Walmart takes aim at Amazon Prime: a $120 bundle with Sam's Club, $19 cheaper

Walmart (NASDAQ: WMT) said Tuesday that it is launching a single membership that combines Walmart+ and Sam's Club Plus for $120 a year, with no monthly payment option and no free trial, CNBC reported and Fox Business confirmed. Reuters carried the same $120 figure. Both chains keep their standalone memberships. Walmart shares were at $118.995, up 0.25%, at 10:50 AM ET, per Nasdaq.

The price arithmetic

Fox Business lists Walmart+ at $98 a year and Sam's Club Plus at $120. Bought separately, that is $218. The bundle is $120, so the saving is $98, or 45%. Against Amazon Prime at $139 a year, per the same report, the bundle is $19 cheaper, about 14%. The equivalent of $10 a month, though, is paid up front for the year.

The bundle includes Sam's Club access, free delivery from both chains, a choice of Peacock or Paramount+, gas savings and 2% Sam's Club cash on eligible purchases. An annual Walmart+ member can add Sam's Club Plus for $22 more a year, and a Sam's Club Plus member can activate Walmart+ at no charge. U.S. store employees at both chains get both memberships as a benefit.

Why Walmart wants this

CEO John Furner told Fox Business the move came "from a position of strength" and that it helps "at a time when we do see some customers showing some signs of pressure," pointing to higher energy costs. The numbers around it: in the fiscal second quarter, Walmart's global membership fee revenue rose 17% to a record, while Sam's Club e-commerce sales grew 26% and Sam's net sales reached $25.7 billion including fuel, CNBC reported. Walmart said any cost of the program is not expected to materially affect fiscal third-quarter or full-year guidance.

The backdrop is a squeezed shopper. Fox Business, citing the Bureau of Labor Statistics, put September inflation at 3.7% year over year, with gasoline up more than 34% and grocery prices up 1.8%. A bundle that advertises gas discounts and delivery is aimed at that gap between food and fuel.

Who it actually hits

A membership fee is a switching cost. A household that has paid $120 up front for free delivery and gas savings has a reason to send its grocery, fuel and bulk spending to one chain for the year. That lands on three kinds of local business:

• Independent grocers.

  112,779 independent retail stores are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 14,307 in CA, 9,799 in TX, 9,064 in NY. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

  These stores compete on freshness and location, not on a bundled fee, so the pressure is on delivery and stock-up trips.
• Independent gas stations and convenience stores. A fuel discount tied to an annual fee pulls the largest repeat purchase toward Walmart and Sam's Club sites.
• Local delivery and small food brands. Free delivery from both chains raises the bar for what a small shop's delivery fee looks like beside it.

What a small operator can do with this is narrow, and we will not pretend otherwise. If your delivery or loyalty offer costs a customer more than $10 a month in fees, the comparison is now easy for them to make. Counting what your own delivery charge adds up to over a year is a reasonable first step; no change may be needed if your customers buy on service.

For traders, the open items are how many existing standalone members move to the lower-priced bundle, and whether the cheaper fee is offset by more Sam's Club visits. Walmart's stock sits 12% below its 52-week high of $135.16, in a range of $98.88 to $135.16. Our stocks section tracks the day's other company news.

Sources: CNBC, Fox Business, Reuters, Nasdaq (10:50 AM ET, may be delayed), Chronicle calculations. This is market information, not investment advice.