As prices at the grocery store and gas station rise, Walmart said Wednesday it will offer deeper discounts on fuel to encourage more customers to join and renew Walmart+.
Chris Cracchiolo, senior vice president and general manager of the Walmart+ subscription service, said everyday spending is top of mind for many shoppers, “especially in this environment of very high inflation.” He said the retailer recently surveyed customers and about half said they were changing their behavior because of more expensive fuel.
Walmart has looked at the subscription service, which launched about 18 months ago, as a way to expand its e-commerce business and encourage customers to increase spending in stores and on websites. It has also served as Walmart’s answer to Amazon Prime.
Walmart+ costs $98 per year or $12.95 per month. Includes free shipping on online purchases, free grocery delivery for orders of at least $35, discounts on prescription drugs and other benefits.
With inflation at a four-decade high, Walmart is touting its low prices as a competitive advantage. Walmart CEO Doug McMillon told CNBC late last year that the company would use inflation as an opportunity to win over customers. Earlier this month, the company aired a new TV commercial highlighting Walmart as the place to find value at a time when “every day it seems to get more and more expensive.”
That strategy carries over to Walmart+.
Starting Wednesday, Walmart+ members can save up to 10 cents per gallon at more than 14,000 gas stations. The retailer was already offering a discount on fuel, but has doubled the savings and increased eligible gas stations more than six times through a partnership with ExxonMobil.
Other companies, including Sam’s Club, BJ’s Wholesale and Walmart-owned Krispy Kreme, have also implemented fuel-related discounts.
The national average for a gallon of regular gas cost $4.13 on Tuesday, according to AAA. That represents an increase of more than 43% from the previous year’s pump price of $2.89.
Cracchiolo, who previously spent nearly two decades at American Express, said Walmart decided to expand that benefit after looking at members’ fuel usage and listening to both members and prospective members about the importance of that particular benefit.
Walmart doesn’t share membership data publicly, but Cracchiolo said members are more lucrative and frequent shoppers than their non-subscribing customers. Additionally, Walmart+ members spend more than twice as much with the company as the typical Walmart shopper, shopping both online and in stores.
“We know that Walmart+ customers are more loyal to Walmart,” he said. “They’re giving us more of their overall portfolio. They transact with us more often and spend more on average than non-members, and that behavior is really because we’ve built that trust and they see value in the program.” .
He added that the grocery part of the business is “at the core of how members shop with us.”
Over the past year, Walmart has added more perks to entice customers. It gave members early access to deals and exclusive access to coveted gaming consoles during the holiday season. It also launched a members-only sales event and began offering high-demand delivery timeslots, such as weekend mornings, for members only. And, in March, it offered six free months of Spotify Premium to Walmart+ members.
Walmart also announced last month that all store and warehouse workers would get a free membership as an employee benefit, allowing them to share feedback and have a personal experience recommending Walmart+ to customers.
Scot Ciccarelli, a retail analyst at Truist Securities, said Walmart, the nation’s largest grocery store, has a natural advantage over other companies with membership programs. He said consumers are less likely to cancel a show at a food retailer than they would, say, with a streaming service.
He said that Amazon has demonstrated the power of subscription services and how they drive purchases by making them quick and easy.
“The first thing you get from a subscription service if you get people to sign up is stickiness,” Ciccarelli said. “You’re a bit locked in. You’ve made the investment, you might as well use the service. Someone who used to shop with me twice a month, is now maybe shopping with me four or five times a month.” “