Walmart announces new membership program to compete with Amazon Prime

Walmart shares gained 1% in premarket trading after it announced its Walmart+ membership program to compete with Amazon Prime. Melissa Repko, CNBC.com retail reporter, joins 'Squawk on the Street' to discuss what Walmart+ offers consumers and why analysts will be comparing it to Amazon Prime. Subscribe to CNBC PRO for access to investor and analyst insights on tech and more: https://cnb.cx/3dIH56N

Walmart will launch its much-anticipated membership program on Sept. 15, looking to build on the strength of its grocery business and customers’ desire for more convenient ways to shop.

The subscription service, however, is notable for what it won’t include. It won’t have the feature that its rival, Amazon Prime, touts: free shipping for every item.

Walmart+ members will get unlimited free delivery, discounts of as much as 5 cents a gallon for fuel and access to a Scan & Go app that allows shoppers to skip the checkout line. But they will still have to meet a $35 minimum for each online order to avoid shipping fees, or to qualify for grocery delivery to their door. It will cost $98 a year, or $12.95 a month.

Amazon Prime costs $119 a year, or $12.99 a month, and includes free two-day shipping and some same-day shipping, without a minimum. Grocery delivery through Amazon Fresh is free, if customers meet a $35 minimum and are in eligible areas. It also includes its ad-free music service and video streaming service, with a large library of TV shows and movies — including award-winning originals like “The Marvelous Mrs. Maisel.” Customers can also get some discounts at Whole Foods.

More share of wallet

Chief Customer Officer Janey Whiteside said the company wants to deepen loyalty among those who already shop at its more than 4,700 U.S. stores and on its website.

“This is about really doubling down with the customers we have and getting more share of wallet and more share of mind,” she said on a call with reporters Monday.

She said the program is not an answer to Amazon Prime or any other competitor.

“We’re not launching Walmart+ with the intent to compete with anything else,” she said. “We’re launching it to meet the needs of our customers, and it really was designed to make their busy lives easier. We think that it offers a comprehensive suite of in-store and online benefits that help people save time and money across a variety of areas.”

Walmart is the largest grocer in the country. During the coronavirus pandemic, its sales have surged as customers have bought everything from milk and toilet paper to board games and bikes in its stores and on its website. Its e-commerce sales nearly doubled in the second quarter as customers sought out safe and easy ways to shop, such as shipping packages to their homes or retrieving purchases through curbside pickup.

How sustainable this growth will be remains to be seen. Walmart hasn’t provided a financial outlook for the rest of the year. Chief Financial Officer Brett Biggs told CNBC that some of the gains came from stimulus spending as customers had extra money in their pocket from the government — something that may or may not happen again.

On the earnings conference call, Walmart CEO Doug McMillon acknowledged the buzz around company’s soon-to-debut membership program. He and Marc Lore, who leads the company’s U.S. e-commerce division, were absent from a call with reporters to announce Walmart+’s rollout.

The company is juggling another significant business decision. It has teamed up with Microsoft to try to buy the U.S. operations of TikTok from Beijing-based ByteDance. The company has chosen a bidder and could announce a deal as soon as Tuesday, according to people familiar with the situation.

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