Walmart Plus is Ready to Battle with Amazon Prime.

Ed Ponsi

Shares of Walmart (WMT) shot higher by 6% on Tuesday on word that the retailer's new subscription service, Walmart Plus, would be rolled out on September 15th. Walmart Plus is priced at $86 per year. Walmart is undercutting competitor Amazon, which charges $119 annually for its Prime subscription service. 

Walmart is a candidate to purchase popular social media site TikTok, which I believe would be a brilliant move. 

Walmart's chart is exploding higher from a cup and handle formation. Note the high volume over the past week. This is an indication that institutional money is pushing Walmart higher. 

WMT

Why is Walmart Plus such a big deal? According to Consumer Intelligence Retail Partners, Amazon's Prime loyalty program has 112 million members. 

The paid membership program essentially locks in members. Discounts and free delivery discourage consumers from buying similar items from competing retailers, and  Amazon's liberal policy on returns seals the deal. 

Product returns are the ace hidden up Walmart's sleeve. According to a survey by UPS, 60% of consumers would rather return a product to a physical store location. Walmart has over 5000 locations in the U.S. alone. 

Why is this good news for Walmart?That same UPS survey says that 70% of consumers who return items to a physical location make additional purchases. This means that Walmart Plus won't just drive online sales higher, but brick and mortar sales as well. 

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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.