Former Walmart CEO Bill Simon says that Amazon has been “predatory” by selling goods below cost subsidized by profits from their cloud and advertising businesses. Simon says that this strategy put major competitors like Circuit City and Toys R Us out of business allowing Walmart to then raise the price of Prime without losing their customers.

Bill Simon, a former Walmart CEO, discussed Amazon, Walmart, and Alibaba in an interview on Fox Business which can be watched below:

Amazon Behavior Has Been Predatory by Definition

I’ve not been an advocate of breaking Amazon up. I’ve been an advocate of really looking at them hard and maybe having them report more details in segment reporting. They just sort of smush everything up into one number and report and I don’t think that gives clarity to the investor. If you really think about it their behavior has been predatory almost by definition. In 2014 they took the price of Prime up right after Circuit City and some others went out of business. They took another price increase to $129 for Prime and Toys R Us is gone.

The consumer loves them, it’s awesome, I use them all the time, it’s really great to have the stuff delivered. But you see them putting people out of business and raising their price, and then again putting people out of business and raising their price, and that’s just not right.

Didn’t Walmart Put Competitors Out of Business? Walmart did it for years and years by being a good retailer, not by selling below cost and subsidizing it from income from the cloud and from advertising. Walmart just bought well, moved it well, shipped it well, sold it well, and did it better than anybody else. That’s a different play. It’s sort of like if Exxon decided to get into the restaurant business and used oil revenue to drive restaurant companies out of business.

How Does Alibaba Compare to Amazon? I love Alibaba. I’ve been in their stock for a while and it is just a terrific business. They’ve got a little bit of a different business model than Amazon. They built it differently because they have much more population density across their key markets than Amazon does other than the main metro’s in the US. I think they have a better opportunity to move the product and eventually, one day make money. I don’t think Amazon has that.

Walmart Successfully Went After Digital Business

Walmart stated a couple of years ago that they were really going to go after the digital business and they’ve done that. They have done it really well. They bought Jet, they just invested in Flipkart, they bought Bonobos, and they’ve bought a lot of other things. It sort of puts some juice back in the business.

On the other hand, three years ago they delivered $29 billion in operating income, last year they delivered $20 billion, and they have already sort of warned that they are going to be below that this year. It’s come at a really steep price but they are doing exactly what they said they are going to do and if you are an investor who likes that strategy you’re buying.

People Don’t Want Their Groceries Delivered

Grocery is hard, it’s really hard. It took Walmart 20-25 years to get average at it, nevermind good. When Amazon bought Whole Foods, they not only bought a grocer, they bought a premium fresh grocer. That’s really hard to deliver and to deliver consistently and I think they are finding that out. Part of the problem is that people generally don’t want to have their groceries delivered.

Most cities, other than New York and San Francisco and older cities, were built in and around the time and grew with the interstate highway system. So people in Dallas commute to and from work and they pass 20 grocery stores. They don’t need it delivered to them. They don’t want it sitting on their doorstep but it would be really nice if they could pick it up on their way home and not have to shop for it. That’s the theory behind Click and Collect and I think that’s a winner.