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Is Amazon Prime Better than Walmart’s ShippingPass?

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Jul. 12 2016, Updated 12:06 p.m. ET

Fight to gain subscribers heats up

Walmart (WMT) introduced its ShippingPass subscription in 2015. More recently, the company reduced its shipping time by one day with a $1 saving for consumers in the annual fee. Walmart now offers a free two-day shipping—faster than the previous three-day shipping offer—with no minimum order requirement for an annual fee of $49.

Should this worry Amazon (AMZN), which runs the more popular Amazon Prime membership program? At first glance, yes. This is a crucial move by the retail giant, as shipping costs, or the lack thereof, is one of the primary reasons behind making the purchase decision. Out of all the perks offered by a membership program, free shipping remains the most important factor to drive subscribers’ growth.

Walmart has been grappling with decelerating e-commerce sales growth, as can be seen in the chart above. So, this move can help the company to win loyal customers.

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ShippingPass no match for Amazon Prime

Although ShippingPass could siphon some members away from Amazon, Walmart has some catching up to do as Amazon’s Prime comprises more than just free shipping.

Amazon Prime, which costs $99 per year, offers free two-day, same-day, and one-hour shipping along with video streaming services, music, and the ability to borrow books from the Kindle owners’ lending library. These offerings differentiate Amazon from other membership programs and are the primary reasons why Amazon has seen robust growth in its Prime memberships.

Prime gives Amazon a competitive edge over retailers like Walmart, eBay (EBAY), Target (TGT), and Macy’s (M). Amazon Prime keeps its members within the fold by offering exclusive deals, videos, and music, as well as fast and free shipping.

The only advantage Walmart has over Amazon Prime is its cheaper membership fee. However, given the vast offerings of Amazon Prime, many consumers can justify the additional $50 per year.

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