Wal-Mart drops its Prime-like ShippingPass program
January 31, 2017 09:23 AM
(Bloomberg)—Wal-Mart Stores Inc. is scrapping its ShippingPass program, which struggled to compete with Amazon.com Inc.’s Prime, opting instead for a two-day shipping model that doesn’t have annual membership fees.
Subscribers of ShippingPass, which had offered two-day delivery for a $49 membership, will receive refunds as the service is eliminated, Wal-Mart said in a statement. The new approach—rolled out Tuesday morning—offers the same shipping speed for free to anyone who makes a minimum purchase.
The turnabout underscores Wal-Mart’s uphill battle against Amazon, which has locked in tens of millions of subscribers with its annual Prime membership. ShippingPass wasn’t able to lure away enough of those customers, and many shoppers have come to expect fast delivery without having to pay a separate fee. Wal-Mart is No. 4 in the Internet Retailer 2016 Top 500 Guide; Amazon is No. 1.
“In today’s world of e-commerce, two-day free shipping is table stakes,” Marc Lore, chief executive of Wal-Mart’s online operations, said on a conference call. “It no longer makes sense to charge for it.”
The move also shows that Jet.com, the e-commerce startup Wal-Mart acquired in September, is now setting the agenda for its online operations. Lore, Jet’s former CEO, is focusing the new service on essential, everyday items, such as home goods, pet products and electronics. Shoppers will have to spend $35 to get the free two-day shipping, the same amount Jet requires. Lore called it a “pretty darn compelling” value proposition.
At Amazon, in contrast, non-Prime members have to pay about $50 to get that delivery speed. In February 2016, Amazon adjusted its shipping thresholds. Consumers buying anything but books have to spend $49 before their Amazon order qualifies for free shipping. But Amazon has dropped the minimum purchase threshold for consumers buying books to $25. Orders that contain goods from multiple categories but include at least $25 in books also will qualify for free shipping, regardless of the total purchase price. Since October 2013 the minimum was $35 for goods coming from any product category. Prior to 2013, the minimum to qualify for free shipping for any products was $25.
The now-abandoned ShippingPass service began offering a two-day delivery service in May—down from three—and had required a $50 minimum order. The retailer declined to say how many people will get a refund.
Wal-Mart, based in Bentonville, Ark., aims to encourage more frequent shopping and lock in customers, something that Amazon’s Prime has achieved with its subscribers. Prime carries an annual $99 fee, but that service includes perks like free movies and TV shows.
Since Wal-Mart completed its $3.3 billion acquisition of Jet, the retail giant has made a big push to catch up to Amazon. The integration has largely taken place at the managerial level so far, eliminating staff from Wal-Mart’s online team and elevating Jet executives to take on a more prominent role in the division.
On Feb. 1, the companies will start to integrate their warehouse networks nationwide, Lore said. Wal-Mart operates more than 4,600 stores in the U.S., which are also used to fulfill some online orders. Most of those orders will ship out of its five fulfillment centers, which average about 1 million square feet in size. The company plans to build another center in Florida later this year.