Could Amazon’s Prime discount pull freight from Walmart?

Program targets lower-income Americans, who spend billions each year in Walmart stores

The online battle between Amazon and Walmart took another turn yesterday when Amazon announced it would begin offering discounted Prime memberships to those in the U.S. on U.S. government assistance. Earlier this year, Amazon was approved for the federal Supplemental Nutrition Assistance Program (SNAP) program, which allows customers to purchase goods using food stamps and other federal aid dollars.

Yesterday’s announcement could potentially shift millions of dollars of freight currently moving to Walmart distribution centers and stores – where one in five customers pay with food stamps – to Amazon’s transportation network, which includes a growing number of Amazon trucks, planes and ships, as well as UPS, FedEx, USPS and more regional and local delivery partners.

Prime subscriptions cost $10.99 a month ($99 a year) and include free and discounted shipping, fast shipping options, ebooks and streaming movies and TV shows among a host of other benefits. The new program will offer Prime subscriptions for $5.99 a month for those receiving government aid, giving them the same benefits as full-priced Prime memberships.

According to Morningstar, approximately 20% of the population receives SNAP assistance and Walmart secured about $13 billion in sales last year from the program – about 18% of the money spent in the program.

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In 2015, the U.S. government provided about $75 billion in SNAP benefits. Walmart and Amazon have both been approved as participants in a government pilot this year that for the first time allows SNAP recipients to make online purchases with their aid, although only residents of Alabama, Iowa, Maryland, New Jersey, New York, Oregon, and Washington are eligible to participate in the government pilot program at this time.