Amazon Discovers That Even Paranoids Have Competitors

Amazon boasts some 170 million Prime subscribers, who pay membership fees for free one-day delivery on many products, video streaming of select TV shows, movies and live sports, and other perks. Despite its enormous reach, Amazon’s retail divisions lost $2.4 billion in the last quarter—a sharp swing from its $3.5 billion in profit during the same period last year.

Since taking the reins in July 2021, CEO

Andy Jassy

has been seeking to reverse the earnings slide by streamlining the company’s retail operations and closing distribution facilities. Amazon’s workforce shrank by roughly 100,000 during the second quarter of this year.

While many progressives cast Amazon as a monopoly, to Mr. Jassy it probably doesn’t feel like one. The company has been fast losing ground to

Walmart.

Profits from Amazon’s dominant cloud service are helping support its struggling retail operations, but such internal subsidization can’t continue indefinitely as cloud computing grows more competitive.

That Prime members haven’t canceled their subscriptions doesn’t mean they won’t when they discover they could get more value for their buck elsewhere. Walmart’s membership service costs about $40 less a year and also offers free next-day delivery—plus gasoline discounts. The company recently inked a deal to provide its members with a free annual subscription to the Paramount+ streaming service (a $59 value). If that isn’t enough to keep Amazon execs up at night, Walmart is pioneering drone delivery and launching its own healthcare network.

Then-CEO

Jeff Bezos

made news on

CBS’s

“60 Minutes” in 2013 when he previewed a delivery-by-drone service that aimed to whisk packages to customer homes within 30 minutes. After nearly a decade and more than $2 billion in spending, the project is only getting off the ground now. Amazon plans to launch a pilot service this year in Lockeford, Calif., population 3,572. Walmart, for its part, is expanding its up-and-flying drone delivery service to up to four million households in six states.

Alphabet’s

drone delivery service is also lapping Amazon’s.

Hence Amazon’s $1.7 billion bid for iRobot, which is a naked play for the company’s artificial-intelligence and robotics expertise. Amazon’s home-monitoring Astro robot—currently available to consumers by invitation only for $999—has been widely panned by tech reviewers. Privacy scolds claim Amazon wants to use the Roomba to map people’s homes, but that’s paranoid.

Amazon simply doesn’t want to catch the next big wave in tech innovation late—again. In 2014, the company belatedly launched a relatively primitive smartphone, which it discontinued a year later. The company took a $170 million write-off on the project. It was similarly late to enter the restaurant-delivery market and struggled to compete with the likes of Grubhub and Uber Eats. It ended its service in 2019, though it recently announced it would provide Prime members free Grubhub subscriptions for a year.

Progressives believe that Amazon and other big tech companies need only plow money into an endeavor to surpass competitors. No doubt they wish it were so.

Earlier this month, Amazon shut down its in-home health and telehealth venture that it launched in 2019, after few businesses signed up for the service. Amazon has apparently realized that it’s easier to buy its way into the healthcare market than build its own service from the ground up.

One Medical would provide Amazon a network of 188 primary-care clinics and more than 8,000 employer-customers who pay for their employees’ access to the network. Employees can book virtual and in-person appointments within 24 hours for basic medical procedures like Pap smears. Here, too, Amazon seeks to compete with Walmart, which last year acquired a telehealth provider and boasts 27 clinics across four states.

But Amazon also has to contend with its archnemesis in Washington—Federal Trade Commission Chair

Lina Khan.

Ms. Khan made a name for herself in progressive circles by arguing in a 2017 Yale Law Journal article, “Amazon’s Antitrust Paradox,” that the company’s “aggressively pursuing growth at the expense of profits” was anticompetitive even if it benefited consumers.

The FTC earlier this month launched a review of Amazon’s iRobot and One Medical acquisitions. Ms. Khan no doubt realizes it would be very difficult to break up Amazon, but she could instead try to stop it from buying companies that could help it evolve as its competitors do. Maybe that’s being too cynical, but only the paranoid survive.