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Amazon is going after Walmart with a 45 percent discount on Prime for lower-income shoppers

It’s on.

Amazon shipping boxes piled on a doorstep. Jeramey Lende /
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

Amazon already owns the high-income shopper segment in the U.S. Now it’s making a bid to court those who have less income at their disposal.

On Tuesday, Amazon announced that it is offering a 45 percent discount on Prime memberships — $5.99 a month instead of $10.99 month — to U.S. residents receiving government assistance.

Shoppers with an Electronic Benefits Transfer card — used for benefits like the Women, Infants, and Children Nutrition Program — are eligible for the lower price but they also have to re-qualify every year for up to four years.

The move comes a little over a year after Amazon first introduced the $10.99 monthly payment option for Prime, which was previously only available for an annual fee of $99.

The monthly option comes with the same perks like free two-day shipping on tens of millions of items and access to a large selection of online movies and TV shows for no extra charge.

The monthly payment option was seen as a way to attract lower-income customers — the type of shopper who might otherwise prefer, say, Walmart — who could not cough up $99 at one time. Since then, Prime membership growth has been the strongest among households making less than $50,000 annually, an R.W. Baird study found.

The offer follows an announcement Amazon made earlier this year that it would start accepting food stamps for its grocery items beginning this summer. Amazon’s grocery service costs an additional monthly fee on top of the Prime membership. It’s unclear if lower-income customers taking advantage of Amazon’s new Prime offer would also get a discount on the grocery delivery fee.

Amazon Prime is the most crucial piece of the Amazon shopping machine, since those customers spend more and buy more frequently than non-Prime members do. CEO Jeff Bezos has said he wants to add so much value to Prime that it becomes irresponsible to not use it.

Amazon’s discount offering is just the latest salvo in a renewed rivalry between Walmart and Amazon since Walmart last year acquired, started by former Amazon employee Marc Lore.

The two sides are currently engaged in a price war in packaged goods that is terrifying some of America’s biggest grocery brands. Amazon has also recently taken Walmart’s lead more often than in recent years. Amazon followed Walmart’s 500-store expansion of a grocery pick-up model with two Amazon locations of its own and has also lowered its free-shipping threshold to $25 in what looks like a way to combat Walmart’s free, speedy delivery offering.

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