Wal-Mart Stores Inc. will offer free two-day shipping without a membership fee on more than 2 million items, replacing the subscription-based program it had been testing for more than a year.
The Bentonville-based retailer said customers can order products online and have them shipped to their homes or Wal-Mart stores within two days, beginning today. The minimum purchase requirement to qualify for free shipping to homes is $35, which has been lowered from $50. There is no minimum requirement for items shipped to stores.
The adjustment means Wal-Mart will no longer offer its membership-only ShippingPass program, which never moved out of a pilot phase. The two-day shipping program was viewed as the retailer's answer to Amazon.com's popular Prime service when it was introduced in 2015.
Marc Lore, head of Wal-Mart's U.S. e-commerce operations, said during a conference call the change was made because free two-day shipping is now a benchmark in e-commerce.
"This certainly was not in reaction to it not working," Lore said of ShippingPass. "It's the contrary. It was working really well. We just upped the ante here and decided not to charge people for it."
Wal-Mart began testing ShippingPass by offering three-day delivery on more than 1 million items for members who paid an annual $50 subscription fee. The company announced last May it was shrinking the delivery time to two days and also trimmed the cost of the yearlong subscription service by $1 to $49.
Lore said in a blog post the program was a "great way to test what we ultimately wanted to offer customers -- free two-day shipping." Wal-Mart has never revealed how many customers participated in the test, but said customers who enrolled will be refunded in full.
Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said the elimination of the ShippingPass program makes sense on a number of levels.
"First of all, it simplifies Walmart's proposition and builds a bridge to shoppers that may like Walmart's price competitiveness on some items yet have concerns regarding its ability to execute within Amazon-like timeframes," Spieckerman said in an email. "Amazon's Prime program enjoys enviable loyalty, but Walmart is being realistic by acknowledging that ShippingPass will not hit those levels in the conceivable future. Casting a wider net is a great counter strategy."
Brian Yarbrough, a retail analyst with Edward Jones, wasn't surprised to see the end of ShippingPass, saying that Amazon Prime's dominance likely made it difficult to get consumers to sign up. He also agreed with Lore, believing free two-day shipping is now the norm for e-commerce success.
"I think in Wal-Mart's mind, they just figured that's the cost of doing business today," Yarbrough said. "So they're going to have to offer it. Now, on the flip side, it's not going to be cheap. ... It's going to impact profitability more and more negatively."
Lore said the retailer's ability to be aggressive on pricing will not be affected by the free two-day shipping plan, which will include items customers buy the most of, like baby necessities, pet products, cleaning supplies and beauty products. Certain food -- like peanut butter and cereal -- will be available as well. So are top electronics and toys.
"We're hoping to build loyalty on the fact you're able to get two-day free shipping on all your everyday essentials," Lore said. "In many cases you'll get them in one day. It's offering the absolute best prices, the widest assortment without a membership."
The two-day shipping plan is another sign of Lore's imprint since taking over Wal-Mart's e-commerce operations a few months ago. Earlier this month, Lore unveiled a restructured e-commerce team that featured a blend of Walmart.com and Jet.com leaders and told employees in a memo the company was becoming a more "customer-centric organization."
Lore said there is more in store as the retailer works to accelerate e-commerce growth.
"Things have been going really well here," Lore said. "We're moving at the speed of a startup. ... I think we're in a really good position to kick off this new fiscal year."
Business on 01/31/2017