Reusable shopping bags are offered for sale at a Wal-Mart Neighborhood Market, in the Chinatown district of Los Angeles. Wal-Mart is sharpening its attack against Amazon. The discounter says it is changing its membership-based free shipping service test to two days from three days and is charging one dollar less for the annual membership fee. Wal-Mart began testing the service in 2015 as a way to counter Amazon's highly successful Prime shippingWal-Mart-Delivery, Los Angeles, USA

Wal-Mart Stores Inc. picked itself off the mat in 2017 and, for the first time, really squared off with Inc. And the retail giant represented the brick-and-mortar crowd well, landing some punches and prompting Amazon to punch back.

Wal-Mart put its $3.3 billion acquisition from the prior year into action; went on a buying spree, culminating with the $310 million deal to buy Bonobos, and strove to better serve its customers online and in stores. For its part, Amazon continued to dominate or match online and got into the brick-and-mortar game in a big way itself, buying Whole Foods for $13.7 billion. Both have been working to up their apparel game, at least online – Amazon through private label and other initiatives and Wal-Mart though acquisitions and a deal with Lord & Taylor.

Consider that round one.

Now, round two starts. And it could get bloody as the two vie in 2018 for market share and consumer mindshare with new approaches, new ideas (and maybe even more help if the dealmaking continues).

“Eighteen months ago it was Amazon and everybody else and the distance was growing between Amazon and the rest of retail,” said Edward Yruma, stock analyst at KeyBanc Capital Markets. “The narrative has changed and it’s Amazon and Wal-Mart versus everybody else. I’m not disputing the idea that Amazon is still the leader in retail from an innovation perspective, but I do think that we’re starting to see Amazon get some real competition from Wal-Mart.”

Yruma said Wal-Mart in many ways is gaining with a back-to-basics approach, investing in its stores and product offering, with the help of Marc Lore, an ex-Amazon executive who founded Jet and now heads the retailer’s massive e-commerce push.

Wal-Mart, for instance, started offering free shipping on orders over $35. And Yruma said, “Amazon had to respond to that, which candidly is the first time I saw Amazon respond to anything” a competitor did.

Wal-Mart added a discount when customers made in-store pickups of online orders and Amazon countered from a pricing perspective, Yruma said, noting that the “two are instances, in a way, where Wal-Mart out-innovated Amazon.”

If Lore and Wal-Mart chief executive officer Doug McMillon have their way, it won’t be the last time.

Wal-Mart is looking to bring to bear the advantages of its massive store fleet and its newfound focus on the latest tech.

“Our associates are using technology and apps for inventory management and price changes that help make their jobs easier and increase productivity in the stores,” McMillon said on the company’s most recent conference call. “Store leverage is helping to allow our strategic investments in e-commerce to continue. It’s also exciting to see how we’re removing friction from the customer experience with express pharmacy, an easier money services process and by expanding pickup options with our automated towers and online grocery. We now have online grocery in more than 1,100 stores and are looking forward to expanding this popular offering to another 1,000 locations next year.”

Wal-Mart’s e-commerce sales shot up 50 percent in the third quarter, with most of the increase coming through

“Over the past year, we’ve tripled the number of items on to reach more than 70 million [stockkeeping units],” McMillon said. “Marc’s team is making progress on hiring additional category specialists, focused on improving the customer experience and our positioning with the top 1 million e-commerce items. The recent agreement with Lord & Taylor [to sell fashions from the department store operator on the platform] is a great example of how we will be creating specialty experiences that complement what we offer and serve customers with the brands they want. We’re making good progress attracting premium brands to the site, such as KitchenAid and Bose.”

All of that amounts to a company on the go — but one that still needs to do some catching up online.

Wal-Mart is far ahead in terms of walk-in retail, but Amazon is still the undisputed e-commerce leader, selling more than 600 million items through its platform, eight-and-a-half times what Wal-Mart offers.

And while Amazon’s relentless drive to bring customers to its site — from free shipping and digital downloads through its Prime membership program to Prime Day in July — it’s also bringing the fight to Wal-Mart on its own turf. An package sits in a UPS truck in Palo Alto, Calif. As of 2014, the company is the biggest online retailer in the U.S., commanding about 20 percent of all e-commerceSmart Spending Avoiding Amazon, Palo Alto, USA

Amazon  Paul Sakuma/AP/REX/Shutterstock

Amazon hit the ground running with Whole Foods and this year is expected to continue to integrate the two businesses.

Brian Olsavsky, Amazon’s chief financial officer, told investors in October: “We’ve had busy months since we’ve joined forces, offering lower prices on a range of key grocery items in the stores. Launching the private-label — Whole Foods’ private-label products on Amazon, we’ve got technical work to make Prime the Whole Foods customer rewards program, and we’ll have that coming out in the future. We’ve added Amazon lockers to select Whole Foods stores. So lots of activity, lots of energy and we’re really, really excited to show customers what’s possible when we join forces here.”

Just where the combination leads to will start to become more clear this year, but more brick-and-mortar seems in the offering.

“We think we’ll also be developing new store formats and everything else just as we’ve talked about in the past with — before Whole Foods — Amazon Bookstores, Amazon Go and the opportunity that technology presents,” Olsavsky said. “We have on-campus bookstores. So we’re experimenting with a lot of formats. I think that Whole Foods really gives us a vast head start on that and a great base and a great team to work with that has a lot of history, and a lot of — they probably have 10 to 20 years of learnings that we don’t have and wouldn’t have. So we’re really excited about that.”

So expect Wal-Mart to go more online while Amazon pushes off-line and where the two meet, look for some sparks.