Walmart Starts Making Inroads In Amazon's Forte By Transforming Business Model; Targets Affluent Customers

Walmart Inc’s WMT online subscription service Walmart+ met success with inflation-sensitive higher-income households as the retailer prioritizes the segment in a tectonic change to its reputation as a destination for lower- and middle-income shoppers.

Walmart sees e-commerce as a big selling point, Bloomberg reports.

At $98 a year, Walmart+ is cheaper by $41 than Amazon.Com Inc AMZN Prime with similar perks, like shipping discounts and video streaming. Walmart’s subscription service also includes benefits, including discounted fuel at gas stations around the U.S.

In February, 28% of U.S. households with an annual income of at least $150,000 were members of Walmart+, up from 13% a year earlier, according to Prosper Insights & Analytics. 

Still, Amazon Prime has a commanding lead with 77% of those households, up 700 bps from the previous year.

As Walmart attracts more shoppers, it draws more brands, multiplying the number of shoppers, benefiting from the same “flywheel” effect Amazon experienced when it launched Prime in 2005.

Besides borrowing Amazon’s online playbook, Walmart is capitalizing on a network of stores within 10 miles of 90% of Americans. 

America’s largest grocer also has a lead in fresh food, a market Amazon has been trying to decrypt for years. 

Walmart+ offers members free delivery on orders of at least $35. In February, Amazon raised its free grocery delivery threshold to orders of at least $150.

“Walmart is eating into Amazon’s e-commerce market share and legitimately becoming a competitor,” said Alasdair McLean-Foreman, founder and CEO of Teikametrics, which helps merchants buy advertising on Amazon, Walmart. 

According to Insider Intelligence, Walmart will likely have 6.3% of the U.S. online market this year, a fraction of Amazon’s estimated 37.6% share. 

Walmart.com is also less crowded than Amazon.com, with about 135,000 merchants compared with some 2 million on Amazon. He said that makes it easier for brands to stand out on Walmart.

About 65% of Walmart+ members are between 18 and 44 years old, versus 51% for Amazon Prime, according to Prosper, a promising trend for Walmart.

Walmart+ has plenty of room to grow. According to a Morgan Stanley February survey, about 11 million U.S. shoppers are “very likely” to subscribe to the service, adding to the approximately 18.5 million existing members. 

Meanwhile, according to Consumer Intelligence Research Partners, Amazon Prime had 168 million members in the U.S. as of December, unchanged from a year earlier.

Price Action: WMT shares traded higher by 0.57% at $137.94 premarket on the last check Friday.

Photo via Wikimedia Commons

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