Amazon’s online retail dominance has never been greater, sparking growing concerns about its business practices. But is it possible that the company is actually starting to falter in ways that other businesses can take advantage of?

According to Jumpshot’s latest CPG eCommerce Report, while Amazon has seen its conversion rates increase in key CPG categories such as household essentials and personal care, its market share is slipping.

In these two categories, Amazon’s marketshare is down by 2% and 5%, respectively, which seem like modest drops. But in some subcategories, such as dog food and snack bars, Amazon’s market share has dropped by as much as 20%.

Jumpshot observes that, “Amazon’s weakening CPG share is fueled by many factors, starting with strong performance by two of their most direct competitors: Target and Walmart. Although neither matches Amazon’s scope or overall volume, both Walmart and Target are growing consistently, and strategically chipping away at Amazon’s weaker categories.”

Among other things, Walmart and Target are making use of their significant brick-and-mortar footprints to lure customers with click and collect. They have also invested heavily in their grocery businesses, which can be used to grow their relationships with customers.

In addition to Walmart and Target, Amazon is facing growing competition from digitally native brands like Chewy, which specializes in pet food and supplies. In 2017, Amazon sold twice as much pet food as Chewy. By July 2019, Amazon and Chewy were selling approximately the same amount. According to Jumpshot, Chewy’s success is based on strong offline branding and effective paid search campaigns. Twenty-five to 30% of Chewy’s traffic comes from paid search, and the company converts a healthy 4.4% of that.

Is Amazon putting profit above customer experience?

Obviously, it would be unrealistic to expect Amazon to maintain a lead in every category, but the fact that it is losing ground in major CPG categories – and by substantial amounts in some subcategories – demonstrates that Amazon is perhaps less resilient to competition than many believe.

Amazon has a number of potential vulnerabilities that competitors can potentially take advantage of. For example, the company is constantly battling to contain the sale of counterfeit products in its marketplace, a problem that can impact customers as Amazon is believed to combine the products it warehouses for third-party sellers into a common pool. Awareness of this and concern about it among shoppers appears to be growing.

A newer potential vulnerability is that Amazon reportedly changed its algorithm to promote its profitability at the expense of customer interests.

According to the Wall Street Journal, which spoke to people who worked at Amazon, “Late last year… Amazon optimized the secret algorithm that ranks listings so that instead of showing customers mainly the most-relevant and best-selling listings when they search—as it had for more than a decade —the site also gives a boost to items that are more profitable for the company.”

The Wall Street Journal’s sources indicate that the algorithm update exposed a rift in the company. The retail giant’s Silicon Valley-based A9 search team is said to have opposed the move, which was pushed by business executives in Seattle, on the grounds that it “violated the company’s principle of doing what is best for the customer.” The company’s lawyers reportedly also initially opposed the move out of concern it would create antitrust issues.

Amazon is now facing antitrust investigations in the US and Europe, and algorithm changes that might particularly benefit the company’s private label brands would no doubt be of interest to regulators. Some of the people the Wall Street Journal spoke with claim that Amazon’s private label team had for years asked the search team to make changes that would lead to increased sales for their products.

Not surprisingly, Amazon denied that its algorithm has been updated to look at profitability. “Amazon designs its shopping and discovery experience to feature the products customers will want, regardless of whether they are our own brands or products offered by our selling partners,” Amazon spokeswoman Angie Newman said.

While it’s impossible to know who is telling the truth, the fact that Amazon employees were willing to speak to a major newspaper and make scandalous claims about their employer suggests that despite its dominance, Amazon isn’t invincible.

In fact, if these claims are accurate, Amazon might be at the point where the temptations associated with dominance become a major threat to its future and create opportunities for other retailers and brands willing to offer consumers better, friendlier experiences.