From here on out, z WalmartIt’s about customer loyalty and customer loyalty.
One of the tools it will use to do this is Walmart +, a subscription service that the company offers started in September.
Walmart is expected to provide a progress report on the program when it releases a earnings report on Tuesday. So far, the retailer hasn’t shared any subscriber numbers – and that probably won’t change this week – but investors and analysts will be listening for clues as to whether the program is helping the retailer deepen relationships with its customers and provide them with other types of services to sell. Holding on to market share and trips to the store has become more important, especially as consumers are vaccinated and allowed to revert to typical spending patterns prior to the pandemic.
Walmart + is part of the retailer’s plans expand their business beyond retail and leverage their reach to make other money, from advertising and financial services to healthcare. When customers sign up for the program, the retailer can learn more about their shopping list and preferences. These can then be converted into customer benefits like personalized coupons and new sources of income like targeted ads.
“This is another tool Walmart has to help drive loyalty and growth online,” said Michael Lasser, retail analyst at UBS. “And what’s important, it allows it [the company] to collect more data from its consumers. “
Walmart, the country’s largest grocer, saw sales spike throughout the pandemic, especially online, as Americans cut back on their shopping trips and focused on groceries and other pandemic-related necessities, from soap to puzzles. Revenue in the same store increased 8.6% year over year in the last fiscal year and US e-commerce revenue increased 79%. Despite its size, the discounter faces numerous competitive threats from e-commerce forces like Amazon and low-cost retailers Dollar general and Aldi and third-party disruptors like Instacart and Fresh Direct.
In a recently released corporate memo received by Recode, Walmart has been open about the challenges it faces from grocery buyers who choose competitors like aim, Publix and Albertsons Learn how to keep members signing up for Walmart + when their subscriptions expire.
Walmart hit a 52-week high of $ 153.66 on December 1. Since then, stocks have fallen to $ 139. Walmarts Fourth Quarter Results This led to a sell-off as company executives said the retailer would increase its investments to $ 14 billion and expected sales to weaken for the year. Stocks are down another 3% this year, which translates to a market value of around $ 391 billion.
Walmart’s revenue growth is expected to slow in the first quarter as pandemic-related spending eases. UBS expects the retailer’s US sales to grow 1.5% in the first quarter. That’s less than the 10% growth that Walmart saw in the first quarter a year ago, but higher than the average 3.6% drop in sales in the same store that UBS expects for consumables retailers.
The company’s earnings per share are projected to be $ 1.21 and revenues are $ 132.09 billion, based on consensus refinitive estimates
Walmart has not provided a specific guidance for the fiscal year, but expects net sales to increase in the low single digits and, excluding the effects of divestments, operating income and earnings per share to increase flat or slightly.
Walmart + is Walmart’s answer to Amazon Prime, but with its own perks and a value-driven spin. The subscription service costs $ 98 for a year or $ 12.95 for a month. It includes features like fuel discounts, free next and second day shipping, and unlimited deliveries of groceries and other merchandise from Walmart stores.
According to a recent survey by Consumer Intelligence Research Partners, Walmart + has grown to an estimated 8 to 9 million members. That is an increase from an estimated 7.4 million to 8.2 million members at the beginning of the year. Members spend $ 1,100 a year at Walmart, according to the study.
Since the subscription service debuted in the fall, Walmart has further optimized it. For example, in December, the company lowered an online member shipping minimum of $ 35. This move brought the retailer more in line with Amazon Prime and came during the holiday shopping season.
On an investor day in February, Doug McMillon, CEO of Walmart, said Walmart + is one of the ways the company can increase sales for new and existing customers. Initially, however, he said the company would focus on “delivering a quality experience” to customers before adding any other benefits and emphasizing membership growth.
“We don’t want to outdo ourselves and sell too many Walmart + memberships and have a customer experience that is below our expectations or expectations,” he said at the virtual event.
For example, he said, the retailer needs more capacity to keep up with orders for groceries and other stores being delivered to members’ homes – one of the main benefits of the program. The company is Adding automated systems to dozens of stores to quickly select items and fill more online orders.
“Over time, more of our customers will want Walmart + because it makes life better,” he said. “This relationship will drive repeat business and provide data that will enable us to serve them even better and be more personalized. It is an important part of our strategy.”
Ultimately, according to Lasser at UBS, the membership program could strengthen other areas of Walmart’s business – like serving ads that are more targeted and relevant based on consumer buying patterns.
Earlier this year, Walmart renamed its advertising business and announced ambitions to become one of the top 10 advertising platforms in the US in the next few years. According to the 2020 annual report, the advertising business accounts for less than 1% of annual sales.
UBS has listed Walmart stock as a buy. The price target for Walmart is $ 160, about 13% higher than stocks.
During the retailer faces tough comparisons a year ago, According to Lasser, customers are likely to buy more goods like televisions, lawn tools, and clothing than household and food essentials like paper towels and milk. That could mean more profitable sales for Walmart, he said.
Charlie O’Shea, retail analyst at Moody, said he will be paying attention to the speed of online sales and whether sales have attracted discretionary items. He said he doesn’t expect the company to reveal Walmart + subscriber numbers, but rather expects to know what’s next for the program.
He said Walmart + is still in its infancy compared to Amazon Prime, which launched in 2005. Prime has has grown to around 200 million Prime subscribers worldwidesaid its CEO Jeff Bezos in April.
Even when Walmart shared subscriber numbers, O’Shea said the pandemic distorted buying patterns and “made it a difficult time to evaluate a membership program.”
“It’s a laboratory experiment that should work,” he said. “But I’m not sure if it will rise to the level of Amazon.”