Amazon Fights Wal-Mart for Low-Income Shoppers
June 06 2017 - 2:29AM
Dow Jones News
By Laura Stevens and Sarah Nassauer
Amazon.com Inc. is dropping its membership price for low-income
shoppers, going after a Wal-Mart Stores Inc. stronghold.
The online retailer giant said Tuesday that it will offer a
nearly 20% segment of the U.S. population -- people who obtain
government assistance with cards typically used for food stamps --
a $5.99 monthly Prime membership, less than the $10.99 a month or
$99 annual plan for other consumers. The membership buys access to
unlimited two-day shipping, video and music content, photo storage
and other perks.
The new Prime offering takes direct aim at Wal-Mart, which
counts on shoppers who receive government assistance for a large
percentage of sales. Wal-Mart generated about $13 billion in sales
last year from shoppers using the Supplemental Nutrition Assistance
Program, or SNAP, accounting for around 18% of the money spent
through the program nationwide. Those customers also spend
additional income while in Wal-Mart stores.
Amazon will require cards typically used for food stamps as an
initial measure to determine participant eligibility, although they
can't yet be widely used for shopping online. The retailer plans to
add additional ways to qualify.
Low-income shoppers are "a big opportunity" and are already
buying online, said Laura Kennedy, director, retail insights at
consultancy Kantar Retail. But some lower-income consumers still
face hurdles because they more often lack typical bank resources
like accounts or credit cards.
An Amazon spokeswoman said the company was looking at
underserved audiences when it came up with the concept, adding that
$99 might be a barrier to entry for some consumers in a temporary
state of need. Amazon will require eligible participants to
requalify every year for up to four years.
Wal-Mart has been working to keep those customers even as more
shop online. It acquired low-cost Jet.com for $3.3 billion last
year and has been revamping its online strategy, scrapping a $50
charge for a two-day, no-cost shipping membership program in favor
of offering free shipping on orders over $35. (Amazon's
free-shipping threshold for non-Prime customers is currently for
orders over $25.) Wal-Mart executives hoped it would draw in more
value-oriented and non-Prime customers by removing membership
fees.
At the same time, Amazon has been working to grow its Prime
membership program, adding perks and expanding it to more than a
dozen countries internationally. Analysts estimate that its
more-than-60-million members spend significantly more than other
shoppers.
Still, 47% of U.S. primary household shoppers say they never or
rarely shop on Amazon, according to data from Kantar Retail. About
30% of the approximately 44 million SNAP recipients have access to
Prime via a subscription, free trial or family member, according to
Kantar.
Amazon also introduced "Amazon Cash" earlier this year, which
lets customers add cash to their account balance at more than
10,000 physical locations around the country.
Food-stamp grocery purchases are set for an overhaul with a new
test allowing online food stamp payment. Amazon and Wal-Mart are
among 10 in a two-year pilot by the U.S. Department of Agriculture
planned to start next year.
Write to Laura Stevens at laura.stevens@wsj.com and Sarah
Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
June 06, 2017 03:14 ET (07:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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