(Bloomberg) -- Walmart Inc. looks like it finally has a legit competitor to Amazon Prime.
The world’s largest retailer began ratcheting up marketing for its Walmart+ membership late last year, leading to big gains in subscribers, according to Bloomberg Second Measure, which tracks anonymous credit and debit card transactions. That included the number of customers rising 15% in July from June.
Amazon.com Inc. started its Prime membership, which offers benefits such as free shipping on some items, in 2005, and it has been credited with helping the company hold on to customers and boost how much they spend. Walmart debuted Plus in 2020, but has said little about its performance. During last year’s holiday shopping season, the company shifted strategy and boosted marketing for the membership. It has also offered discounts, more perks and kept the price at $98 a year, about 30% cheaper than Prime.
“They are just starting to push the pedal on the gas,” Jennifer Bartashus, an analyst for Bloomberg Intelligence, said in an interview.
On Thursday, investors might get more insights on Plus when Walmart reports its second-quarter results. The retailer has benefited this year from shoppers seeking out more bargains. That has helped it take market share in groceries. One key component of Plus is that it offers free delivery for food orders of $35 or more, while Amazon charges fees on purchases of less than $150.
What Bloomberg Intelligence Says
“As Walmart adds shoppers to its fast-expanding Plus membership program, their transactions are growing at a faster rate than at rival Amazon and its members are clearly shifting some spending away from grocers Kroger, Ahold Delhaize and Albertsons.”
— Jennifer Bartashus, senior packaged food and retail staples analyst
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Membership estimates vary for both services, with some putting Prime at roughly 150 million and Plus at about 25 million. That leaves Walmart plenty of room to grow, which could equate to billions in added revenue a year, according to Bartashus. When customers join Walmart+, they shop more frequently at the retailer and spend roughly the same amount on each transaction, according to Second Measure.
In a base-case scenario where Plus reaches about 23 million members this year, that would generate an additional $100 billion in revenue, according to Bloomberg Intelligence. If Plus keeps growing at its current pace, incremental sales could hit $160 billion by 2027.
Plus is also slowing down Prime. After shoppers who have Prime subscribe to Walmart+, transactions at Walmart increase, while Amazon purchases remain flat, according to Second Measure. When loyal customers of grocery chains Kroger, Ahold Delhaize and Albertsons sign up, purchases slightly decline.
“What’s under-appreciated is just how loyal these customers are,” Bartashus said. “If Walmart can continue to grow subscribers, that becomes a very powerful revenue and profit generator.”
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