Walmart just undercut Amazon's most valuable perk

Walmart just made a move that should terrify Amazon.

Starting Tuesday at 8 a.m., Walmart will offer free two-day shipping on more than two million items for all orders over $35.

All Walmart customers will qualify for the free two-day shipping. There are no fees or enrollment in membership programs required.

“We upped the ante here and decided not to charge people for it,” Marc Lore, CEO of Walmart US ecommerce, said on a call with reporters Monday.

By comparison, Amazon offers “free” two-day shipping only to members of its Prime program, who pay $99 annually for membership.

Non-Prime members can also qualify for free shipping — but without two-day delivery — on orders of $49 or more.

As a result of the change, Walmart will be scrapping “ShippingPass,” a two-day shipping program it has been testing for several years that costs $49 annually. The company said it will be refunding customers currently enrolled in its ShippingPass program.

“At a very fundamental level we just don’t believe in having to charge for a membership,” Lore said.

Two million of the 20 million products carried on Walmart’s website will be available for two-day shipping. Those items will include Walmart’s most popular products, including baby necessities, pet products, food like cereal and peanut butter, cleaning supplies, electronics, and toys, the company said.

Customers must spend $35 for free two-day shipping to their homes, but there is no spending threshold for free two-day shipping to stores.

Offering free two-day shipping can be a costly and profit-draining endeavour for retailers — which explains why Amazon charges customers $99 annually for the service.

When asked whether Walmart could raise prices to offset the cost of the new service, Lore responded with an emphatic “no.”

“It won’t affect our pricing at all,” he said. “In fact, we are looking to get even more aggressive on the pricing side.”

Lore said this is the first of many announcements to come for Walmart ecommerce, which he characterised as “moving at the speed of a startup.”

“We’ve got a lot of things planned for the year,” he said. “This is the first of many.”

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