Will Free Shipping Give WalMart an eCommerce Edge?

WalMart last week dropped its ShippingPass subscription service in favor of a more open free-shipping policy. The move is part of the brick-and-mortar giant’s response to Amazon’s eCommerce edge.

WalMart launched ShippingPass in 2015 to compete with Amazon Prime. For $50 a year, customers got free three-day shipping on all purchases. WalMart reduced that to two-day shipping in 2016.

ShippingPass didn’t gain traction. Yes, Amazon Prime charges customers more ($90 a year). But they can buy more products than WalMart offers online. They can also stream original television programs and other media.

The Policy Shift

WalMart replaced ShippingPass with a non-subscription based free shipping policy. The new option gives customers free two-day shipping on purchases of $35 or more.

“In today’s world of eCommerce, two-day free shipping is table stakes,” WalMart eCommerce lead Marc Lore said in a statement. “It no longer makes sense to charge for it. Two-day free shipping is the first of many moves we will be making to enhance the customer experience and accelerate growth.”

Positioning for eCommerce Edge

WalMart’s free shipping program seems geared to a specific market segment.

Its website says free shipping applies to the two million products “customers shop for the most, including household essentials such as baby necessities, pet products, food, like cereal and peanut butter, cleaning supplies and beauty favorites, as well as top electronics and toys.”

Business Insider writes that by dropping the subscription, WalMart hopes to undercut Amazon by attracting would-be Prime members who don’t want to pay an annual fee.

It’s a tall order, perhaps, considering Amazon captured 33% of all online holiday retail sales. Amazon also has 70 fulfillment centers across the US (with more on the way). WalMart will be relying on its five fulfillment campuses to execute the two-day promise, according to MarketWatch.

By one measure, WalMart’s efforts appear to be working. According to Business Insider analysis, by the third quarter of 2016, WalMart equaled Amazon in online sales growth.

It will take time to see how free shipping will shift WalMart’s fortunes.

But it appears that in order to compete in the omnichannel world, companies must provide flexible fulfillment options that appeal to their particular customer base.

Read how inventory management is key to competing in the omnichannel world.