Walmart is facing headwinds. Tariffs are roiling the US economy, recession fears are looming, and the retailer recently disappointed Wall Street with its outlook. Yet, amidst these challenges, a surprising source of strength has emerged: Walmart+, the company’s membership program. This subscription service isn’t just boosting sales; it’s proving to be a crucial weapon in Walmart’s arsenal, driving both online and in-store traffic and contributing significantly to profit growth.
Walmart+ members accounted for nearly half of all spending on Walmart’s US website and app during the most recent fiscal year. The average Walmart+ member shops twice as frequently and spends almost three times as much as non-members. This impressive statistic highlights the program’s success in fostering customer loyalty and increasing spending per customer. This is particularly significant given the current economic uncertainty and the potential for consumers to cut back on spending.
The program’s success is further amplified by Walmart+ Assist, which offers half-price memberships to customers who qualify for government assistance. This initiative not only expands the membership base but also demonstrates Walmart’s commitment to serving a broader range of customers, enhancing its social responsibility image while simultaneously boosting its bottom line. Walmart’s Chief Growth Officer, Seth Dallaire, describes Walmart+ as a ‘frequency driver,’ indicating that the program is effectively increasing the frequency of customer purchases.
Walmart’s strategy with Walmart+ extends beyond simply increasing sales. The data gathered from members provides valuable insights into consumer preferences, allowing Walmart to refine its product offerings and target advertising more effectively. This data-driven approach contributes to higher profit margins in both its retail operations and its growing advertising business. As Walmart+ continues to expand, the increased profitability will allow the company to maintain competitive grocery pricing and invest in other areas to stay ahead of the competition.
The upcoming investor event in Dallas will offer a platform for Walmart to showcase its progress in various areas, including its retail business, Walmart+, and advertising. This event will be closely watched as Walmart is frequently seen as an indicator of the overall health of the US consumer market and will likely provide commentary on the current economic climate and its impact on the company.
Walmart+’s success can also be seen in the company’s e-commerce performance. Walmart has reported eleven consecutive quarters of double-digit online sales growth in the US, with 20% growth in the most recent quarter. This growth is partially attributed to the convenience and benefits offered by Walmart+, which directly competes with Amazon Prime, a service that recently surpassed Walmart in overall revenue. To further capitalize on member loyalty, Walmart will launch Walmart+ Week later this month, offering even deeper discounts on existing perks.
While Walmart+ has significantly fewer members than Amazon Prime (estimated 25 million compared to Amazon’s estimated 190 million in the US), its growth is impressive. The number of Walmart+ subscribers has more than doubled since fall 2022, indicating a strong trajectory. This growth, coupled with Walmart’s established position as the largest grocer in the US and its ability to manage costs, positions the company relatively well to weather the economic storm, even with the looming tariffs and recession fears.
The impending tariffs on goods from major production hubs like China and Vietnam will undoubtedly impact Walmart, but the company’s size and established value proposition may provide a buffer. Analysts believe Walmart’s scale allows it to negotiate better terms with suppliers and absorb some of the increased costs, while its focus on value could attract more price-conscious shoppers. The addition of high-margin revenue streams like Walmart+ further enhances the company’s resilience.
In conclusion, while Walmart faces significant challenges, its strategic investment in Walmart+ has proven remarkably effective. The program’s ability to drive loyalty, increase spending, and provide valuable consumer insights positions Walmart favorably to navigate the current economic uncertainty and emerge stronger. The company’s upcoming investor event will offer a valuable opportunity to assess its overall strategy and future prospects.
