The Great Subscription Race: How Walmart+ Stacks Up Against Amazon Prime
Ever since mid-September when Walmart launched Walmart+, its new subscription service — often referred to as “Walmart’s answer to Amazon Prime” — the question has been how the product actually stacks up against Prime. Were consumers really looking for a way to subscribe to a fuller set of offerings from Walmart, like discounts on gasoline and in-store self-checkout via mobile device?
Those looking for answers, or perhaps for Walmart to announce fuller functionalities in its quarterly earnings call on Tuesday (Nov. 17) were doubtless a little disappointed.
It wasn’t that Walmart had nothing to say about Walmart+ or how consumers are responding to the offering so far. It’s just that management didn’t have much in the way of hard figures or any big announcements about new additions to the platform.
What was on offer from CEO Doug McMillon during the call with analysts was an assurance that Walmart got what it was looking for in terms of offering a positive customer retention strategy.
“I do think Walmart+ can be helpful in a lot of ways over time,” McMillon said. “The information will help our ability to personalize for customers, and I think we’ll be able to serve them better. And both sides — both the stores and eCommerce — will come to life in a way that helps make Walmart+ even stronger. In particular, the ability to leverage costs to pick efficiently, obviously getting things into one box as much as possible, getting shipping efficiencies, all those kinds of things are going to generate a sustainable business as well as [boost] eCommerce as a channel over time.”
Walmart+ Is Winning Subscribers, But Still Badly Trails Amazon Prime
And while McMillon didn’t cite hard figures, PYMNTS has released some in recent weeks based on independent consumer surveys. Thus far, it does seem Walmart+ is signing on members out of the gate.
However, conceptualizing it as a competitor to Amazon Prime might be something of a misnomer. So far, Walmart+ doesn’t seem to be much of an “either/or” over Amazon Prime for consumers so much as it seems to be a “both/and.”
According to PYMNTS’ most recent data on the subject, roughly 17 percent of U.S. consumer have signed on to Walmart+ since its September launch, vs. the 68 percent of the U.S. population that have signed on with Prime since its February 2005 launch.
But among that 17 percent, almost no one is choosing Walmart+ as an alternative to Amazon Prime. Some 15 percentage points of that 17 percent of the population are also Prime subscribers. That leaves only 2 percent of Americans who have Walmart+ but not Amazon Prime.
Moreover, demographics seem to make something of a difference in subscription enthusiasm, particularly among the highly coveted “bridge millennial” demographic. There are currently 47 million such U.S. shoppers, making them the first generation of connected consumers with real spending power. They’ll set the pace of U.S. payments and commerce for the next several decades.
That consumer group is already incredibly enamored with Amazon Prime, which has an incredible lead with both bridge millennials and the millennial category of shoppers as a whole.
According to PYMNTS data, 159 percent more bridge millennials and 182 percent more millennials in general subscribe at Amazon Prime than Walmart+. But it’s notable that in a little over a month, Walmart has already captured three in 10 millennial shoppers — and has its eye on attracting a lot more.
Also highly coveted — and clearly within Walmart+’s sights — are affluent shoppers, although they overwhelmingly prefer Prime at this point. PYMNTS’ study found that 82 percent of consumers earning more than $100,000 subscribe with Amazon Prime, while only 22 percent subscribe to Walmart+.
But again, Amazon is 15 years into offering and perfecting Prime. Walmart+ is less than three months old, but is already approaching 25 percent penetration of that segment.
As Karen Webster noted in a recent commentary on the Plus/Prime face-off: “That makes both groups — the higher-income consumers and the bridge millennials — the ones to watch as Amazon and Walmart go head to head in their efforts to capture and keep an increasing share of their paychecks across the major drivers of consumer and retail spend.”
The Subscription Challenge Going Forward
When put up next to each other, Amazon Prime seems like the more robust of the two programs. After all, it offers free one-day shipping, grocery delivery, Prime Video, Prime Music and as of Tuesday (Nov. 17), Prime Pharmacy services.
By comparison, Walmart+ is a much skinnier offer, albeit with more goodies promised to come at an unspecified future date. Walmart, by Webster’s description, is betting that its rather slimmer offering will be enough to move consumers to pay $98 a year for a subscription.
But that’s a pretty big bet in many regards — and one that’s unsure to pay off in the long run despite a strong start for Walmart+ so far. There’s a lot to do to build a bundle that really appeals to both affluent consumers and bridge millennials, and there’s no guarantee Walmart can do so.
“More than twice as many consumers who have both Prime and Walmart+ report that they live paycheck to paycheck and have trouble paying their bills each month than those who say they live paycheck to paycheck but comfortably pay their bills each month,” Webster noted. “For consumers who only subscribe to Walmart+, 85 percent more consumers report that they live paycheck to paycheck and struggle compared to those who say they can pay their bills comfortably. Twenty-five percent fewer Amazon Prime-only customers report the same.”
Target Has Already Thrown In The Towel
That’s a big challenge that has notably scared away at least one other big player of late. Earlier this month, Target said goodbye to its version of a subscription program first launched seven years ago.
That program offering consumers automatically reordering items in bulk a 5 percent discount, with the goods shipped directly to their door. But Target said it had seen customers moving away from the service. So, the chain is instead looking to focus on other delivery and pick-up options that are more popular.
“The majority of our subscription guests have shifted away from regular deliveries to enjoy the speed and flexibility of our same-day services,” Target spokeswoman Jacqueline DeBuse told Bloomberg.
Target declined to say how much revenue its subscription service was bringing in. But perhaps the retailer saw that with everyone crowding into subscription services, now might just be the time to get out of the game.
The bottom line: It seems that launching a subscription service is the easy part. However, making it sticky enough to keep customers paying over the long term turns out to be quite a bit harder.