Americans are upping their online spending again – and paid subcriptions by Walmart and Target are playing a part.
Both charge just under $100 a year – but they provide free same-day delivery on most orders, plus other discounts.
Analysts say the free and fast delivery is key to boosing online shopping, up seven per cent for the first four months of 2024 compared to a year ago.
Savvy Americans can save money overall – even thought they are paying for the memberships – by taking advantage of the bundled free delivery.
That is because they are not paying for gas to go to the store or stumping up for delivery when shopping online. High gas prices are detering Americans from driving to malls.
A surge in deals following as inflation finally cools is also boosting online sales too, US retailers say. Walmart, Target, Lowe’s are all seeing an uptick in online orders.
Target, like Walmart, has a paid membership schemem
Americans, who embraced shopping online when many stores were closed or had restrictions, are returning to web and app buying, retailers say.
Leading the fresh surge is Walmart and Target, whose paid subscripton services offer free delivery and other discounts.
E-commerce sales made up 15.9 percent of total retail sales in the first quarter, the highest since they peaked at 16.4 percent during the height of the pandemic in 2020’s second quarter, according to Department of Commerce data.
Despite slow in-store sales, Target said its online sales returned to growth in the first quarter after more than a year of declines. It cited more products available online and the popularity of same-day delivery.
Bigger rival Walmart reported a 22 percent surge in U.S. online sales last week, exceeding the 17 percent growth it recorded during the typically strong holiday season.
Lowe’s said its expanded same-day delivery partnerships with DoorDash and Shipt helped it grow online sales and offset some of the slowdown it was seeing with big-ticket projects.
Gas prices are also dissuading Americans from driving to stores, according to Cox Automotive.
Walmart offers unlimited free deliveries for $98 per year under its Walmart+ subscription.
Target launched Target Circle 360 in April, offering unlimited same-day deliveries for $99 a year if subscribers meet a $35 basket minimum.
Some of the sales gains in the quarter were driven by spring sales events Walmart and Target launched to rival Amazon’s first ever ‘Big Spring Sale’ in March.
Target announced this week it is cutting the prices of 5,000 items
Still, consumers spent $331.6 billion online from January 1 to April 30, up 7 percent from a year ago, Adobe said in a report this month. They were looking for cheaper groceries, personal care, electronics, apparel and furniture
Brian Jacobsen, the chief economist at Annex Wealth Management, suggested that Target’s digital sales growth might be attributed to their heavy promotion of the Target360 service with free trials.
The company offered the service for $49 per year for a few months besides a 14-day free-trial option.
‘The key is to convert the free trials into actual paying subscriptions,’ he said.
Walmart attributed some of its online sales growth to a 45% increase in the number of rollback deals on food and grocery products it offered in April compared to the same period last year.
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Target announced today it will launch a new paid membership program for its customers.
It will closely resemble offerings from Amazon and Walmart – offering free shipping, plus extra discounts.
Known as Target Circle 360, it will launch in April – initially for $49 a year during a promotional period. But for those who sign up after May 18 it will cost $99.
The program will include unlimited free same-day delivery, in as little as an hour in some areas, for orders over $35, plus free two-day shipping on cheaper items.
That would made it different to Costco, where customers have to be members – at a cost of $60 a year – just to shop at stores or online.
Target is a late entrant into the market of paid membership and will have to compete with Amazon’s Prime, launched in 2005, Walmart + and Kroger’s Boost programs.
A membership to Amazon Prime – launched in 2005 – costs $14.99 per month, or $139 per year in the US. It comes with free two-day delivery, plus streaming of popular movies and TV shows.
Walmart+ was launched in 2020 and or for $12.95 per month or $98 a year it has perks like free shipping, free grocery deliveries for orders over $35 and discounts on gas.
It is easy to see why Target is copying its competitors. Walmart boss Dugh McMillon said last month in the retailer’s earnings call that members of its program spend almost twice as much as non-members over a year.
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U.S. online spending is experiencing a rebound, spurred by high gas prices, convenient delivery options and a surge in deals following a brief post-pandemic slump, U.S. retailers say.
Americans, who embraced shopping online when many stores were closed or limited traffic, may be coming back to it now, retailers say.
However, the sustainability of these recent gains will depend on whether gas prices remain high and if shoppers can continue paying for subscriptions that offer free delivery.
E-commerce sales made up 15.9% of total U.S. retail sales in the first quarter, the highest since they peaked at 16.4% during the height of the pandemic in 2020’s second quarter, according to Department of Commerce data.
Target said its online sales returned to growth in the first quarter ended March 4 after more than a year of declines.
It cited more products available online and the popularity of same-day delivery. Bigger rival Walmart reported a 22% surge in U.S. online sales last week, exceeding the 17% growth it recorded during the typically strong holiday season.
Lowe’s said its expanded same-day delivery partnerships with DoorDash and Shipt helped it grow online sales and offset some of the slowdown it was seeing with big-ticket projects.
Gas prices are also dissuading Americans from driving to stores, according to Cox Automotive.
Target said store-originated comparable sales fell 4.8% in its first quarter, while those originated online rose 1.4%.
Walmart said consumers of all income levels are prioritizing price, but especially low-income shoppers. Higher-income shoppers are gravitating to Walmart.com for the wider array of merchandise it now offers through its third-party marketplace.
Delivery was a big draw, with those services availed at a higher rate than pickup in store, Walmart said. Target, by contrast, saw more of its shoppers use curbside pickup. Its ‘Drive Up’ offering generated over $2 billion in sales in the first quarter.
U.S. retailers invested heavily in online businesses during the pandemic, offering perks like streaming subscriptions, discounts on fuel and multiple delivery options.
Walmart offers unlimited free deliveries for $98 per year under its Walmart+ subscription.
Target launched Target Circle 360 in April, offering unlimited same-day deliveries for $99 a year if subscribers meet a $35 basket minimum.
To be sure, some of the sales gains in the quarter were driven by spring sales events Walmart and Target launched to rival Amazon’s first ever ‘Big Spring Sale’ in March.
Still, consumers spent $331.6 billion online from Jan. 1 to Apr. 30, 2024, up 7% from a year ago, looking for cheaper groceries, personal care, electronics, apparel and furniture, Adobe said in a report this month.
Brian Jacobsen, the chief economist at Annex Wealth Management, suggested that Target’s digital sales growth might be attributed to their heavy promotion of the Target360 service with free trials. The company offered the service for $49 per year for a few months besides a 14-day free-trial option.
‘The key is to convert the free trials into actual paying subscriptions,’ he said.
Walmart attributed some of its online sales growth to a 45% increase in the number of rollback deals on food and grocery products it offered in April compared to the same period last year.
(Reporting by Siddharth Cavale in New York Editing by Nick Zieminski)