Report: Target opts out of Amazon cloud services
Target is pulling back on its use of Amazon’s AWS cloud services unit, unnamed sources have told CNBC. Target wouldn’t discuss details about which cloud services vendors it does use, but confirmed to Retail Dive that it has recently found new options. A request for comment from Amazon wasn’t immediately returned to Retail Dive.
In an email to Retail Dive, a Target spokesperson said that the company does not discuss vendor-partner relationships, but that they are using multiple providers: "Early this year we evaluated providers, as we regularly do, and determined there were options that would better fit our business. We decided to implement changes and have been in the process of doing so since. While we won’t share details, we plan to continue to use multiple cloud providers moving forward."
In a similar move that could undermine AWS, Walmart is reportedly pressing technology suppliers not to use Amazon’s cloud services, telling them they must run their applications with another provider if they want to do business with Walmart.
Amazon’s cloud services business isn’t just a lucrative source of revenue, but also a key support for its otherwise less profitable — if not unprofitable — retail business.
While retailers like Target and Walmart are on their toes responding to Amazon’s wide-ranging and highly experimental retail plays, which have raised consumer expectations for assortment and fulfillment speed, they don’t have such non-retail operations to fall back on.
"You need to examine the Amazon model and then determine what part or parts of it you can participate in profitably," Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive, adding that Walmart’s recent e-commerce acquisition spree may not be the best part. "Microsoft is second to Amazon in the cloud computing part of that business, so I suppose you can also make an argument that Walmart should be buying Microsoft."
Target is considering Microsoft Azure among other rival cloud services working to snap up that business, according to CNBC’s report, which also notes that Google and Oracle are expanding their own cloud services.
Such moves are obvious, in light of Amazon’s position as a competitor, a Walmart spokesperson recently told Retail Dive. "Our vendors have the choice of using any cloud provider that meets their needs and their customers' needs," the spokesperson said. "It shouldn’t be a big surprise that there are cases in which we’d prefer our most sensitive data isn’t sitting on a competitor’s platform."
It’s not like there’s been a mass defection from AWS, which also hosts Netflix (an Amazon Prime Video competitor) and other non-retail sites that make great use of the cloud. But Moody’s Lead Retail Analyst Charlie O’Shea warned last month that competition in the cloud is building. "AWS continued its revenue growth trend, though we note that margins crept down slightly as the competition in this segment also heats up," he said in a statement emailed to Retail Dive.
Retailers, aside from the distaste they may have for contributing to Amazon’s success, have other reasons to consider more options. A number of AWS retail clients, including Target, suffered website slowdowns in March, and some analysts have noted that, while AWS’s dominance in the space is due in part to its early entry, that has also led to an aging infrastructure.
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