Walmart offers big discounts on gas to attract and retain subscribers

As grocery store and gas station prices rise, Walmart said Wednesday it will offer deeper discounts on fuel to encourage more customers to join and upgrade Walmart+.

Chris Cracchiolo, senior vice president and general manager of Walmart+’s subscription service, said daily spending is a concern for many shoppers, “especially in a very high inflation environment.” He said the retailer recently surveyed customers and about half said they changed their behavior because of more expensive fuel.

Walmart sees the subscription service, which launched about 18 months ago, as a way to expand its e-commerce business and encourage customers to spend more in-store and on the website. It also served as Walmart’s response to Amazon Prime.

Walmart+ costs $98 per year or $12.95 per month. It includes free shipping for online purchases, free home delivery of groceries on orders of at least $35, prescription discounts, and other benefits.

With inflation at its highest in four decades, Walmart is using low prices as a competitive advantage. Walmart CEO Doug McMillon told CNBC late last year that the company will use inflation as an opportunity to attract customers. Earlier this month, the company aired a new commercial highlighting Walmart’s value as a place to find value at a time when “every day seems more and more expensive.”

This strategy has been carried over to Walmart+.

Starting Wednesday, Walmart+ members can save up to 10 cents a gallon at over 14,000 gas stations. The retailer has already offered a discount on fuel, but has doubled the savings and more than six times the number of qualifying fill-ups through a partnership with Exxon Mobil.

Other companies, including Walmart-owned Sam’s Club, BJ’s Wholesale and Krispy Kreme, have also introduced discounts on fuel.

The national average for a gallon of regular gasoline on Tuesday was $4.13, according to the AAA. This is more than 43% more than a year earlier, when the pump was priced at $2.89.

Cracchiolo, who previously worked for nearly two decades at American Express, said Walmart decided to expand the perk by looking into members’ fuel usage and hearing from them and potential members about the importance of this particular benefit.

Walmart doesn’t release membership data publicly, but Cracchiolo said members are more profitable and frequent shoppers than his non-subscription customers. What’s more, Walmart+ members spend more than twice as much at the company as regular Walmart shoppers, as they shop both online and in physical stores.

“We know that Walmart+ customers are more loyal to Walmart,” he said. “They give us a large share of their total wallet. They transact with us more often and spend more on average than non-participants, and this behavior is really because we have built that trust and they see value in the program.”

He added that the grocery side of the business is “at the heart of how members shop with us.”

Over the past year, Walmart has added more perks to attract customers. This gave members first bets on deals and exclusive access to coveted gaming consoles during the holiday season. It also organized a members-only sale and began offering high-demand delivery timeslots, such as weekend mornings, to members only. And in March, the company gave Walmart+ subscribers six months of Spotify Premium subscriptions for free.

Walmart also announced last month that all store and warehouse employees will receive a free membership as an employee benefit, allowing them to share reviews and gain personal experience by recommending Walmart+ customers.

Scott Ciccarelli, retail analyst at Truist Securities, said Walmart, the nation’s largest grocer, has a natural advantage over other companies with membership programs. He said consumers are less likely to cancel a program on a grocery store than on, say, a streaming service.

He said Amazon has shown the power of subscription services and how they incentivize purchases by making them quick and easy.

“The main thing you get from a subscription service if you get people to subscribe is stickiness,” Ciccarelli said. “You are kind of locked in. You have made an investment, you can also use the service. Someone who used to shop with me twice a month now maybe shop with me four or five times a month. “

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