The Reason Walmart Began A Two Day Shipping Service To Battle Amazon Prime

Walmart has learned an important lesson about the rules of the digital economy: speed is more important to customers than saving a few bucks.

The world's largest retailer has suffered through years of sub-par performance as it struggled to battle ecommerce upstarts - primarily Amazon - who might charge a little more but provided wide selection and convenience while saving time.

Walmart's initial response was rooted in its deeply held cultural belief that saving money is the root of all consumer activity. It instituted a program called ShippingPass that offered @ 1 million of the 7 million items from the Walmart inventory, with a promise to deliver them in three days (versus Amazon's two day offer). The big advantage Walmart thought it had was that it would charge $50, about half of Amazon charges for its Prime service.

The recalibration - two day delivery for $49 and access to the full Walmart selection - is recognition of the fact that most customers with access to computers may no longer find the company's 'every day low prices' strategy as compelling as the promise of better selection and faster delivery. Walmart is learning that consumers' expectations are evolving along with the promise of digital commerce. If it wants to survive, it will have to keep up. JL

Sarah Perez reports in Tech Crunch:

Walmart’s original idea with ShippingPass was to compete by offering a delivery service that’s faster than usual, but not quite as speedy as Amazon Prime. The advantage was that Walmart would undercut the cost of Prime in exchange for this delay.
Walmart is making a notable to change to ShippingPass, its three-day shipping service and answer to Amazon Prime launched into beta testing last year. The company says this morning it will move from three-day delivery to two-day delivery — which makes the service far more competitive with Amazon’s similarly structured annual shipping program.
This is an interesting move on Walmart’s part, given that its original idea with ShippingPass was to compete by offering a delivery service that’s faster than usual, but not quite as speedy as Amazon Prime. However, the advantage was that Walmart would undercut the cost of Prime in exchange for this delay.
Walmart’s ShippingPass customers paid half the price of an annual Prime Membership — ShippingPass is $49/year (down from $50/year previously), versus Amazon’s $99/year program — and only had to wait one more day for their delivery.
Now, they only have to wait two days — the same as with Prime.
While Prime today is a membership program with a range of benefits, including access to free music, books, TV shows and movies, Walmart is focusing only on delivery with its ShippingPass service. There are no other features.
But it’s not the lack of benefits that’s keeping the price down, says Walmart. Instead, the company explains that it’s able to offer “faster and more affordable shipping” because it has a unique fulfillment network that includes new, large-scale fulfillment centers, stores, distribution centers and a transportation network.
Walmart’s shipping service today offers subscribers access to more than a million items, including those most frequently purchased on Walmart’s website. The website offers a wider selection of around 7 million items. That suggests Walmart may eventually choose to expand the selection for ShippingPass customers in the future.
ShippingPass items are delivered to customers’ doors in two days or less. There are also no minimum requirements to use ShippingPass, and free returns are supported, as well.
Walmart has not yet disclosed any details about ShippingPass, like number of sign-ups, sales to date or its margins and impact to Walmart.com’s revenue or bottom line.
ShippingPass isn’t broadly available at this time, but interested customers can sign up here to join a waitlist for the pilot program.