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Consumers who simply cannot wait to have their purchases delivered from their favorite online retailer have a couple of notable options. They can pay nearly $100 to sign up for an annual Prime membership from Amazon, or they can pay half that to subscribe to the ShippingPass service from Walmart. Let’s compare the two.

Lo-res_MHED9000393-SShippingPass is still a relatively new service from Walmart, and it is available in only limited areas. For $49 per year, members get free delivery of millions of popular products, in under two days. In contrast, nonmembers must wait up to six days for delivery and are required to pay the shipping costs for any orders that total less than $50. To support these promises, Walmart is relying on its excellent distribution network, including eight e-commerce–dedicated warehouses that coordinate with its more than 150 distribution centers. Delivery from these centers will come from regional services. Furthermore, Walmart plans to leverage its existing stores, which number more than 4,600, and its fleet of more than 6,000 trucks to increase consumers’ access to products they order online.

Amazon’s Prime service instead is well established, having been around for more than a decade. Also promising two-day, free delivery in most cases, it costs more, $99 per year, but it includes immediate access to digital content, including select television shows, movies, music, and books. Amazon lacks its own stores or trucking fleet, but it has existing agreements with various delivery services to get packages onto consumers’ doorsteps quickly and accurately.

In this competitive environment, Walmart promises that its logistics and transportation experience make it able to offer quicker shipping for less money..

Discussion Question:

  1. What is Walmart doing to better compete with Amazon?
  2. How will this action impact the financial ratios discussed in Chapter 6?

Source: Tom Ryan, Retail Wire, May 17, 2016