One of Walmart’s biggest bets is putting pressure on Amazon

• Walmart’s logistics business is putting pressure on Amazon’s, according to Wells Fargo analysts.
• Walmart offers a cheaper version of Fulfillment by Amazon, which could limit Amazon’s fees.
• Wells Fargo cut its rating on Amazon to equal weight from overweight

Amazon’s fulfillment business is being hurt by another major retailer: Walmart.

The big-box chain has spent years building its own logistics network. This helps Walmart fill its own online orders, including from the Walmart Marketplace, where third-party sellers can pay fees to list products on Walmart’s website and let Walmart stock and ship them to customers.

The model is similar to Amazon’s Fulfillment by Amazon, or FBA, which allowed small businesses to do the same with Amazon’s own logistics network years before Walmart.

But Amazon “is no longer the only large-scale marketplace in North America,” Wells Fargo analysts led by Ken Gawrelski wrote in a research note on Monday.

Walmart’s third-party logistics offering is also about 15 percent cheaper than what Amazon charges through FBA, the analysts wrote.

Amazon may limit how much it raises its own fees “due to competitive pressure from Walmart Marketplace,” according to the note. While Amazon has raised FBA fees for sellers by about 5 percent a year in the past, those increases could be closer to 2 percent in the next few years because of rival Walmart’s bid, the analysts wrote.

That could mean billions of dollars less in fees over the next few years and a hit to Amazon’s operating income, Wells Fargo analysts wrote.

Gawrelski and his fellow analysts downgraded Amazon shares to equal weight from overweight, according to the note. They now have a $183 price target on Amazon stock, down from $225.

Walmart’s logistics options for other businesses have only grown recently, the analysts wrote. They pointed to Walmart’s announcement in August, for example, that third-party sellers would be able to use Walmart’s fulfillment network for orders placed off Walmart’s website.

Analysts cited pressure from Walmart’s business as just one of the challenges facing Amazon’s revenue. Others include investments in Amazon Web Services, a smaller contribution to revenue from Amazon’s advertising business and spending on Project Kuiper, Amazon’s plan to provide global broadband access using thousands of satellites.

Amazon shares fell more than 3 percent to about $180.50 on Monday after Wells Fargo analysts released their note.