Wal-Mart offers free two-day shipping in latest attempt to compete with Amazon

CHICAGO (Reuters) - Wal-Mart Stores Inc WMT.N will offer U.S. shoppers free two-day shipping on a minimum order of $35 starting Tuesday, its latest attempt to compete with rival Inc's AMZN.O popular Prime shipping program.

Aircraft flies over a Wal-Mart billboard in Mexico City March 24, 2015. REUTERS/Edgard Garrido/File Photo

Free shipping will replace ‘Shipping Pass’, Wal-Mart’s existing two-day shipping program that charges shoppers an annual membership fee of $49. Amazon Prime charges customers $99 a year for two-day shipping that comes with additional features like a streaming video service.

Marc Lore, head of Wal-Mart’s e-commerce operations, said the company’s offer will be “most compelling” for shoppers looking for low prices, a wide assortment and fast shipping.

“In today’s world of e-commerce, two-day free shipping is table stakes. It no longer makes sense to charge for it,” Lore said on a conference call. He is the former head of online retailer, which Wal-Mart bought for $3.3 billion last year.

The decision to scrap the membership fee is Lore’s boldest move yet to challenge Amazon since he took charge of Wal-Mart’s struggling online business. Earlier this month, Lore shuffled Wal-Mart’s e-commerce decks.

The move is in line with the broader push by Wal-Mart Chief Executive Doug McMillon to narrow the gap with Amazon and give it an even more dominant position in U.S. e-commerce. The retailer has been investing in e-commerce for the past 15 years, but it still lags far behind its Seattle-based rival.

Wal-Mart’s free shipping offer will be available on over 2 million items. It will include frequently ordered items such as household essentials, baby products, cleaning supplies and food items like cereal and peanut butter.

Wal-Mart said it will use its new online warehouses around the country to fulfill such orders and expects to ship many such items in just one day. In October, the retailer said it is on track to double the number of giant warehouses dedicated to online sales to 10 by the end of 2016.

Wal-Mart will also fully refund the membership fee for existing Shipping Pass members. The company started experimenting with Shipping Pass in 2015 and was trying to boost demand for the program by offering a free 30-day trial in 2016.

In a separate blog post, Lore said the retailer remains committed to saving consumers money. “I’ve been here for four months and I couldn’t be more excited about how fast we are moving. It feels like a startup.”

He indicated there will be more changes at the world’s largest retailer.

Reporting by Nandita Bose; Editing by Christopher Cushing