Walmart taking on Amazon
Walmart Stores Inc. (NYSE:WMT)
Today, May 13th 2015 Walmart Stores Inc.(NYSE: WMT) announced that they will be taking on Amazon.com (Nasdaq: AMZN) in an unlimited shipping plan, one-low price per year for unlimited shipping. Walmart’s new challenge is directed at the largest online shipping company in America currently- Amazon.com.
In usual fashion, Walmart will be severely undercutting their competitor- 50% lower or $50 per year compared to Amazon’s current plan Amazon Prime-valued at $99 per year. Products are estimated to arrive in no more than 3 days and possibly less.
However, in its beginning stages Walmart’s offerings of merchandise will be severely restricted to just about 1 million of their top selling items ranging from electronics, to boys and girls toys and various household items and gadgets.It won’t include perks like video and music streaming, as opposed to the Instant Video and music service that comes along with a Prime subscription. Currently walmart sells more than 7 million products through their online division so one can see that this is just a small trial run before Walmart makes a final decision if they will pursue it in a much larger scale. And in the beginning at just anyone can be a part of this new program as it is by invitation only. For more details and references look here.
WHY WHY WHY ?
One reason for Walmart’s ramp up in online exposure maybe somewhat loosely tied to the their recent hike in employee wages for about 500,000 of its 1.3 million employees – boosting their hourly rate to $9 an hour this year and up to $10 per hour for next year. By having more exposure online perhaps Walmart will be able to operate their stores overall with less employees going forward.
Another possible reason is there own recognition during their February conference call after reporting earnings- acknowledging that they have to address their need for improvement in the e-commerce division. “We recognize the significant opportunity we have to grow this area of our business, as customers continue to reshape their shopping behaviors,” said Greg Foran, president and CEO of Walmart U.S.
One thing is for sure, most analysts don’t expect Amazon to just sit back and wait to see how successful or not Walmart does. We can expect Amazon to ramp up its own program and possibly slashing its annual fee to meet Walmart to put a monkey wrench into Walmart’s new plan.