Amazon Goes After Low-Income Shoppers in Battle with Walmart

Amazon.com is lowering its membership price for its low-income shoppers as it tries to go after a stronghold of Walmart.

The e-commerce behemoth said on Tuesday that it would offer close to 20% of the U.S. population – those who obtain assistance from the U.S. government with cards typically used to purchase food – a Prime membership for $5.99 monthly or $5.00 less than the regular Prime membership price.

The Prime membership allows access to unlimited music and video content, photo storage, two-day shipping as well as other perks.

This new offering of Prime is a direct aim at Amazon’s biggest competitor Walmart, which relies on shoppers who are receiving assistance from the government for a large portion of its sales.

Walmart in 2016 generated sales of over $13 billion from shoppers that used the SNAP or Supplemental Nutrition Assistance Program, which represented over 18% of money spent nationwide through that program. Those customers spend other income while in Walmart stores.

Amazon is requiring cards that typically are used like food stamps as the first measure to determine eligibility to participate, although they cannot be widely used at this time for online shopping. The e-commerce retailer is planning to add more ways in which people can qualify.

Shoppers with low-income represent a huge opportunity and already are buying online said an analyst that follows retail purchasing. However, some of the lower-income consumers have hurdles they face as they more often than not do not have bank resources such as an account or credit or debit cards.

A spokesperson for Amazon said the online retailer was looking at the underserved section of the country when it decided on this new concept, adding that the $99 annual membership could be a big barrier for entry for certain consumers.

Amazon will be requiring its participants that are eligible to requalify annually for as many as four years.

Walmart has worked to keep the low-income shopper even as more of them shop online. It purchased Jet.com the low cost online retailers last year for over $3.3 billion and has revamped its strategy online, eliminating a charge of $50 for a two-day no-cost membership program for shipping for free shipping of orders that are $35 or more.

The threshold for free-shipping on Amazon for its customers that do not have Prime is $25. Executives at Walmart hoped it would attract more customers who are non-Prime members and value oriented by removing fees for membership.

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