Wal-Mart to Challenge Amazon Prime With $50 Shipping Service

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Amazon Fulfillment Center
An employee stacks items to be shipped at the Amazon.com Inc. fulfillment center in Phoenix. Photographer: David Paul Morris/Bloomberg

Wal-Mart Stores Inc. will offer a $50-a-year unlimited free-shipping service for online customers starting this summer, seeking to challenge the $99 Prime service offered by retail rival Amazon.com Inc.

The service will be available by invitation only in select markets, said Ravi Jariwala, a spokesman for Bentonville, Arkansas-based Wal-Mart. More than 1 million items -- including apparel, sporting goods, electronics and toys -- will be available for delivery in three days or less, Jariwala said.

Jariwala declined to say what markets will be included in the initial test of the service, how long it will last or how many people will be invited.

The move ratchets up competition in e-commerce, where Wal-Mart has been trying to make inroads. While the company is the world’s largest retail chain, Amazon dominates online shopping. Prime has emerged as a key weapon for Seattle-based Amazon because it keeps customers loyal, making it ripe for imitation.

In the U.S., customers pay $99 a year for Amazon Prime membership, which includes delivery discounts and online streaming of movies, television shows and music. Prime membership grew by more than 50 percent in 2014 from a base of “tens of millions,” according to Amazon. Prime members also spend more than occasional shoppers.

Same-Day Shipping

For that reason, Amazon is trying to boost Prime membership with new perks. In December, it introduced same-day delivery for Prime members in Manhattan and has since expanded the service to additional cities, including Dallas and Miami.

Macquarie Research analyst Ben Schachter estimated last month that Amazon has at least 35 million Prime members and that approximately 50 percent of U.S. households will have a membership by 2020.

Wal-Mart, meanwhile, is trying to pull out of a broader slump and improve customer service.

The company cut its sales forecast in February, and higher spending on wages and other investments have raised concerns for investors. Wal-Mart shares declined 1 percent to $78.16 at the close in New York on Wednesday. They have dropped 9 percent so far this year.

The company’s website, Walmart.com, has an average of 60 million unique visits a month and offers about 8 million varieties of product. The site also is integrated with its physical stores through services like “Walmart Pickup,” which lets customers place orders online and then pick them up at a store for free. A related service, “Pickup Today,” allows shoppers to retrieve an online order within four hours from a store that already has the desired product in inventory.

Pay Raise

Wal-Mart, the largest private employer in the U.S., hiked the wages of about 500,000 of its 1.3 million employees in April, part of a plan to reduce turnover and improve service. Hourly rates rose to $9 an hour, with a boost to $10 planned for next year.

Jet, which is planning to introduce a sort of online Costco later this spring with 10 million discounted products, also charges a $50 membership fee and adds to the competition.

Plans for Wal-Mart’s shipping-service were reported earlier by technology-news website the Information.

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