When they announced that Radio Shack would get into the game business, the same argument came about. market share loss as well as a direct competitor in the same malls etc. Result was a non issue, actaully made GameStop stonger.
If Amazon doesn't execute flawlessly, they will be holding the bag on tons of titles that they won't know what to do with. When a game falls out of favor, as they quickly can, you can really get stuck with inventory on trades.