Amazon’s recent announcement of a new benefit for Prime members highlights the intense competition between the e-commerce giant and Walmart. This new initiative, which offers a fuel discount, appears to be a strategic response to Walmart’s own membership program.

On Wednesday, Amazon revealed that Prime members can now save 10¢ per gallon at BP, Amoco, and Ampm gas stations across the United States. According to the company, “Amazon today announced that Prime members can now save 10¢ per gallon at approximately 7,000 BP, Amoco, and Ampm gas stations across the U.S. This offer could lead to average savings of nearly $70 per year on fuel for members shopping at eligible locations. Additionally, in 2025, Prime members can look forward to more transportation-related savings, including an electric vehicle charging discount through BP Pulse, BP’s electric vehicle charging service, with further details to be shared next year.”

While we’ll set aside the electric vehicle (EV) charging initiative for now, the fuel discount stands out, particularly as it mirrors a similar benefit offered by Walmart’s membership service, Walmart+, which provides discounts at Exxon, Mobil, and Walmart gas stations.

The Competitive Landscape

It’s evident that Amazon is closely monitoring Walmart’s actions in the marketplace. As two of the largest companies globally, their competition is fierce. This rivalry ultimately benefits consumers, as both companies strive to enhance their offerings.

What makes this new benefit particularly interesting is that it marks the first time Amazon has extended Prime perks beyond its own products and services. Historically, Prime benefits have centered on Amazon’s core offerings, like free shipping and access to its streaming platform.

Understanding Amazon’s Strategy

Amazon likely views Walmart’s fuel discount as a legitimate competitive threat. The underlying assumption is that consumers may be reluctant to subscribe to multiple annual memberships, prompting Amazon to innovate in order to keep its customer base intact.

By introducing this discount, Amazon is incurring costs it hasn’t previously faced. The company estimates that members could save an average of $70 each year, but it’s unlikely that BP is completely absorbing that expense. While gas stations anticipate increased traffic from Amazon Prime members, their profits primarily come from in-store sales rather than fuel sales. Therefore, it stands to reason that Amazon is covering some of the costs associated with this discount.

It’s worth noting that all Prime benefits come with associated expenses. Even with free shipping, there are tangible costs related to picking items, packaging them, and delivering them to customers. Amazon views these costs as essential to its marketing strategy and customer retention efforts. The more value it adds to its membership program, the less likely members are to cancel.

For Amazon, the aim goes beyond the $139 annual fee for Prime. The company knows that Prime members typically spend considerably more on its platform than non-members. If customers see added value—like a gas discount—they are less likely to shop elsewhere. For instance, if a Prime member can save money at the pump in October, they may be less inclined to make a purchase at Walmart.

The Walmart Factor

However, it’s important to recognize that Walmart provides similar benefits, and many consumers likely have a Walmart store nearby. If individuals are weighing which membership to maintain, the fuel savings could sway their decision toward Walmart, particularly since many Americans frequently buy gas.

In conclusion, I have long considered Amazon Prime to be one of the most brilliant business concepts ever conceived. It has eliminated barriers to online shopping and significantly increased customer spending. With the introduction of this new fuel discount, the value proposition for Amazon Prime members has only strengthened—now, they can save money not only when shopping online but also at the gas station.