Wal-Mart Stores Inc is scrapping its ShippingPass program, which was designed to compete with Amazon.com Inc.’s Prime, opting instead for a two-day shipping model that does not have annual membership fees.
The new service was to be available as of 8am New York time on Tuesday, Wal-Mart said in a statement.
The company plans to refund the US$49 annual fee for all active memberships in its ShippingPass program, Wal-Mart online operations chief executive Marc Lore said.
The retailer declined to say how many people would get the refund.
‘TABLE STAKES’
“In today’s world of e-commerce, two-day free shipping is table stakes,” Lore said in a conference call. “It no longer makes sense to charge for it.”
Lore, the former CEO of Wal-Mart’s Jet.com unit, said the new service would focus on essential, everyday items, such as home goods, pet products and electronics.
ShippingPass rolled out a two-day delivery service in May last year — down from three days — and had required a US$50 minimum order. That threshold is to be cut to US$35 under the new service — the same amount Jet requires for free two-day shipping.
Lore called it a “pretty darn compelling” value proposition.
CATCHING UP TO AMAZON
Wal-Mart, based in Bentonville, Arkansas, aims to encourage more frequent shopping and lock in customers, something that Amazon’s Prime has achieved with its tens of millions of subscribers.
Prime carries an annual US$99 fee, although that service includes perks like free movies and TV shows.
Since Wal-Mart completed its US$3.3 billion acquisition of Jet in September last year, the retail giant has made a big online push to catch up to Amazon.
The integration has so far largely taken place at the managerial level, eliminating staff from Wal-Mart’s online team and elevating Jet executives to take on a more prominent role in the division.
ORDER FULFILLMENT
Today, the companies are to start integrating their warehouse networks nationwide, Lore said.
Wal-Mart operates more than 4,600 stores in the US, which are also used to fulfill some online orders. Most of those orders are to ship out of its five fulfillment centers, which average about 92,903m2 in size.
The company plans to build another center in Florida later this year.
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