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Walmart+ growth plateaued in first half of 2022, analysis says
Membership remained at a "constant" through two quarters, according to Consumer Intelligence Research Partners.
Against the backdrop of a return to more in-person shopping, the growth of Walmart+ has leveled off in 2022, according to a new analysis.
As of the quarter that ended July 1, 11 million Walmart.com customers were members of the subscription program, according to a new analysis from Consumer Intelligence Research Partners. That is the same number as the quarter that ended in April, indicating the program has "plateaued," CIRP said.
“The data shows that Walmart+ membership has yet to grow in 2022,” said Josh Lowitz, partner and cofounder at CIRP. “For the last three quarters, membership has remained constant at 11 to 11.5 million customers.”
Walmart itself has not publicly released Walmart+ subscriber data. CIRP bases its findings on surveys of 500 US subjects who made a purchase at Walmart.com in the period from May-July 2022.
The launch of a subscription program was one of many moves made by Walmart to bolster ecommerce in the midst of the pandemic. Launched in September 2020, the primary Walmart+ offerings included free delivery from a store and shipping from Walmart.com, access to contactless checkout in a store, as well as savings on fuel.
Over the five quarters prior to this year, the program had steadily added members as it brought on shoppers during the pandemic, Lowitz said. The July 2022 quarter’s total was up from 9 million members from the same quarter a year ago.
(Source: Consumer Intelligence Research Partners.)
CIRP reports that 25% of Walmart.com customers are Walmart+ members, which is up slightly from the quarter that ended in April 2022.
“We’ve seen Walmart+ penetration in a narrow range, representing 23-25% of online shoppers for the past three quarters,” said Michael Levin, partner and cofounder of CIRP. “Penetration increased slowly, after strong membership growth in the program’s first year. More recently, Walmart appears to have re-emphasized in-person shopping, and customers have not seen the same need for online shopping as they did when Walmart first introduced the program and the Covid pandemic reduced in-person shopping.”
While Walmart's ecommerce business posted big gains over the pandemic, it more recently slowed amid a wider return to in-person activities. Ecommerce sales in the second quarter were up 1%, but 38% on a two-year stack, the company said.
The findings from CIRP come as Walmart is set to release its full earnings report for the quarter on August 16. In a pre-emptive move in late July, the company cut its profit outlook for the quarter and the year, saying that consumer spending was higher on food and fuel amid 40-year-high inflation, leaving fewer available funds for more profitable items like apparel. It has also been working to move inventory that was mismatched to demand, in part due to supply chain bottlenecks.
Walmart has added perks to the subscription program in 2022. It upped the fuel benefit to 10-cents a gallon, and extended its availability to 14,000 gas stations, including Exxon and Mobil locations. It also added six free months of Spotify membership with a subscription, and opened up free membership to Walmart associates. Bringing two subscriptions together, it then combined a Walmart+ membership with InHome, the company’s service that delivers groceries directly to a person’s kitchen or fridge.
More recently, Walmart+ has explored perks that resemble those offered by Amazon Prime, the vaunted subscription service that is central to Amazon’s business. In June, it held Walmart+ Weekend, a members-only event designed to provide deals. The next month, the company didn’t hold its own discount event to coincide with Amazon Prime Day as it had done in the past, saying that it was already marking down items to deal with the inventory glut. Meanwhile, the New York Times reported this week that Walmart was holding talks to potentially add a streaming service to the program.
While adding video and exclusives to increase the value of a membership is following a similar pattern to the Prime playbook, these additions may not be aimed at bringing on new members.
“It’s not clear how, if at all, these benefits attract new members. Our analysis of Amazon Prime suggests these features help with retention, rather than with converting trials into members,” Levin said. “Most members find these programs attractive initially because of the core shipping benefits,” not the media services and other perks, he said.
Growing the number of members, then, may have more to do with bolstering its ecommerce business and fulfillment network – an area where the company is also making investments.
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Walmart's third-party marketplace is reducing commission rates for 90 days.
To kick off 2023, Walmart’s third-party marketplace is continuing to make moves to expand the number of sellers on the platform with a savings incentive.
The news: Starting this week, Walmart Marketplace is running a Seller Savings promotion for 90 days that provides new sellers with a 25% commission rate reduction. This allows sellers to try new tools including:
- Walmart Fulfillment Services, which allows third-party sellers to tap Walmart’s logistics network, and in turn offer two-day shipping.
- Sponsored search advertising, which allows brands to run search ads within the Walmart Marketplace.
- Repricer: An automated pricing tool that automatically updates prices based on other ecommerce platforms, or Walmart Marketplace.
Growing the Marketplace: Walmart’s third-party marketplace has been a focus area of expansion efforts from the world’s largest retailer, and it showed results in 2022. In the company’s most recent earnings report, executives said the Marketplace’s SKU count increased by 50% to 370 million SKUs, and it onboarded 8,000 new sellers in the quarter.
Along with services such as fulfillment and advertising, Walmart said it is continuing to upgrade its experience for sellers, including introducing a faster onboarding process. In September, the company also provided access to an advertising tool that boosts products to the top of search results called Search Brand Amplifier, and provided automatic onboarding to Walmart's ad portal upon launch. In a move to grow internationally, the company opened the Marketplace to Canadian sellers.
The flywheel spins: For Walmart, the Marketplace is a key part of its bid to grow ecommerce. Adding more sellers allows the retailer to expand the assortment of items available on the platform. This helps the company offer more items that keep shoppers coming back, and keep prices down. At the same time, Walmart is working to engage more repeat customers through its Walmart+ membership program. A bigger Marketplace also bolsters the importance of advertising on Walmart ecommerce, as brands seek ways to stand out on an ever-growing platform.
“We're scaling our newer businesses and connecting them to our larger, established retail businesses, primarily by how we design digital interactions,” Walmart CEO Doug McMillon told analysts on the earnings call. “One example is how our growth in ecommerce, especially the marketplace, fuels our ad business. More items and sellers drive GMV and improved customer satisfaction. And it also drives success in advertising. They're mutually reinforcing.”
What it means for marketplaces: Any discussion of third-party marketplaces would be incomplete without mention of Amazon, which pioneered the model and continues to operate a juggernaut through its Fulfillment by Amazon program. However, Walmart's emergence is one of the clearer signals that sellers are increasingly looking to have a presence across multiple marketplaces. Increasingly, ecommerce platforms are marketing to sellers, just as they are to consumers.