Walmart Offering Week of Sales to Counter Amazon Prime Day
Amazon's (AMZN) - Get Report second annual Prime Day sales event Tuesday is expected to double the financial returns the country's largest e-commerce company saw in 2015, according to analysts at MKM Partners. But brick-and-mortar retailer Walmart (WMT) - Get Reportis not taking the Amazon's promotional push laying down, announcing Monday that it will be offering a full week of sales as well as free shipping for online orders with no minimum purchase requirement.
Prime Day was a success for Amazon -- a key holding of the Growth Seeker portfolio -- last year as online customers ordered an average of 398 items per second during the sale. MKM Partners' estimates suggest that Amazon raked in between $375 million and $400 million during the promotion. Those estimates beat the revenue Amazon generated during the national post-Thanksgiving Black Friday sales day in 2015, according to the notoriously secretive company.
Analysts at the firm believe that Amazon will surpass those totals this year for numerous reasons, including the fact that the total number of Prime members increased by 51% since last year. During last year's Prime Day, Amazon saw U.S. sales spike by 93% while European sales grew by 53%.
"People were not happy with Amazon's full complement of offerings last year," Growth Seeker co-manager and Cocktail Investing co-author Chris Versace said in a phone interview today. "With their second Prime Day, we will be able to see whether they Amazon was able to work out all the kinks."
Meanwhile, online sales account for only about 13% of Walmart's revenue amid slowing same-store sales growth. Walmart's stock has recovered nicely from its late 2015 nadir when Walmart touched $56.42. Now back above the $70 level, Walmart seems to be making a play for a burgeoning online market that Amazon has dominated for years.
This is the second year in a row that Walmart has stepped into the online sale arena with Amazon. "We've said all along, we don't believe customers want to pay extra for a one-day sale and Wednesday proved it," the company told CNNMoney last year. Walmart took the same tack this year, saying in a statement "We believe saving money every day is better than just one, and that all customers should save, not only some."
In addition to its free shipping offer, Walmart also recently launched a 30-day free trial of its unlimited 2-day shipping program, Shipping Pass, which costs $49 per year, or about half of Prime's annual $99 price tag.
"Walmart is definitely cashing in on the Prime Day hype," Versace said. "But they don't have the infrastructure or brand awareness to really compete with Amazon in its backyard."
Online sales in the U.S. are expected to reach $523 billion by 2020, a 56% increase from $335 billion last year, according to Forrester Research. The segment is expected to grow at an annual rate of 9.32% over the next five years.
At the same time online sales are expected to grow, Walmart has seen its own online sales growth slow. Walmart net online sales increased only 8% during the peak holiday quarter vs. 22% growth in the previous year.
As for Amazon, Versace measures the success of this year's Prime Day against what it was able to do last year. "MKM Partners is expecting Amazon to double its numbers from last year. That may be too high of an expectation, but if it falls below last year, Prime Day will be a disaster. Pulling even would be OK, but Amazon really needs to beat last year's totals for this Prime Day to be seen as a success."
This article was first published on Real Money at 3:30 p.m. ET on July 11.