Wal-Mart should go all-in on free two-day shipping

Wal-Mart Stores Inc.’s newly-anointed e-commerce czar is absolutely right: Offering two-day shipping is mere table stakes. So why hasn’t the retailer upped the ante?
Walmart smartly dropped its Amazon copycat membership program on Tuesday and said all customers would now get free, two-day shipping, which was the main feature of the failed $49-a-year ShippingPass program.
The only catch is that, unlike with Amazon’s Prime membership, Walmart customers still have to meet a $35 threshold to qualify for two-day shipping. That is short-sighted.
Walmart is basically going back to the policy in place before it tried unsuccessfully to copy Amazon’s $99-a-year Prime membership program. Sure, the $35 order minimum is down from the previous $50 hurdle, and Walmart says most of its current e-commerce orders are currently above $35. And non-Prime Amazon shoppers have to hit a $49 order minimum. But all this misses the point.
Amazon has hooked more than 65 million Prime members by eliminating the need to even think about a shopping list, let alone order minimums. The promise of fast and free shipping means shoppers order goods the very second they run out of toilet paper or coffee filters. They don’t put much thought into it, and they certainly don’t wait until they need $35 worth of goods.
Even non-Prime Amazon shoppers now tend to get stuff delivered within two days; the
majority of Amazon’s customers are Prime members, so warehouses and vendors
are increasingly set up to cater to their
expectations.
If the selling point for Walmart’s two-day shipping promise is that shoppers don’t need to pay an Amazon membership fee to get fast shipping, then Walmart should go all the way and really equalize the offering.
Already, Americans are shopping at Amazon more frequently than at Walmart.
And that will only accelerate as Amazon’s Prime Now offering expands, making it
possible to get stuff within an hour or two of ordering.
Prime Now already reaches 18 percent of the US population and is available in areas overlapping with 12 percent of Walmart’s 4,600 U.S. stores, according to research from Alliance Bernstein.
Meanwhile, Amazon’s customer relationships keep getting stickier, as Prime membership goes beyond free shipping and expands to video, Kindle Library, and the Echo.
Walmart said getting rid of Shipping Pass was “just the beginning” and that it hopes to grow its e-commerce business more quickly. If so, it shouldn’t let a measly $35 shipping minimum hold up progress.
An order threshold might help maintain Walmart’s profit margins, but it hurts customer perception. If shoppers have to stop and think about a minimum order amount when shopping at Walmart, then they might skip the sale completely — or just jump to Amazon instead.
If Walmart is truly going to take on Amazon, then it has to be willing to take a hit on profits in the short term and start playing the long game. — Bloomberg