Walmart dangles deeper gas discounts to attract and retain members of subscription service

As prices climb at the grocery store and gas station, Walmart said Wednesday that it will offer deeper discounts on fuel to nudge more customers to join and renew Walmart+.

Chris Cracchiolo, senior vice president and general manager of the subscription service Walmart+, said the everyday expense is on the minds of many shoppers, “especially in this very high inflationary environment.” He said the retailer recently surveyed customers and about half said they were changing their behavior because of pricier fuel.

Walmart has looked to the subscription service, which launched about 18 months ago, as a way to expand its e-commerce business and encourage customers to boost store and website spending. It has also served as Walmart’s answer to Amazon Prime.

Walmart+ costs $98 per year, or $12.95 per month. It includes free shipping of online purchases, free grocery deliveries to the home for orders of at least $35, prescription discounts and other benefits.

With inflation at a four-decade high, Walmart is flexing its low prices as a competitive advantage. Walmart CEO Doug McMillon told CNBC late last year that the company would use inflation as an opportunity to win customers. Early this month, the company aired a new TV commercial that stressed Walmart as the place to find value at a time when “every day seems to get more and more expensive.”

That strategy carries over into Walmart+.

Starting Wednesday, Walmart+ members will be able to save up to 10 cents per gallon at more than 14,000 gas stations. The retailer already offered a fuel discount, but it has doubled the savings and increased the eligible gas stations more than sixfold through a partnership with Exxon Mobil.

Other companies, including Walmart-owned Sam’s Club, BJ’s Wholesale and Krispy Kreme, have also rolled out fuel-related discounts.

The national average for a gallon of regular gas cost $4.13 on Tuesday, according to AAA. That’s up more than 43% from the year-earlier pump price of $2.89.

Cracchiolo, who previously spent nearly two decades at American Express, said Walmart decided to expand that perk after looking at members’ fuel usage and hearing from both them and prospective members about the importance of that particular benefit.

Walmart does not share membership data publicly, but Cracchiolo said members are more lucrative and frequent shoppers than its nonsubscriber customers. What’s more, Walmart+ members spend more than twice as much with the company as the typical Walmart shopper, since they shop both online and in stores.

“We know Walmart+ customers are more loyal to Walmart,” he said. “They’re giving us a higher share of their overall wallet. They transact with us more frequently and spend more on average than nonmembers, and that behavior is really because we’ve developed that trust and they see value in the program.”

He added that the grocery part of the business is “at the core of how members shop with us.”

Over the past year, Walmart has added more perks to entice customers. It gave members first dibs on deals and exclusive access to coveted gaming consoles during the holiday season. It also threw a members-only sales event, and started offering high-demand delivery time slots, such as on weekend mornings, to members only. And, in March, it tossed in a free six months of Spotify Premium to Walmart+ members.

Walmart also announced last month that all store and warehouse workers would get free membership as an employee benefit, allowing them to share feedback and have personal experience when recommending Walmart+ to customers.

Scot Ciccarelli, a retail analyst at Truist Securities, said Walmart, the nation’s largest grocer, has an natural advantage over other companies with membership programs. He said consumers are less likely to cancel a program at a food retailer than they would for, say, a streaming service.

He said Amazon has shown the power of subscription services and how they drive purchases by making them fast and easy.

“The No. 1 thing you get from a subscription service if you get people to sign up is stickiness,” Ciccarelli said. “You’re kind of locked in. You’ve made the investment, you might as well use the service. Someone who was shopping with me two times a month, now maybe they’re shopping with me four or five times a month.”