Dive Brief:

• Walmart unveiled its new membership program, Walmart+, that ties together unlimited free delivery from stores and other benefits.
• The service costs $98 a year, or $12.95 a month, with a free trial period, according to a press release. The company said it would "continue to have delivery options with a per-delivery transaction fee so customers can choose the service that's best for them."
• Along with unlimited delivery, the service includes fuel discounts and a Scan & Go checkout option for in-store shoppers. The membership becomes available to all shoppers starting Sept. 15, Walmart said.

Dive Insight:

The comparisons between Walmart+, in the works for months now, and Amazon's Prime membership service are obvious. They both trade upfront fees for costless delivery per order, potentially making customers stickier to the retailer through the subscription. 

Historically, Walmart has highlighted its lack of a subscription fee in its marketing. It was a potential competitive advantage over Amazon that consumers could receive free shipping on orders over $35.

But Prime makes Amazon a formidable force. "Prime membership continues to get better for customers year after year. And customers are responding — more people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world," Amazon CEO Jeff Bezos said following fourth quarter 2019. "We've made Prime delivery faster — the number of items delivered to U.S. customers with Prime's free one-day and same-day delivery more than quadrupled this quarter compared to last year."

Walmart has a long way to go if it truly aims to build a direct competitor to Prime. Part of the latter's value to customers is access to video and music content, along with other assorted perks and services. For a single fee, Prime customers get both an e-commerce and media service. Last year, Amazon also added grocery delivery to the Prime perks.

"Walmart's Walmart+ program will help retain new customers that it has gained as a result of COVID-19, as well as deepen relationships with long-standing customers, and as such is a positive for the company," Moody's vice president and senior credit officer Charlie O'Shea said in emailed comments. "It should not be considered a direct 'competitor' to Amazon Prime due to its focus on shopping and shipping/delivery benefits versus Prime's significant content offerings, which we continue to believe are a significant portion of the value proposition for Prime as fast or discounted delivery is becoming increasingly commoditized as it is easily replicable, and our view was validated in Q2 as Amazon called out streaming volumes of 2x 2019 levels."

For its part, Walmart touts its store base in its Walmart+ membership. "Along with the power of its online presence, Walmart+ has the reach of more than 4,700 stores, including 2,700 stores that offer delivery as fast as same day," the company said. 

In recent periods, grocery has been a major source of the retailer's digital growth. That is good news for Walmart in terms of competing with Amazon, though it has also meant in the past that low-margin items make up a large portion of its online sales, something executives have acknowledged. In the second quarter of this year, during which digital sales basically doubled, Walmart made important headway in expanding its category mix online and expanding profits from its e-commerce business.