Amazon & Marketplaces

Ecommerce Briefs: Walmart Wins Flipkart; Amazon Expands Prime; Target Beefs Up

In “Ecommerce Briefs,” I address news and developments from online merchants. In this installment, I’ll review Walmart’s purchase of a majority interest in Flipkart, India’s dominant marketplace. I’ll also address Amazon’s expansion of its Prime program and Target’s recent moves to beef up its Restock and parking-lot pickup services.

Walmart Wins Flipkart

Walmart bested Amazon in the battle to take a majority stake in Indian ecommerce giant Flipkart. I wrote about that topic last month.

Walmart paid $16 billion to obtain 77 percent of Flipkart, a marketplace that has never been profitable. That’s a huge investment considering that total 2017 ecommerce sales in India were $21 billion, according to Forrester Research.

Walmart plans to complete the transaction with a combination of cash on hand and newly issued debt, which will increase the company’s interest expense and weaken its bottom line. Walmart estimates that additional interest costs associated with the investment will reduce its fiscal year 2019 profit by 25-30 cents per share.

In 2017 Walmart topped the Fortune 500 list for the sixth straight year and became the first company in history to generate $500 billion in annual sales. Ecommerce sales contributed 5 percent of the total. In the first quarter of this year (fiscal 2019), Walmart’s U.S. ecommerce sales grew 33 percent over the same period last year according to Walmart C.E.O. Doug McMillon — a good showing after ecommerce sales slumped in the last quarter of calendar year 2017.

Walmart estimates that additional interest costs associated with the investment will reduce its fiscal year 2019 profit by 25-30 cents per share.

Amazon Prime

After raising the price of Prime membership by 20 percent, Amazon is trying to make the program more robust, if not indispensable. JPMorgan estimates that Prime membership is worth $785 annually to customers, versus the $119 that Amazon is now charging.

Amazon is offering its Prime members an additional 10 percent discount on sale items at Whole Foods. To receive the discount, Prime members will have to sign into the Whole Foods app with their Prime membership information and then scan the app at checkout. The program will start in Florida shortly and expand nationwide later this summer.

Earlier this year, Amazon implemented free two-hour delivery of Whole Foods groceries in 32 cities through the Prime Now service. Amazon expects to expand the offering later this year. Eligible Prime members also receive 5 percent back on Whole Foods purchases when they use the Amazon Prime Rewards Visa card.

In another move to solidify the Prime program, Amazon is gradually shifting its U.S. Prime Pantry program for basic household items to a subscription model. Prime members who sign up for the program can receive a free 30-day trial. Afterward, if they don’t cancel, members will automatically be charged $4.99 a month in addition to the $119 annual Prime fee. Subscribers receive free shipping on all orders of $40 or more or can pay a flat $7.99 shipping fee for each order. The flat $7.99 fee for orders under $40 is not affected by the number of items.

Target Beefs Up

Target announced that its Restock program — a direct competitor to Amazon Pantry — will grow from a trial program in a few markets to a nationwide rollout, eventually covering more than 75 percent of the U.S. population. Target Restock offers more than 35,000 items, including cleaning supplies, non-perishable food, and baby products.

Next day shipping is free on all REDcard (the Target credit card) purchases and $2.99 for all other orders. Restock orders will be delivered the next day if placed before 7 p.m. Monday through Friday. There is no membership fee.

On the Target website, customers can virtually place items in their “box,” which holds up to 45 pounds. An online tracker informs the customer how much room remains in the box. All Restock orders are filled directly from stores. Customers can also use Google Home or a smartphone with the Google Assistant app to order items using voice commands.

Target has also recently launched free two-day shipping on orders on Target.com. Many of these orders are also shipped directly from stores.

Another Target program, “Drive Up,” which received a good response from a Minneapolis area pilot program in 2017, is now available in nearly 270 stores throughout the Southeast. Customers place orders via the Target application, and Target notifies customers when orders are ready for pickup, usually within one to two hours.

Customers hit the “I’m on the Way” button on the app when they are ready to drive to the store, and a Target employee brings the items to their cars within two minutes of arrival in the parking lot. Target plans to continue expanding “Drive Up” to nearly 1,000 stores across the country by the end of 2018. This program is competing with Walmart Grocery (formerly Walmart To Go), wherein customers can pick up orders placed online.

Marcia Kaplan

Marcia Kaplan

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