Walmart Launches Rewards

In the past, Walmart has stayed away from rewards programs — particularly those based on discounting — instead favoring a focus on everyday low prices.

But as that competition becomes increasingly crowded — and complicated — in the digital age, Big Blue is feeling pressure to modify its tactics to meet the needs of the moment. And the latest of those modifications was announced yesterday (March 31): Walmart is getting into card-based, discount-centered rewards.

Walmart is far from the first to this table. Most headlines on the story referenced Walmart’s rival, Costco, and its card-based rewards program as what Walmart’s latest loyalty play is most directly competing with.

But the new loyalty play is also a unique look into Walmart specifically and what goals it is pushing through its new platform, formally titled “3-2-1 Save.”

Cash Back For All

Walmart’s 3-2-1 Save program is, in many senses, a fairly familiar variation on cash back-based loyalty. As of now, all Walmart Credit Cards, Walmart MasterCards and Walmart MoneyCards will offer 3 percent cash back on online purchases made on Walmart.com, 2 percent back on fuel purchases at Walmart or Murphy USA gas stations and 1 percent cash back on purchases at Walmart or anywhere else.

On its own, it is a significant bump up from Walmart’s rather limited prior offerings, which involved getting $5 cash back for every $500 spent and a standing discount of $.05 per gallon on any fuel bought at a Walmart station.

The move is also notable because it applies to all of the retailer’s cards. The program is designed to be inclusive and sticky, whether one uses a traditional or prepaid card.

“We’re always looking for ways we can create and change products and services to make them even better for our customers,” Daniel Eckert, senior vice president of services for Walmart U.S., said in a statement. “The new 3-2-1 Save program simplifies and strengthens the card proposition for more than 10 million cardholders and helps add even more value to their Walmart purchases, no matter how they choose to shop with us.”

Competing With Costco

Since Walmart’s card program is slated to go into action on April 1, the natural comparison the program is drawing is to Costco’s, which is also getting ready to launch a new and improved credit card rewards program with its new partner in co-branding, Visa.

Slated to hit the market in late June, the new Costco cards program will allow holders of the co-branded credit card to reap 4 percent cash back on eligible gas purchases (up to $7,000 per year, then 1 percent back), 3 percent back on restaurant and travel purchases, 2 percent back on Costco and Costco.com purchases and 1 percent back everywhere else.

Other than its later start, more limited focus and higher cash-back thresholds, the Costco rewards program is also clearly differently structured, and is chasing different demographic shifts. Gas is a staple that will keep consumers driving to its locations, hence the holder of the biggest cash-back reward (and an easy one to offer while gas prices are historically low), while the second chases a trend of consumer spend shifting away from things to experiences. Driving consumers to Costco, either online or in store to buy, is still given a push through cash back — but a tertiary one, only one click ahead of general cash back for buying anything, anywhere.

Walmart, on the other hand, is clearly pushing a little differently with its cards and is also competing with more than just Costco.

Competing With Amazon 

One of the more surprising aspects of Walmart’s card-based loyalty program is that it isn’t working overly hard to push cardholders of all stripes to Walmart locations — shopping at a physical Walmart gains no preference over shopping anyplace else. Walmart clearly isn’t too worried about attracting that real-world spend and thinks everyday low prices plus 1 percent back will probably make it the winner of many real-world calculations, where it will be the closest in proximity and the lowest overall price.

Walmart is using its reward platform to push customers onto Walmart.com and reserving the biggest cash back for those who do their buying there. When it comes to real-world shopping, Walmart has many loyal fans, but when those same fans are shopping online or on mobile, their first stop is almost always Amazon. By pushing a card-based reward, Walmart is hoping to divert both that first look and the subsequent conversion by offering a price to some cardholding customers that is likely to be lower than Amazon’s — and in a way that is hard for Amazon’s pricing algorithm to see.

Moving more customers onto Walmart.com also has the benefit of creating more online profiles for Walmart customers, which creates a larger base of customers to incorporate into its other digital-backed efforts, like Walmart Pay.

Walmart may not have loved rewards programs in the past, but it is also suffering through changing times and is now working doubly hard to build the type of digital ecosystem that keeps customers habituated to going to Walmart in both the real and digital world.

We’ll keep you posted as to whether consumers are following along.