Walmart drops online membership

Walmart’s latest e-commerce initiative focuses on making it easier for consumers to buy the “everyday essentials” that form a large segment of traditional supermarkets’ center store offering.

The move to drop its ShippingPass paid-membership program and instead offer free two-day shipping (for orders of $35 or more) on 2 million of its most commonly ordered items marks the first major shift under Marc Lore, president and CEO of Walmart U.S. eCommerce. Lore had been the co-founder and CEO of Jet.com, the online retailer Walmart acquired last year for $3.3 billion.

“In today's world of e-commerce, two-day free shipping is table stakes,” Lore (left) said in an online statement. “It no longer makes sense to charge for it. We believe this is the most compelling all-around value proposition for customers looking for low prices, a broad assortment and quick shipping.”

The new two-day shipping offer applies to nine broad categories, according to the retailer’s website: baby items, pet care, personal care, specialty foods (including many organic grocery items), traditional shelf-stable grocery, household essentials (detergent, light bulbs, batteries, etc.), health, beauty care, and clothing and jewelry.

As part of the new offering, Walmart dropped the minimum order for free shipping from $50 to $35.

Walmart’s test of the ShippingPass program began on a limited basis in 2015 and expanded last May before the September acquisition of Jet.com. ShippingPass charged a $49 per year membership fee for free delivery.

“ShippingPass was a great way to test what we ultimately wanted to offer customers — free two-day shipping,” Lore said, noting that current ShippingPass members will receive a refund on their membership.

The ShippingPass membership service was seen as Walmart’s no-frills answer to Amazon’s Prime membership program, which at $99 per year also includes access to online streaming of movies and TV programs and access to its e-book lending library.

Bill Bishop, chief architect at e-commerce consulting firm Brick Meets Click, said he sees Walmart’s new online proposition as positioning it even better against online behemoth Amazon.

“It seems to me that this change will have more of an impact on Walmart’s ability to compete with Amazon than it will with its ability to compete with supermarkets,” he told SN. “The change actually gives Walmart an offer that’s somewhat closer to something that customers would be familiar with at Prime.”

Walmart.com, a distant No. 2 in online sales, has been seeking to gain ground on Amazon. Walmart was estimated to have about $14 billion in online sales in 2015, vs. $107 billion at Amazon.

In addition to the new two-day free shipping offer, Walmart also offers free online ordering with same-day in-store pickup for certain items at 4,600 locations, and it offers click-and-collect grocery at 600 stores and counting.

Walmart’s latest move comes as consumers increasingly turn to the internet for CPG purchases, according to a new report from IRI.

The Chicago-based research firm predicted that within the next five years, e-commerce will account for 10% of CPG sales, totaling about $88 billion, up from 1.4% in 2015. Food and beverage CPG sales conducted online will account for 5.5% of total 2022 food and beverage CPG volume, while nonfood CPG will account for 18%, the report projected.

The IRI Times & Trends report, “Build, Drive and Earn E-commerce Growth for Retail Success,” projects that brick-and-mortar CPG sales will decline between 2020 and 2022, from $802 billion to $787 billion.

Meanwhile, Walmart’s Lore promised more changes to come.

“This is just the beginning,” he said. “Now that we’ve checked the two-day shipping box, my focus is on leveraging our unique assets and network to serve customers in innovative ways that only Walmart can. Stay tuned … you won’t be waiting long.”