Walmart’s Looking Everywhere to Boost Walmart+

It’s been less than two years since Walmart (WMT[1] -1.47%) launched Walmart+, and it’s already seeing its subscriber growth stagnate. The big-box retailer attracted about 11 million customers to its shipping subscription, according to researchers at Consumer Intelligence Research Partners (CIRP). Not only does that pale in comparison to the 172 million U.S. shoppers using Amazon (AMZN[2] -2.86%) Prime, it’s actually lost subscribers since the start of the year.

While stagnating subscriber growth is a challenge for Amazon[3] as well, Walmart’s relatively new subscriber offering and smaller subscriber base suggest there’s room to grow. But Walmart may be looking in all the wrong places.

Looking for new partners

Walmart’s strategy to grow its membership is to partner with various companies to draw in new subscribers or provide additional perks to members. Most recently, it partnered with Paramount Global (PARA[4] -0.27%) to offer Walmart+ members free access to the ad-supported tier of Paramount+.

Paramount counted 43 million global Paramount+ subscribers as of the end of June. The video streaming service[5] addition echoes Amazon’s move to include Prime Video in its membership program. That said, Walmart won’t be able to exercise much control over the future of the streaming business.

Amazon, meanwhile, is investing billions to make it one of the best streaming options available for consumers, differentiating itself with things like Thursday Night Football. Additionally, Walmart partnered with American Express to give Platinum cardholders free memberships. The move is aimed at attracting more affluent households to Walmart, a demographic not typically associated with the “everyday low price” retailer.

It also partnered with ExxonMobil and Murphy USA to offer discounts on fuel at their gas stations. The move expands the reach beyond Walmart’s own fuel stations, which are somewhat limited geographically.

Prime competition

Walmart is faced with a challenging environment right now. Inflation is squeezing the budgets of many of its shoppers, leaving them with little room to pay for more discretionary items outside of groceries.

Groceries are notably a low-margin business. On top of that, since many consumers are only buying groceries, they’re finding lower-priced grocery stores like Aldi a better alternative than making the trip to Walmart. Traffic to Walmart has dropped over the last two months while discount retailers have seen foot traffic climb, according to a report from Reuters[6].

Walmart reported the total number of transactions in U.S. stores (including online) grew just 1% in the second quarter. Meanwhile, Amazon said it had its biggest Prime Day ever, and any negative impacts from its price hike in March were more muted than management anticipated. Indeed, Amazon appears to be retaining the less price-sensitive more-affluent customers Walmart needs for Walmart+ while maintaining broad appeal.

Walmart’s challenge is that it’s hard to differentiate its service from those that already exist. It’s living in the shadow of Amazon Prime. Partnering with other service providers isn’t going to massively increase the value Walmart offers through Walmart+.

Walmart needs to find a way to offer outsized value that stems from its unique offerings like its pharmacy, money services, and other in-store services. Focusing on the convenience of shopping at Walmart may serve the retailer better than trying to partner with other companies. As it tacks on other services despite seeing limited growth, it could be burning hundreds of millions of dollars, if not billions, on payments to partners that may be better off reinvested in itself to grow the program internally.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. Adam Levy[7] has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Walmart Inc.

The Motley Fool has a disclosure policy[8].

References

  1. ^ WMT (www.fool.com)
  2. ^ AMZN (www.fool.com)
  3. ^ stagnating subscriber growth is a challenge for Amazon (www.fool.com)
  4. ^ PARA (www.fool.com)
  5. ^ streaming service (www.fool.com)
  6. ^ Reuters (www.reuters.com)
  7. ^ Adam Levy (boards.fool.com)
  8. ^ disclosure policy (www.fool.com)