Walmart (NYSE:WMT) is working on a new membership program called “Walmart+,” which will compete with Amazon (NASDAQ:AMZN) Prime, according to a report from Recode. Walmart+ could start rolling out as early as next month.
Amazon’s rapid rise in the retail business has come at the expense of traditional retailers like Walmart and Target (NYSE:TGT). Now, traditional retailers are trying to fight back. Walmart and Target have worked with Google (NASDAQ:GOOGL) to help grow their online sales through the Google Express program. Currently, Amazon dominates the online retail market. In the US, Amazon accounts for nearly 40% of all online retail sales, according to eMarketer estimates. Walmart lags behind with roughly a 5.0% share of the online retail market in the US.
In Walmart’s bid to counter Amazon, it acquired Indian e-commerce provider Flipkart for $16 billion in 2018. Flipkart was the company’s biggest acquisition ever. Walmart purchased Flipkart after Amazon bought Whole Foods. With the Whole Foods acquisition, Amazon launched a major attack on one of Walmart’s most important businesses—selling groceries.
Walmart wants to build a powerful Amazon Prime competitor
Walmart+ aims to attack one of Amazon’s most successful ventures. The Prime membership program has contributed significantly to Amazon’s success in the retail business. As a result, competitors like Walmart want to challenge the company.
There are more than 150 million Prime members. The members pay a yearly or monthly fee for a range of benefits like free delivery on Amazon orders. The other benefits include free access to video and audio entertainment as well as cloud storage. Amazon generated $19.2 billion in subscription services revenue in 2019—mainly from Prime membership fee collections.
Prime members are very loyal. Notably, they’re Amazon’s most valuable retail customers. On average, they spend $1,400 per year on Amazon purchases, according to estimates from Consumer Intelligence Research Partners. The spending is significantly more than a regular Amazon shopper’s average spending of $600 per year.
Walmart aims to make Walmart+ more attractive to shoppers in order to challenge Amazon in the retail space. The Recode report stated that Walmart+ will offer member benefits that Amazon can’t match. For example, there might be an option for Walmart+ members to place orders through text messaging.
However, Amazon continues to develop its Prime program. The company might invest in Dish Network’s (NASDAQ:DISH) wireless business. Overall, the company could leverage the relationship with Dish to extend wireless benefits to Prime members and boost the program’s appeal.