WalmartThe online marketplace has become an important part of the strategy to increase profits faster than sales and compete with longtime rivals. Amazon.
As the largest US retailer with over 4,600 locations nationwide, increasing sales online is also important for the future.
However, a CNBC study found that Walmart’s digital boom was a cost-intensive strategy as it made it easier for third-party sellers to join and sell in the market.
CNBC discovered that some consumers were receiving potentially dangerous products from counterfeit products after shopping at the market. The research found dozens of third-party sellers who stole qualifications for another business and set up accounts, including those offering fake health and beauty items.
In the early days of Walmart’s online marketplace, former employees and sellers said there is a strict policy to review third-party sellers and the products they offer. However, according to sellers, e-commerce consultants and current and former employees, Walmart has loosened these controls over time to plead with sellers away from Amazon and begging sellers to the sellers, appearing to be more friendly than their rivals.
When asked to comment on the CNBC report, Walmart said “trust and safety are unnegotiable for us.”
“The counterfeiters are bad actors targeting retail markets around the world, and we are proactive in our efforts to prevent and fight their deceptive behavior,” Walmart said. “We continue to invest in new tools and technologies to enforce zero-tolerance policies for banned or uncomplex products and ensure that only reliable and legitimate items reach our customers.”
A CNBC study unveils new details about Walmart’s strategy to expand the online market and the risks needed to take market share from Amazon.
Here are five takeaways from the survey.
Stolen Identity and Product Testing
During a CNBC investigation into Walmart’s marketplace, at least 43 third-party sellers were found using different business identities to set up an account. Some of these sellers were spoofing large, publicly available companies. Thermo Fisher Scientific and Rockwell Medicalothers were small but private companies, such as the New York grocery chain and the Chicago Pizzeria.
CNBC purchased and tested six items for research. They all bought highly rated, deeply discounted beauty products offered by sellers impersonating legal business. According to brand and lab tests, they were all fake.
The Walmart trailer is kept at Walmart Distribution Center in Hurricane, Utah on May 30, 2024.
George Frey | AFP | Getty Images
Some businesses that were impersonated as Walmart.com told CNBC that they later realized that they had received mysterious packages at homes and businesses were a customer’s return.
One of them, Lifeworks-ACS, received at least 14 returns and mailed them to CNBC for certification. They turned out to be all counterfeit products.
Employee pressure
During Covid Pandemic, Walmart’s Marketplace was booming, and the company gradually made it easier for sellers to join and list items on the platform, a former employee said.
Tammy Jones, one of the former employees, said when he first joined Walmart’s seller review team, the requirements for participating in the market were strict. However, she said there is pressure from management to approve more sellers over time, even if they are concerned about the applicant’s qualifications or documentation.
“It got to where they were like, ‘What do you know? Go ahead and approve everyone,'” Jones said. “They wanted that business, so they were willing to get the opportunity to do it.”
Onboarding and product review
The requirements for participating in the Amazon and Walmart markets are different. Amazon often forces sellers to do video interviews with company employees, but Walmart’s Marketplace does not list video interviews as a requirement for participation.
Over time, Walmart changed documents that require sellers to submit during the application process. In the past, according to a video of Walmart’s application uploaded in February 2022, applicants had to provide the employer’s identification number and form with both W-9 and EIN.
By late March, applicants still had to provide an EIN, but according to a video from the Walmart Sellers application posted on YouTube on March 31, there was no longer a need to upload the W-9 and EIN form.
According to the video at the time, the only document that our sellers needed to upload was a copy of their driver’s license or passport. Additional IRS documents are listed as “optional”, the video shows.
There are also differences in the documentation Amazon and Walmart ask sellers for the products they want to list. On Amazon, some sellers are asked to provide an invoice that shows how they sourced their products. Walmart’s Sellers CNBC said Walmart was interviewed in July before changing some aspects of the review process. People asked to submit documents said they often need to view the invoice for one unit and sometimes answer some questions about the supplier.
When you provide an invoice that shows only one unit compared to 10 or 100, experts said, it would make it easier for people to resell stolen or counterfeit items.
Changes to Walmart
Approximately three weeks after CNBC shared its report with Walmart, the market review policy and personal products policy were changed in late July.
In an email sent by Walmart to some sellers, the company said it would announce new restrictions in this category and begin requiring certain sellers to participate in the “enhanced review program” of such items. This change addresses some of the issues raised in the CNBC report.
As part of the new program, some sellers will need to provide documentation for each of the assortment of personal care or beauty items, including invoices indicating that the product was directly supplied by the brand’s owner or manufacturer.
According to some sellers, many beauty and personal care lists have been removed from the platform after the change.
Legal landscape
The nature of the online marketplace makes it difficult to remove counterfeit products completely due to lack of regulations. Selling counterfeit goods is a crime, but the platform faces little responsibility for promoting their sales as long as the brand removes the list of fake products after they have brought them attention.
The Shop Safe Act, a bipartisan federal bill, is designed to curb the sale of fake online products by encouraging the platform for better veterinarian sellers and the products they offer. If the platform complies with certain anti-anticipation measures, if the seller provides fake products, it may be protected from liability.
The brands supported the law widely, but in some cases like Walmart and other online marketplaces, they have not been able to pass at least three times so far. Amazon, Etsy and eBay Two U.S. senators who spoke on condition of anonymity because the debate was private, told CNBC they lobbyed against that aspect. They said the law is expected to be reintroduced in current Congress.
Without more specific policy changes, legal experts said the argument that certain platforms could be held responsible for the sale of harmful products such as counterfeit body lotions and broken fire alarms is gaining momentum, even if they were technically sold by third parties.
