of what it already does.”

He said the regional network of carriers to help with faster deliveries don’t put Shipping Pass on par with Prime because of the other benefits like streaming television and music.