THE CLARUS Blog

What Do Loyalty Experts Think of the Launch of Walmart+? [Interview]

Walmart is preparing to launch Walmart+, a premium loyalty program, and its answer to Amazon Prime.

Walmart+ will be like Prime in that it’s a premium loyalty program that consumers can sign up for in exchange for valuable benefits, but there are some differences.

And while Amazon has a leg up in the sheer number of products available for fast, free shipping, Walmart+ will have some advantages of its own.

It will include same-day delivery of groceries, fuel discounts at 2000 locations, and access to Scan & Go (which allows customers contactless checkouts with their phones so they can skip lines). Plus, its annual fee will be $98 ($21 less than Prime).

Will these two programs co-exist harmoniously?

What does this mean for other retailers?

Will it spark more interest in premium loyalty programs?

How will it impact retail and customer loyalty going forward?

We talked to various loyalty experts to find out and here’s what they had to say:

 

Jim Tierney, Clarus Commerce: Do you think there is room for the Walmart+ program and Amazon Prime?

Mark Johnson, CEO & CMO, Loyalty360: At a slightly lower price point than Amazon Prime and some additional benefits, Walmart+ could be a unique offering to consumers.

If its fuel discounts, delivery (or same day pickup) and savings on groceries and other household items — or a flexible offering between in-store and online shopping, — there may be a lot of appeal in the program. Amazon, of course, has set the standard in several respects, when it comes to convenience, product suggestions, and more – but more brands are looking to have their own “Amazon effect” on customers to remain competitive.

Jenn McMillen, Founder and Chief Accelerant, Incendio: There is definitely room for both.

Walmart will target the budget shopper, so it’s no surprise that they’re coming in $21 (so under $100) below Amazon Prime.

With Amazon killing it on the logistics front, my guess is that the play for Walmart+ will be grocery since the precursor to Walmart+ is the grocery-focused Delivery Unlimited and ShippingPass before that.

Walmart is the largest grocer in the U.S., so it makes sense that they’d concentrate their efforts there. Amazon doesn’t have enough critical mass with Whole Foods, derisively called Whole Paycheck for good reasons, to do grocery pickup well.

Plus, they’ve really amped up their curbside pickup program and online grocery biz, as many have. Amazon seems to want to play in the soft goods spaces–media streaming, health tracking–whereas Walmart will likely do better in the hard goods spaces–grocery, household products, etc.

Adam Toporek, President, CTS Service Solutions: For Walmart+ to succeed, Walmart has to create a value proposition strong enough to entice their existing customer base to take on another subscription fee.

Walmart will have to create room in the marketplace by convincing customers with less discretionary spending to add a monthly charge and by enticing their most valuable customers, many of whom are already Prime members, to adopt Walmart+ in addition to Prime.

Mass defection from Prime is unlikely in the short term. Walmart+ will have to overcome established purchasing habits, app fatigue, and a serious technology gap to gain significant market penetration.

It can be done, but it will take consistently enhancing the value of the Walmart+ offering over time, just like Prime.

Robbie Kellman Baxter, a customer loyalty expert who created the popular business term, “Membership Economy.”:

Of course.

Walmart+ offers different benefits and a different product assortment, and while their audience overlaps with Amazon, it’s not the same audience.

In other words, the value proposition is differentiated and the target audience is too. Just because they’re both retailers doesn’t mean there isn’t room for consumer choice.

Jill Noblett, Principal, Noblett Consulting: Yes, absolutely.

I think it’s very possible that people will choose to be members of both–especially while we are dealing with the pandemic and online shopping continues to be essential for many.

Walmart+ benefits have the potential to appeal to a different audience as well–those who prioritize gas discounts, groceries, and in-store conveniences over Prime’s entertainment streaming, for example.

Jeannie Walters, CEO, Experience Investigators: Absolutely.

Amazon Prime has evolved into a robust platform going beyond just shipping. Amazon’s service is more expensive, but includes Prime Video on-demand content, plus no minimum order for delivery.

Customers have been avoiding physical stores during the pandemic, so Walmart is responding to specific needs for customers who want the convenience of shipping directly to them.

 

Jim Tierney: What do you think the launch of Walmart+ means for other retailers, in general, and for the upcoming holiday season?

Mark Johnson: This year will be a unique holiday shopping season for a few reasons, but expect to see a new precedent in ecommerce at the end of 2020.

With more customers shopping online to beat crowds, many will now already be familiar with options that allow for in-store pickup, drive-through, or curbside pickup. Also, when it comes to the holidays, customers are in search of deals, last-minute items, and free shipping – which Amazon has set the standard for in many ways.

With Amazon pushing back Prime Day, it will be interesting to see the impacts on other retailers this year. 2019 was a record-breaking holiday season for Amazon, with billions of items purchased. However, with more brands, including Walmart, launching a more robust digital presence and enhance benefits for customers or members, it will be interesting to see if customers embrace other options this year instead of relying on Amazon so heavily.

Jenn McMillen: With Walmart launching Walmart+ on Sept. 15, they’ve got a short window to work out the kinks before the holiday season really hits.

Other retailers are likely giving Walmart+ the side eye since Walmart is undeniably the elephant in the room with so many physical locations, unlike Amazon.

But Americans love to see and touch, even in a global pandemic, especially when it comes to gift giving. You don’t want to give Grandma a super heavy kitchen gadget that she can’t lift or move or buy a scratchy sweater for a child that is going to feel terrible against the skin.

I think people will still turn out for gift buying when the holiday season is upon us, but I think Walmart+ and Amazon may have a lock on the more mundane purchases, since many of us have made online shopping and ordering a habit during the pandemic.

