Last week Walmart announced a new initiative - discounts for products ordered online, but picked up in stores. By the end of June the program is expected to expand to include over 1 million products (out of over 35 million already on the site. Depending on the product and various logistics factors the discounts could go as high as 10%.
On paper this is a great idea since it is estimated that 70 percent of US population are located within 5 miles of a Walmart store.
Yet this is the opposite of what Amazon is doing. In our previous article Why Amazon Buy Box Is Not the Lowest Price we wrote that Amazon is often surfacing the best deal which is not necessary based on price alone. It considers shipping times, trust in the seller, etc. and picks the one to deliver the best experience. The idea behind this is that many customers would be willing to pay a bit more to get the product quickly and reliably.
Amazon has over 65 million Prime members paying $99 a year for the convenience of always having free shipping. This translates to more than half of American households. So while it is safe to assume almost all of Prime members are within 5 miles of a Walmart store, they’d rather have products delivered.
Thus this change by Walmart raises a question - are shoppers more cheap than they are lazy? Amazon is building features for convenience like same-day delivery in major cities. Walmart on the other hand wants to offer the best possible price they can. If price is indeed the key factor, Amazon will have a hard time matching those discounts and still offer free shipping. But Amazon is willing to subsidize free shipping, so Walmart trying to underprice Amazon is unlikely to work.
It is possible that the audience shopping on Walmart.com has different priorities than those buying on Amazon. So this change is not a direct competitor for Amazon offerings, but instead an improvement to the Walmart experience. Despite many articles celebrating this as Walmart’s push to compete with Amazon, given the growth of Prime memberships we think it will have no effect.
In a Bloomberg article “Walmart Offers Cheap When People Want Easy” Shelly Banjo wrote:
“It’s one of the reasons the complicated way Jet.com prices items still seems so puzzling to me. Customers save money by jumping through a series of hoops when they make purchases – bundling on extra products, paying with a debit card, and the like – and this helps Jet cut costs. The real beneficiary here seems to me to be the company, not the shopper.”
This Walmart change seems to do the same thing. It’s unclear how much of it is to make life easier for customers, and not to save money and make things easier for Walmart itself. We agree with S. Banjo that savings achieved by customers taking on some of the shipping work looks more like a benefit for the company.
It is interesting to see Walmart experiment and test what their customers like. We are just not sure if this aligns with modern customer expectations, largely trained by Amazon over the years.
