As Target and Walmart Move Away From AWS, How Much Pain Will Amazon Feel?

As Amazon  (AMZN)  moves into brick-and-mortar retail with the purchase of Whole Foods, it only makes sense for Target (TGT) , Walmart  (WMT)  and other big retailers to seek other partners in the cloud, rather than help fund a large rival. 

Target is reportedly following Walmart's lead and plans to shift business away from Amazon Web Services. A mass exit of retailers from AWS would benefit competitors such as Microsoft's (MSFT) Azure and Alphabet's (GOOGL) Google Cloud Platform. Amazon's cloud business is so vast that it could withstand the losses, however. Microsoft, Google and other major cloud players each have their own potential conflicts that could eventually cost them business. 

While Target would not comment directly on Amazon Web Services, the company said it uses multiple cloud service providers. "Early this year we evaluated providers, as we regularly do, and determined there were options that would better fit our business," a spokesman said. "We decided to implement changes and have been in the process of doing so since."

Likewise, Amazon declined to comment. While the digital commerce giant may have friction with Walmart and Target, Amazon Web Services still has retail clients such as Brooks Brothers Group Inc., GameStop Corp. (GME) and Nordstrom Inc. (JWN)  Retail brands including Lululemon Athletica Inc. (LULU) , Nike Inc. (NKE) and Under Armour Inc. (UA) also use AWS.

"While AWS remains the 800-lb gorilla in the public cloud market, we believe the ambitions of its parent company may start to have a more significant impact on AWS' ability to move into certain vertical markets," Evercore ISI analyst Kirk Materne wrote in a report on Sunday. "Couple this with the increasing momentum behind hybrid cloud architectures and we believe that Azure remains well-positioned to gain market share over the next few years as it will be considered a safe partner and Azure's technology capabilities are essentially on par with AWS in many areas now (if not ahead in some)."

While losing a large account is unquestionably bad, John Dinsdale of Synergy Research Group said in an email that the defections of Wal-Mart and Target would be "blips" rather than "major events" for Amazon.

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