One of Walmart’s big bets is paying off in its retail battle against Amazon, analysts say

Walmart is pressuring Amazon’s fulfillment business, Wells Fargo analysts wrote on Monday.

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

Amazon‘s fulfillment business is feeling the pinch from another major retailer: Walmart.

The big-box chain has spent years building its own logistics network. That’s helping Walmart fill its own online orders, including from Walmart Marketplace, where third-party sellers can pay fees to list products on Walmart’s website and let Walmart store and deliver 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 for years before Walmart.

But Amazon “is no longer the only scaled 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% cheaper than what Amazon charges through FBA, the analysts wrote.

Amazon is likely to limit how much it increases its own fees “due to competitive pressure from Walmart Marketplace,” according to the note. While Amazon has raised FBA fees for sellers by around 5% a year in the past, those increases could be closer to 2% in the next few years due to Walmart’s rival offering, 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, the Wells Fargo analysts wrote.

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

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

The analysts cited the pressure from Walmart’s fulfillment business as just one of the challenges facing Amazon’s income. Others included investments in Amazon Web Services, less contribution to income from Amazon’s advertising business, and spending on Project Kuiper, Amazon’s plan to provide global broadband access using thousands of satellites.

Amazon’s stock slid more than 3% on Monday to about $180.50 after the Wells Fargo analysts published their note.