I have, just in the past year, ordered a huge variety of things from other vendors, because Amazon prices were far from competitive. And, with free two day shipping from merchants partnered with Shop Runner (which I get free when I pay with my American Express), the difference in experience, cost, and time to deliver is competitive. NewEgg got my server hardware purchases, saving me several hundred dollars on a ~$3000 order. An RV parts vendor sold me an RV air conditioner for ~$200 less than Amazon. I'm shopping for a tankless water heater right now, which is about $160 less from other vendors. And, on the lower end, when Amazon first started doing subscription groceries, they were competitively priced; now, not so much. I find I prefer just buying what I need when I need it from local grocery stores.
I still buy a lot of stuff from Amazon, but it's much less than it used to be. And, I don't know if Amazon knows what they're doing or not when choosing to lose these sales. Presumably the increased margins make up for the lower sales (or at least the loss of sales to me, which may not necessarily be the same as decreased sales overall). Surely they're doing the math.
This is the same thing. I bought from Amazon before Prime partly because of the free shipping. The further away the free shipping gets, the harder it would be to choose Amazon over getting it local or from another vendor, I think.