It's a Horse Race Between Amazon and Walmart

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When the book is closed on this retail quarter we'll have two narratives, the companies that Amazon (AMZN) can crush and the companies that Amazon should admire or even fear.

We know who is getting crushed. We only need to check the scoreboard. Today we see the stock of LBrands (LB) down almost 10 percent as, once again, it has had to slash the estimates. The numbers here are a casualty of the slowly dying mall: Victoria's Secret is in 1100 of them, Bath & Body Works 1,600. CEO Leslie Wexner's remarkable, but you need to be an alchemist to make gold in the mall these days and we know there are no successful alchemists.

LBrands joins Dick's Sporting Goods (DKS) ,  Macy's (M) and Coach (COH) in the loss column. Dick's and Macy's have said they need to be very promotional to stay maintain share and the P word, as we call it, is the kiss of death for profits. Coach lowered the boom on gross margins which made those of us who applaud the purchase of Kate Spade chill in our boots.

But yesterday we heard from Target (TGT) and its strategy of growing both online and offline's paying off, with the former putting up gold standard 32% growth and the latter excelling in apparel, electronics and new store formats including much needed college-based stores. What could be better than to outfit your kid's room from a nearby Target rather than Amazon where you might not even have the correct address and you certainly can't figure out what works best in the dorm room. That's why Target's stock rallied yesterday although everything's softer today.

Now, today along comes the one company that, I think, Amazon really needs to worry about: Walmart (WMT) . What makes Walmart so special? First, it has committed to online in a big way, leveraging its 4,100 store base to make it easy for the 100 million people who shop there each week to pick up goods. You could also look at that store base as 4,100 distribution centers with easy delivery for food, blunting the footprint of Amazon which will only have a tenth of the stores that Walmart has when the Whole Foods deal closes.

More important, the commitment to online comes replete with one of the greatest e-commerce minds, Marc Lore, CEO of Jet.com, who is simply identified as the leader of e-commerce. I love that Jet.com can be so integrated already that it's part of the family.

Speaking of family, that's Walmart's ace in the hole. Amazon has endlessly been able to access the capital markets for all the money it needs, even though it doesn't consistently show profits. Walmart CEO Doug McMillon has a similar luxury, the Walton family, which wants to win the same way it did when Walmart rolled over all of the smaller stores in so many markets across the country with its scale and with its low prices, courtesy of its buying clout.

And there, too lies the real Achilles heel of Amazon: the clout Walmart has over the suppliers. Amazon's the biggest customer of pretty much every single consumer products company in the country. They all have web sites, too, many of them hosted by Amazon Web Services.

So many suppliers make a pilgrimage to Bentonville Arkansas to beg for more space and more favorable terms for their wares. If I am a chief technologist of any supplier I am going to greenlight shifting away from Amazon Web Services to the ultra-competitive Microsoft Azure or Google Web Services. That way my CEO can go to Walmart's headquarter and say "we know the score. We aren't trading with the enemy."

Yep, it's one thing to fear Amazon. It's another thing for Amazon to fear you. I think Walmart's got that possibility. Of course Amazon's clever. It has Alexa steering you toward their products. It has Prime, although Walmart has free two-day deliver-no membership fee as McMillon calls out in today's comments. And it's got great prices like Walmart.

Let just call it like it is: a legitimate two horse race with others bringing up the rear but at least their now at the track.