Robbie Kellman Baxter: Where Amazon and Walmart go, others will follow.

They set the standards for other retailers.

Consumers say, “how come you don’t have free shipping like Amazon?” or “how come you don’t have curbside pickup like Walmart?”

I already do all my holiday shopping online—I’m guessing this year many people who have historically shopped in malls are going to join me.

Retailers need to be thinking about two things: First, how to offer a fast, easy, and safe online experience—that’s table stakes.

Second, though, is how to make that experience unique to their brand and their audience. This second challenge is where Walmart has failed in the past, by not differentiating enough to leverage their strengths and audience.

Jill Noblett: It will, arguably, be the most important time in recent history for retailers to up their online game, both because of the potential scale of Walmart+ and because online sales will likely get an even bigger boost since several retailers have announced they will close on Thanksgiving day.

Jeannie Walters: The pandemic has shifted customer behavior and the holidays will also be different.

Customers won’t be willing to stand in long lines in crowded stores. Retailers should be prepared to offer the continued conveniences of online ordering, curbside pickup, and safe spaces.

I think retailers should look for ways to personalize the experience and help customers in ways store workers had in the past. Getting gift selection guidance from a real person within the retail brand’s app or site, for example, could be a great way to help customers shop in new ways that still feel familiar.

 

Jim Tierney: Since the pandemic hit and consumer spending shifted significantly online, do you think other retailers will launch premium loyalty programs like Walmart+ where consumers pay for enhanced benefits?

Mark Johnson: With COVID-19 and the shift to consumers spending online, it is no secret that brands have been looking for other ways to engage customers.

Some brands were previously focused on digital – and brands are always looking for ways to differentiate themselves – but this year, many quickly found themselves in a position where they were forced to pivot swiftly or reinvent themselves to stay relevant. One of the most important things brands can do right now is listening to their customers – understand what their customers are looking for a better serve them.

The options may be endless, but if you look at some of the perks Walmart is offering, such as enhanced member benefits, unique offers, contactless payments, free delivery, pick up in-store/curbside pickup, improved online experiences – these are where customer preferences are headed. It comes down to the brands listening to their customers and understanding what their needs are currently.

Jenn McMillen: Premium loyalty programs will always be around if the consumer value proposition is solid.

Yes, consumers are basically funding their own discounts, but to many, that’s acceptable and even desirable for special perks and better treatment.

Call it premium loyalty, paid loyalty, or subscription programs, but they are on the rise.

There are many programs out there that require a fee: Barnes & Noble at $25, Bed Bath & Beyond at $29, Lululemon at $129, GameStop Pro at $15–so they definitely aren’t an anomaly.

For retailers, they represent a continual revenue stream, and in these tough times, who doesn’t want that?

But can retailers–already with downsized staffs, slashed budgets, compromised supply chains, and a host of other issues–pivot that fast with a program in market for holiday? I doubt it.

Robbie Kellman Baxter: Retailers should take a step back and ask themselves what is the forever promise their customers wish they’d make.

In other words, why did the customer come to them in the first place? what was that goal or problem that brought them to the retailer? And how could that retailer expand their offering to better deliver?

If the customer came because their sink was broken, they might need the part from the store, but maybe also access to a plumber, or advice about kitchen remodels.

And if they come to the pet shop for dog food, what about other elements of pet care and even ways to get more enjoyment out of being a pet parent?

Retailers that can align their offerings to the ongoing challenges of their customers through ongoing and enhanced benefits will thrive during this time, especially because consumers are so open to new ways of doing things right now.

Jeannie Walters: I do.

Nordstrom has been experimenting with Nordstrom Local stores. They are smaller spaces where customers can pick up online orders and receive services like tailoring.

I think more retailers will look for ways to serve customers in the ways they want. Customers are now used to conveniences like contactless payments and delivery.

The trend of subscription boxes and these new services will create more opportunities to create a feeling of membership with customers.

As long as customers feel they’re receiving value with personalized and convenient experiences, they’ll be willing to pay a premium for the brands that deliver.

I don’t think this model is for every retailer, however. Customers will have to make choices about how many services they really need.

Meanwhile, Doug Stephens, Retail Prophet, offered some general thoughts about premium loyalty programs versus free programs.

While most loyalty programs are free, Stephens believes membership-based premium loyalty programs (like Prime and Walmart+) create stronger, more powerful bonds with consumers.

“Through Prime, Amazon has proven several things,” he explained. “First, that membership is more powerful economically than loyalty programs. Amazon Prime members, of which there are now more than 100 million, spend double each year what non-Prime members do.”

As Amazon adds more value for Prime members, those members are more inclined to share data, reviews, etc., Stephens notes.

“Most retailers struggle to pull clean data out of their audiences,” he added. “At the end of the day, membership eats loyalty for breakfast.”

That’s why we’ve been seeing more retailers launch premium loyalty programs where their best customers pay for membership in return for enhanced value.

 

There’s Room For More Than One Premium Loyalty Program on the Block

Our Premium Loyalty Data Study reveals that nearly two-thirds of consumers said they would join another premium program even if they were already enrolled in another within a 12-month period, which means many consumers may end up using both Prime and Walmart+.

There’s a good chance that many consumers will be members of both Walmart+ and Prime. Consumers will always pay for something that is valuable to them.

Premium loyalty programs like Prime and Walmart+ offer enhanced value, instant benefits, and create emotional bonds between brands and their members.

With more retailers getting on board with the next generation of loyalty programs, is it time to think about a premium loyalty program of your own?

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