Customers absolutely love Amazon’s Prime membership program, mostly due to its chief perk: unlimited free two-day shipping. According to a recent survey by The Diffusion Group, members still cite the perk as the most important offer of the subscription. In fact, out of 1,160 Prime members, 79 percent claim it’s the most important. The second most popular was Prime Video by far, with only 11 percent claiming it’s the biggest perk.
Amazon offers free two-day shipping on over 100 million items – achieved thanks to the company’s extensive network of warehouses located throughout the United States. Amazon disperses its inventory amongst these warehouses, enabling lower costs of speedy shipping to almost any address.
Amazon Prime is quite unique due to how consistent it is and the millions of items that it sells, either directly through Amazon or through third-party sellers. Though the company has been doing well and chose benefits many other retails couldn’t achieve, the rest of retail is finally catching up.
Walmart, one of Amazon’s biggest competitors online, announces free two-day shipping without a membership in 2017, though orders must be more than $35 to qualify. On the other hand, Walmart will need to add more selection to its free two-day shipping offering to even keep up with Amazon. Although it offers millions of items, it is nowhere near the 100 million items that Amazon boasts.
Walmart carries nearly 55 percent of Amazon’s 1 million best-selling products, according to Cowen within a report to investors in October. Amazon’s top 1 million products account for about 80% of sales on its website, Cowen said, exposing a weakness of Walmart.
Cowen also said that Walmart management agreed that the gap of items between Walmart.com and Amazon.com is still too large, but noted Walmart called expanding assortment a “top priority.” One way that Walmart planned to do this is by allowing third-party merchants to sell on Walmart.com with a green two-day shipping badge. The initiative began in October, meanwhile, the retailer said it plans to expand over the coming months.
Now you might be thinking, “Well Amazon has warehouses located everywhere, how could Walmart keep up since not all merchants are equipped to handle wild demands of two-day shipping?” However, companies like Deliverr, which partners with large merchants, could make it happen. Deliverr uses a network of leased space in warehouses around the country to mimic the services of Amazon, according to co-founder Michael Krakaris.
In 2019, “more parity [will] come to the space, where a retailer now can offer free two-day shipping anywhere they sell,” Krakaris said. Business with Walmart is “really rapidly scaling,” and he estimates that 30% of Walmart’s third-party sellers use Deliverr.
Amazon will most likely realize this could hurt its Prime membership and that offering two-day shipping will not keep the lead forever. Though only time will tell whether Amazon can persuade its more than 100 million US Prime customers to stay.