Walmart Inc.’s online subscription service, Walmart+, is growing — and narrowing the gap with Amazon.com Inc. in a key demographic: affluent shoppers.
Walmart+ launched in 2020 as the grocery chain’s answer to Amazon Prime. Today, it resonates with higher-income households eager to fend off inflation. At $98 a year, Walmart+ costs $41 less than Prime and offers many of the same perks, including shipping discounts and video streaming. Walmart’s subscription service also has benefits Amazon can’t match, like discounted fuel at gas stations around the US.
Amazon is No. 1 and Walmart is No. 2 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. Amazon ranks No. 3, and Walmart ranks No. 9 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.
Walmart+ is growing quickly
In February, 28% of U.S. households with annual income of at least $150,000 were members of Walmart+, up from 13% a year earlier, according to Prosper Insights & Analytics. Amazon Prime still has a commanding lead with 77% of those households, up 7 percentage points from the previous year.
Walmart’s inroads with this cohort mirror what’s been happening in its stores. The company is gradually shedding its reputation as a destination for lower- and middle-income shoppers. Attracting and hanging onto wealthier customers is now a key priority for the company, and executives see ecommerce as a big selling point.
Walmart+ benefits from the same “flywheel” effect Amazon experienced when it launched Prime in 2005. As Walmart attracts more shoppers, it lures more brands, which in turn bring in even more shoppers.
Walmart’s stores are an advantage
Besides borrowing Amazon’s online playbook, Walmart is capitalizing on a vast network of stores. 90% of Americans live within 10 miles of a Walmart location. Shoppers can pick up online orders from their closest Walmart. America’s largest grocer also has a decided advantage in fresh food, a market Amazon has been trying to crack for years. Walmart+ offers members free delivery on orders of at least $35. Amazon last month raised its free grocery delivery threshold to orders of at least $150.
“Walmart is eating into Amazon’s ecommerce market share and legitimately becoming a competitor,” said Alasdair McLean-Foreman, founder and CEO of Teikametrics, a Boston-based software firm that helps merchants buy advertising on Amazon, Walmart and other platforms. “People are seeing Walmart as a viable marketplace, and that wasn’t the case in 2019 or 2020.”
Amazon is the clear winner for now
To be clear, Amazon remains the undisputed king of online commerce in its home market. U.S. shoppers will spend $431 billion on Amazon this year, almost six times the $74 billion they’ll spend on Walmart, according to Insider Intelligence. Walmart is expected to have 6.3% of the U.S. online market this year, a fraction of Amazon’s estimated 37.6% share.
Still, Walmart is gradually gaining on Amazon. In 2020, the company surpassed EBay Inc. as the second-largest ecommerce player in the U.S. And there are signs that the Bentonville, Arkansas-based retailer will continue to gain momentum. Walmart+ members skew younger than Amazon Prime members, a promising trend for Walmart if it can hang on to them. About 65% of Walmart+ members are between 18 and 44 years old, compared with 51% for Amazon Prime, according to Prosper.
Walmart+ has plenty of room to grow. About 11 million U.S. shoppers are “very likely” to subscribe to the service, adding to the approximately 18.5 million existing members, according to a February survey conducted by Morgan Stanley. Meanwhile, Amazon Prime had 168 million members in the U.S. as of December, unchanged from a year earlier, according to Consumer Intelligence Research Partners.
Amazon spokesman Bradley Mattinger disputed that the subscription service has stopped growing.
“Prime membership continues to grow — in the U.S. and worldwide — as the value members receive continues to increase,” he said.
Online advertising is an opportunity for Walmart
Walmart’s online advertising business is a fraction the size of Amazon’s. But here, too, Walmart has an advantage because it can provide brands with data on how shoppers spend not just online but also in stores, said Sreenath Reddy, the founder and CEO of Intentwise, which helps clients place ads on web marketplaces. Walmart.com is also less crowded than Amazon.com, with about 135,000 merchants compared with some 2 million on Amazon. That makes it easier for brands to stand out on Walmart, he said.
“I think Walmart+ is about more than just handing savings to people,” Reddy said. “It’s connecting the online and offline world in a way that wasn’t possible before.”
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