Walmart’s challenge to Amazon’s online retail supremacy is good news for consumers.

Yet, I suspect that Amazon is only now beginning to face the full force of this challenge. And in this case, it’s only due to Amazon’s own arrogance. Namely, its escalating punishment of those who do not kneel in subservience to its paradise-pretense system, Prime.

I say paradise, because Prime’s range of Prime-only goods and its unlimited two-day delivery program are obviously perceptibly beneficial to its subscribers.

I say pretense, because Prime’s relative gain skews very firmly towards the retail outlet rather than to its consumers.

After all, getting consumers to pay $100 a year for Prime, Amazon doesn’t simply retain a nice guaranteed plus-payment before any of its goods are sold, it locks-in consumers to its product line. Once Prime users have paid their $100, they want to maximize their use of that service rather than look for cheaper prices elsewhere. Correspondingly, they maximize use of Prime services.

In that sense, Amazon’s masterstroke is to get consumers to pay a fee to buy more of its goods than they might if they didn’t pay the fee in the first place!

But now Amazon faces a challenge.

Facing Walmart, that which has the greatest capital base, consumer name recognition and understanding of Amazon’s business model to compete with it, Amazon faces a problem.

And consider what Walmart is doing to win over Amazon’s customers.

First off, Walmart has engaged in a much more aggressive effort to undercut Amazon prices on a range of goods. I have found items as diverse as cellphone protectors, to bathroom products to clothing that are lower than their equivalents at Amazon. The opposite is also true for other items, but Walmart is fraying the edges of Amazon’s key brand identifier: That it’s always the cheapest place to go to for all you need.

Walmart is also making a major push to undercut Amazon on shipping prices. Walmart now offers regular deals in which buying $25 or $35 in goods gets you free two-day shipping. This has forced Amazon to offer free shipping for similar purchases, but with a catch. The free shipping in this case takes substantially longer, in what I believe is a deliberate effort to not-so-subtly remind customers that failing to buy Prime leads to punishment.

Now, while it was once possible for Amazon to do this without consequence, Walmart’s escalated effort to compete with the Seattle-based giant poses a problem.

Consider my example. As a non-Prime owner, I now use Walmart.com before Amazon.com wherever possible, even where there is a small price difference in Amazon’s favor. I do so because I know I will get my goods delivered more quickly and because I resent Amazon’s effort to punish me for not kneeling in worship to Prime.

This speaks to something broader in terms of the evolving online marketplace. As consumers become savvy to growing divergences in options, service, and prices, more and more people will resist Amazon’s game.

Ultimately, Amazon will have to offer a better deal to non-Prime customers or it will lose customers at growing margins. Walmart certainly intends to force that outcome.

Regardless, when people ask why capitalism is the best way of serving the most people, this situation is a great example. Consumers will be the ones who benefit here. Amazon just doesn’t know it yet.