Walmart takes aim at Amazon and Costco with new membership program - but is it a good deal?

By Bill Peters

Some analysts question whether Walmart customers will actually take advantage of the perks, and whether the savings add up

Walmart is selling a new bundled membership offering.

Walmart seems to be targeting Amazon.com and Costco Wholesale as it unveils a new membership bundle, but some analysts wonder if the subscription package will actually translate into meaningful benefits for customers.

The retail giant (WMT) on Tuesday said it had begun offering its Walmart+ and Sam's Club Plus plans together for $120 a year. The bundled membership package offers perks like members-only prices, free delivery, gas savings of 10 cents a gallon at some 17,000 gas stations, and an option to watch streaming services Peacock (CMCSA) or rival Paramount+ (SKYD).

Walmart's announcement comes as the competition between big retailers expands beyond lower prices to things like delivery, digital advertising and other incentives, and as shoppers try to save money amid rising costs of living.

But Walmart implied that the other plans out there are limited in scope.

"Consider what people may be paying today: $139 for a retail membership with delivery," the company said in a press release on Tuesday. "$130 for a warehouse club. $129.99 for a single, stand-alone streaming service."

An annual subscription to Amazon Prime (AMZN) costs $139, while Costco (COST) charges a $130 yearly fee for its Executive Membership tier. The cheapest Netflix (NFLX) subscription plan costs around $108 over 12 months, while a Peacock annual premium plan costs $129.99 a year.

"It's the most aggressive membership move that we've ever seen in grocery," said Phil Lempert, a food-industry analyst and editor of the Lempert Report on Substack. "Walmart is deciding that they're not going to discount products. They're discounting the decision to commit to become a member." Lempert noted that the move would also help Walmart collect more consumer data.

Shares of Walmart were down 0.5% on Tuesday. The stock has eked out a 6.2% gain so far this year, as some investors still worry about deeper pressures on consumers.

Jay Aldebert, a growth strategist and the chief growth officer of the business advisory company International Services, said Walmart's new plan puts pressure on both Costco, which made around $5.9 billion in membership fees during its last fiscal year, and Amazon, which has made a name for itself in delivery.

Walmart's membership-fee revenue was up 17% in its second quarter. The "membership and other income" line on its financial disclosures - a metric that includes money made from member fees and things like rental and tenant income - came in at around $1.84 billion.

Aldebert noted that since customers will be paying Walmart for a year-long membership, they might feel pressured to get more out of it by shopping at the chain more often.

"Once a household has paid one company up front for the year, every other retailer has to win that customer back from a decision they already made," he said.

Still, how much Walmart consumers might actually save depends on how they use the new plan.

For members of both Walmart+ and Sam's Club Plus, Aldebert said, spending $120 a year for two plans that cost a combined $218 a year was a no-brainer. But he noted that someone would have to buy 1,200 gallons for the gas savings to cover that $120 fee. While the plan offers a Sam's Cash reward of 2% on some purchases, Aldebert said it would take $6,000 of eligible spending to make the $120 back.

Lempert said that figuring out which gas stations offer discounts and which benefits apply to which products could require some research, while not everyone might want or need to sign on to a new streaming service. He added that Walmart's new bundle was likely more about marketing for the company than actual use of the plan.

Lempert likened the options in the new plan to the array of options one encounters when they walk the aisles of a supermarket - even if their shopping list contains only a few items.

"That doesn't mean you're going to use all that, but it makes you feel great, by spending just $120 a year," he said.

-Bill Peters

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10-20-26 1747ET