Retail

Walmart ditches online shipping minimum for Walmart+ to better compete with Amazon Prime

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Key Points
  • Walmart is dropping its $35 online shipping minimum for Walmart+ members.
  • The move could persuade more customers to sign up for the service and help Walmart+ compete with Amazon Prime.
  • Online shopping has gained importance amid the global pandemic and during the busy holiday shopping season.
  • "Customers have been clear — they want this benefit," Walmart Chief Customer Officer Janey Whiteside said.
A Walmart package is unloaded from a trailer to be sorted at a FedEx ground hub in Hagerstown, Maryland.
Andrew Harrer | Bloomberg | Getty Images

Walmart said it will drop its online shipping minimum for customers who belong to its membership program, Walmart+.

Starting Friday, Walmart+ members will get free next-day and two-day shipping — even if they have just one item from the company's website in their basket. Walmart typically requires customers to spend $35 or more to get free shipping.

"Customers have been clear — they want this benefit," Walmart Chief Customer Officer Janey Whiteside said in a news release. "Being able to toss an item into your cart, regardless the total, and check out right away lets them knock little things off their to-do list in no time."

The big-box giant is eliminating the minimum as it tries to persuade more customers to sign up for Walmart+ and aims to better compete with rival membership program, Amazon Prime. Walmart+ and Amazon Prime have different prices and perks. One of Amazon's popular features is its free and fast deliveries, even for items as cheap as a toothbrush or a lightbulb.

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Walmart's announcement comes as online shopping has gained importance amid the global pandemic and during the busy holiday shopping season. Many consumers are buying gifts, decorations, baking ingredients and more on websites to limit trips to the store.

Walmart has tried to best Amazon on price and speed, too. It has used its footprint of more than 4,700 stores to help expedite the fulfillment of orders. More than 90% of Americans live within 10 miles of one of the company's stores.

Walmart+ launched in September, but the retailer hasn't shared how many customers have joined. On an earnings conference call in November, Walmart executives repeatedly dodged questions from analysts about the number of sign-ups. When asked by CNBC, the company declined to comment.

In a mid-November research note, BMO Capital Markets estimated that as many as 19 million households may have signed up for Walmart+. The projection is based on a survey of about 1,000 U.S. shoppers that found 16% had already joined.

Amazon Prime had approximately 126 million U.S. subscribers as of October, according to an estimate from Consumer Intelligence Research Partners. The company said in late January that it had more than 150 million paid Prime members across the globe — before the pandemic-related e-commerce surge.

Walmart previously said it planned to keep adding perks to Walmart+ to make it more appealing. During the November earnings call, CEO Doug McMillon said the service is a way to deepen customer loyalty and build upon its e-commerce growth during the pandemic. U.S. e-commerce sales soared by 79% in Walmart's third quarter ended Oct. 31.

Online sales growth has slowed as the pandemic has stretched on, prompting some investors to express skepticism that stay-at-home trends, such as the boom in online grocery shopping, will continue at the same levels after distribution of the Covid-19 vaccine. That has inspired retailers, including Walmart, to look for other sales drivers.

Walmart+ costs $98 a year or $12.95 a month compared with Amazon Prime, which costs $119 a year or $12.99 a month. It includes discounts of as much as 5 cents per gallon on fuel and access to a Scan & Go app that allows shoppers to skip the checkout line. Customers can also get free unlimited grocery deliveries to their home for orders of $35 or more.

Along with Amazon's quick and fee-free deliveries, its members get access to a large library of movie and TV content — including hit originals like "The Marvelous Mrs. Maisel." Prime members can also get free grocery delivery for orders of $35 or more and get discounts at Amazon-owned Whole Foods.

—CNBC's Annie Palmer contributed to this story.

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