> Does the corner bakery need a moat to be a business?

Yes, actually. Its hard to open a competing bakery due to location availability, permitting, capex, and the difficulty of converting customers.

To add to that, food establishments generally exist on next to no margin, due to competition, despite all of that working in their favor.

Now imagine what the competitive landscape for that bakery would look like if all of that friction for new competitors disappeared. Margin would tend toward zero.