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Wal-Mart Ditches Subscription Model for Free Two-Day Shipping

Wal-Mart Stores Inc. is scrapping its ShippingPass program, which was designed to compete with Amazon.com Inc.’s Prime, opting instead for a two-day shipping model that doesn’t have annual membership fees.

The new service will be available as of 8 a.m. New York time on Tuesday, Wal-Mart said in a statement. The company will refund the $49 annual fee for all active memberships in its ShippingPass program, said Marc Lore, chief executive officer of Wal-Mart’s online operations. The retailer declined to say how many people would get the refund.

“In today’s world of e-commerce, two-day free shipping is table stakes,” Lore said on a conference call. “It no longer makes sense to charge for it.”

Lore, the former CEO of Wal-Mart’s Jet.com unit, said the new service would focus on essential, everyday items, such as home goods, pet products and electronics. ShippingPass rolled out a two-day delivery service in May -- down from three -- and had required a $50 minimum order. That threshold will be cut to $35 under the new service -- the same amount Jet requires for free two-day shipping. Lore called it a “pretty darn compelling” value proposition.

Wal-Mart, based in Bentonville, Arkansas, aims to encourage more frequent shopping and lock in customers, something that Amazon’s Prime has achieved with its tens of millions of subscribers. Prime carries an annual $99 fee, though that service includes perks like free movies and TV shows.

Since Wal-Mart completed its $3.3 billion acquisition of Jet in September, the retail giant has made a big online push to catch up to Amazon. The integration has largely taken place at the managerial level so far, eliminating staff from Wal-Mart’s online team and elevating Jet executives to take on a more prominent role in the division.

On 1 February, the companies will start to integrate their warehouse networks nationwide, Lore said. Wal-Mart operates more than 4,600 stores in the US, which are also used to fulfill some online orders. Most of those orders will ship out of its five fulfillment centers, which average about 1 million square feet in size. The company plans to build another center in Florida later this year.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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