Thanks for this vivid illustration.
Most of this is actually possible to do today. The cost saving could be meaningful, but most likely half of the items would not be in Walmart’s inventory. But that could be fixed relatively easily.
The real problem, the reason why this scenario is not realistic today, is that Michelle would quickly come back to Amazon: it is actually difficult to offer the type of retail experience that Amazon is offering today. Michelle would miss her prime video, or her fresh deliveries, or simply the quality of the customer support and the functionalities of the website.
I see this happening, but it will take some seriously good e-commerce alternative.