The Issue

Compared to July 2019's net profit of USD 2.6 billion, Amazonreportedin July 2020 that it had doubled its net profit year over year to a staggering USD 5.2 billion. That number doesn't include the over USD 4 billion that the company spent on COVID-related costs to keep employees and customers safe. As more people turn toonline shoppingfor groceries and other goods amid the COVID-19 pandemic, it can often feel like there isn't a competitor in sight for the world's biggest retailera contentious topic recently covered in acongressional antitrust hearinginvolving powerhouse tech companies, including Amazon, and their apparent dominance in their markets.

On September 1, however, Walmart announced it would be throwing its hat in the ring by debuting Walmart+, their version of Amazon's popular Prime service. The membership program costs USD 98 per year compared to Prime's USD 119 fee. Both services have a UDS 35 minimum order for same-day delivery.

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Can Walmart+ Compete With Amazon Prime?

Sage

Kelsey Lawrence 2020

Sage Business Cases

Another key difference: Walmart's service will not include streaming entertainment, but it will offer a 5-cent- per-gallon fuel discount with its gas station affiliates. Also, while Walmart's service will offer a total of 160,000 items that would qualify for same-day delivery, Amazon has 3 million products in comparison.

Why Is It News?

The release of Walmart+ had been delayed multiple times due to COVID-19, with an original launch date of late March/April 2020. While the pandemic caused the delay, the resulting panic-buying of groceries and household goodsboosted Walmart salesto record highs. The release of the Amazon Prime alternative has been eagerly anticipated, but some analysts are saying that the new service isn't as exciting as it seems. "For a $35 minimum and $98 annual fee, this is a thin gruel," Craig Johnson, president of Customer Growth PartnerstoldThe New York Times.

But Walmart's chief customer officer Janey Whiteside says that most grocery delivery services require mini- mum orders and that shoppers' orders usually exceed the USD 35 minimum. On September 9, it was reported that the retailer wastesting drone deliveryof grocery and household items from its Fayetteville, NC stores. The news comes weeks after Amazon was granted approval from the Federal Aviation Administration to op- erate drone deliveriesone of only a handful of companies allowed to do so by the U.S. government.

In the battle between Amazon's online dominance and Walmart's traditional retail, there's also the issue of labor. Throughout the early months of the pandemic, Amazon's poor labor practices made headlines. Un- precedented employee protests, internal controversies over the firing of a warehouse worker, lawsuits from workers, and public petitions brought the company under fire for not doing enough to keep its employees safe. In April,The Interceptreportedthat a coalition of workers from both companies, as well as Target, Whole Foods, FedEx, and Instacart, went on strike to protest working conditions. What's unknown is whether Wal- martwhich has also come under fire forlabor practiceswill have a strategy for employee safety and sus- tainability that will be any different than its rival's.

There doesn't appear to be anything substantial that sets Walmart+ apart from its competitor, but as their recent ad campaignsuggests, the company perhaps isn't trying to highlight that. Its first ad about the mem- bership service focuses on the time families can save by using it, instead of trying to sell its features.

Page 5 of 6

Can Walmart+ Compete With Amazon Prime?

Sage

Kelsey Lawrence 2020

Sage Business Cases

Discussion Questions

Do you think Walmart+ can help the company gain a competitive edge on Amazon Prime?

Putting aside whether the service can compete with Amazon Prime, is enhancing its online retail ser-

vice a good strategy overall for Walmart?

Considering the scrutiny on the labor practices Amazon puts to use in order for its Prime service to

function at maximum capacity, do you think Walmart should have a plan for employee safety and sus- tainability for its Walmart+ fleet?

https://doi.org/10.4135/9781529760149