The $ 98 delivery subscription from Walmart could concern Amazon and Target

Walmart (NYSE: WMT) currently offers unlimited grocery delivery for an annual fee of $ 98 in four markets. This fall, it will be expanded to 200 markets covering 50% of the US population. Delivery Unlimited takes advantage of Walmart's massive physical footprint to take on competing services such as Amazon (NASDAQ: AMZN) Prime Now and Targetof (NYSE: TGT) Shipt. Prime and Shipt cost $ 119 and $ 99 a year, respectively.

Walmart has established itself as a leader in online grocery shopping, and Delivery Unlimited is the next step in consolidating this lead. However, Walmart's US e-commerce manager said in a recent interview with Recode that Delivery Unlimited will eventually expand beyond the grocery store to include everything that is sold in Walmart's Supercenters. This could be the factor that drives more consumers to choose Walmart rather than the same day delivery options of Target or Amazon Prime Now.

Catch up on the competition

Walmart's focus on online grocery has allowed it to outpace Amazon and Target in this regard, but is lagging behind in the rapid realization of general merchandise sales. The company recently took steps to accelerate deliveries, deploying its NextDay program in 75 percent of the country well ahead of schedule. Yet he still has some work to do.

Target has doubled its Shipt delivery service in the past year. First, the service was expanded to include more general merchandise in December, giving subscribers greater access to Target's store inventory. In June, the company gave Target.com buyers the opportunity to pay for a single delivery instead of subscribing to the service for a full year. She has also integrated Shipt more closely with Target.com, creating a dedicated section of the website dedicated to same-day delivery. Last quarter, Target pointed out that its same-day delivery options, including in-store pickup, Driveside pickup, and Shipt delivery, accounted for nearly three-quarters of digital order growth.

Similarly, the management of Amazon indicated that the shift to the premium shipping in a day was one of the reasons for the acceleration of its online retail sales in the last quarter. At the same time, he continues to expand Prime Now to new markets, capitalizing on its footprint in the Whole Foods market.

Walmart has the potential to reach many more customers than Amazon and even more than Target through its large number of stores. There is a Walmart store within a 10-mile radius of 90% of the US population. And if Walmart can expand its same-day delivery or curbside options to include the average 144,000 items available in its Supercenters, it will quickly outpace Amazon and Target in terms of selection. In comparison, Amazon states that Prime Now customers can order "tens of thousands" of items through its offer.

Taking Premier

The big challenge for Walmart with Delivery Unlimited is to tackle Amazon Prime. More than 100 million US consumers already have access to a premium subscription, and the idea that they would pay Walmart another annual fee to access another delivery program seems unlikely. This is the same challenge that Target has had to face in trying to grow Shipt in the last two years.

Walmart e-commerce CEO Marc Lore believes customers will see the value of Delivery Unlimited. Customers will be first away from their local supermarket to replace Prime afterwards, for many consumers. But if that were the case, Target would explain the speed with which Shipt subscriptions increase. Shipt delivers from Target, local supermarkets, and several national chains, but he still has not won a market share that Lore predicts for Walmart's more limited delivery option.

When Walmart already tried to attack Prime, it failed. It offered an unlimited shipping service for two days at $ 50 a year before scrapping it and offering faster shipping to all customers at no cost.

Asking consumers, especially consumers who already subscribe to Prime, to make more money available for another delivery service is a difficult task. That said, the general trend of same-day delivery demand could push more customers to Walmart if it succeeds in fulfilling Lore's vision of offering everything in its Supercenters with same-day delivery. The road will be long and difficult, but Walmart must determine what will be its next step in the digital world, as online grocery sales will not continue to grow indefinitely at the same pace.