The pressure comes in the form of an ultimatum directed at technology companies with which Wal-Mart does business.
Wal-Mart is telling the companies if they want Wal-Mart's business they can no longer run applications for the retailer on Amazon’s cloud services platform known as Amazon Web Services (AWS).
The Basic Problem
Amazon has become a dominant player in cloud storage and on-demand web-based services. Wal-Mart has no desire to add to Amazon’s bottom line, ergo the reported ban on the use of AWS by Wal-Mart tech partners.
Instead of using AWS, as many companies such as Netflix Inc. (NASDAQ:NFLXD) do, Wal-Mart has been keeping most of its data on its own servers or renting cloud space from AWS competitors such as Microsoft Corp.’s (NASDAQ:MSFTB) Azure.
A Security Issue
In addition to normal corporate rivalry, Wal-Mart spokesman Dan Toporek told The Wall Street Journal there’s another reason his company doesn’t want its data stored at Amazon. “It shouldn’t be a big surprise,” Toporek said, “that there are cases in which we’d prefer our most sensitive data isn’t sitting on a competitor’s platform.”
Amazon isn’t buying that explanation. An Amazon spokeswoman said Wal-Mart’s moves were attempts to “bully” tech partners. “Tactics like this are bad for business and customers,” the spokeswoman said.
The Battle Rages On
Wal-Mart and Amazon have been at each others corporate throats for years. Amazon’s plan to buy Whole Foods Market was seen as a direct attack on Wal-Marts attempts to grow its grocery business by slashing prices. Amazon also lowered its Prime membership fee by almost 50% for people on government assistance – a major part of Wal-Mart’s target audience.
It may not be that Wal-Mart will do much to slow down AWS’s growth but by insisting partners use alternatives, the company could very well boost those alternative companies and help accelerate their growth.
And The Grocery Wars Continue
Meanwhile Amazon's planned purchase of Whole Foods Market gives the company instant access to nearly 450 physical grocery locations nationwide. While that sounds like a lot, Wal-Mart has about 5,000 locations in the U.S. and is the most dominant retailer in the world.
Although there is currently a Wal-Mart store within a 15-minute drive of 90 percent of all Americans, Amazon is known for quick growth and experts and analysts alike assume Amazon’s physical presence will only get larger.
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Acquisition ActionBoth Amazon and Wal-Mart have made acquisitions part of their growth plan. Amazon’s latest, Whole Foods Market, followed several others including Zappos, Twitch, Kiva Systems and Audible.
Wal-Mart, on the other hand, has been buying up online retailers recently in a move to boost its e-commerce sales. Most recent acquisition was menswear company, Bonobos. Last year Wal-Mart bough Amazon competitor, Jet.com for $3 billion.