Walmart‘s online marketplace has become a key part of its strategy to grow profit faster than sales and better compete against its longtime rival, Amazon.
As the largest U.S. retailer with more than 4,600 locations nationwide, growing sales online is also critical for its future.
But a CNBC investigation found Walmart’s digital boom came as it made it easier for third-party sellers to join and sell on its marketplace, a strategy that has come with a cost.
Some consumers have received counterfeit, potentially dangerous products after shopping on the marketplace, CNBC found. The investigation also uncovered dozens of third-party sellers who had stolen the credentials of another business to set up an account, including some who were offering fake health and beauty items.
In the early days of Walmart’s online marketplace, former employees and sellers said it had strict policies for vetting third-party sellers and the products they offer. But over time, Walmart loosened those controls in a bid to woo sellers away from Amazon and appear more friendly than its rival, according to sellers, e-commerce consultants, and current and former employees.
When asked for comment on CNBC’s reporting, Walmart said “trust and safety are non-negotiable for us.”
“Counterfeiters are bad actors who target retail marketplaces across the world, and we are aggressive in our efforts to prevent and combat their deceptive behavior,” Walmart said. “We enforce a zero-tolerance policy for prohibited or noncompliant products and continue to invest in new tools and technologies to help ensure only trusted, legitimate items reach our customers.”
CNBC’s investigation uncovered new details about Walmart’s strategy to grow its online marketplace and the risks it took to take market share from Amazon.
Here are five takeaways from the investigation.
Stolen identities and product tests
During CNBC’s investigation into Walmart’s marketplace, it found at least 43 third-party sellers who had used the identity of another business to set up their account. Some of these sellers were impersonating large, publicly traded companies such as Thermo Fisher Scientific and Rockwell Medical, while others were smaller, private businesses, such as a New York grocery chain and a Chicago pizzeria.
CNBC purchased and tested six items for its investigation, all of them highly rated, deeply discounted beauty products offered by sellers that were impersonating legitimate businesses. All of them were fake, according to brands and lab testing.
Walmart trailers sit in storage at a Walmart Distribution Center in Hurricane, Utah on May 30, 2024.
George Frey | AFP | Getty Images
Some of the companies that were being impersonated on Walmart.com told CNBC they had received mysterious packages at their homes or businesses that they later realized were customer returns.
One of them, Lifeworks-ACS, received at least 14 returns and mailed them to CNBC for authentication. All of them were found to be counterfeit.
Employee pressure
During the Covid pandemic, Walmart’s marketplace boomed and the company gradually made it easier for sellers to join and list items on the platform, former employees said.
One of those former employees, Tammie Jones, said when she first joined Walmart’s seller vetting team, the requirements to join the marketplace were strict. But she said over time, there was pressure from management to approve more sellers, even when she had concerns about the applicant’s credentials or documentation.
“It got to a point where they were just like, ‘You know what? Just go ahead and approve everybody,'” said Jones. “They wanted that business, so they were willing to take a chance on it.”
Onboarding and product vetting
The requirements to join Amazon’s and Walmart’s marketplaces are different. Amazon often makes sellers conduct a video interview with a company employee, while Walmart’s marketplace does not list a video interview as a requirement to join.
Over time, Walmart also made changes to the documentation it requires sellers to submit during the application process. In the past, applicants were required to provide their employer identification number and both a W-9 and EIN form, according to a video of Walmart’s application uploaded in February 2022.
As recently as late March, applicants still needed to provide their EIN, but they were no longer required to upload their W-9 and EIN form, according to a video of Walmart’s seller application posted to YouTube on March 31.
At the time, the only document U.S. sellers were required to upload was a copy of their driver’s license or passport, according to the video. Additional IRS documentation was listed as “optional,” the video shows.
There are also differences in the documentation Amazon and Walmart require from sellers about the products they want to list. On Amazon, some sellers are asked to provide invoices showing how they sourced their products, which includes proof they purchased between 10 and sometimes as many as 100 units. The Walmart sellers CNBC spoke to, who were interviewed before Walmart changed some aspects of its vetting process in July, said they were rarely, if ever, asked to provide details on how they sourced their goods. Those who were asked to submit documents said they often only needed to show an invoice for one unit and occasionally, answer a few questions about their supplier.
Providing an invoice that only shows one unit, compared with 10 or 100, makes it easier for people to resell stolen or counterfeit goods, experts said.
Walmart’s changes
About three weeks after CNBC shared its reporting with Walmart, the company changed some of its marketplace vetting policies for beauty and personal-care products in late July.
In an email Walmart sent to some sellers, the company announced new restrictions for the category and said it would start requiring certain sellers to participate in an “enhanced vetting program” for those kinds of items. The changes would address some of the issues raised in CNBC’s reporting.
As part of the new program, some sellers would have to provide documentation for each personal-care or beauty item in their assortment, such as an invoice that demonstrates the product was sourced directly from a brand owner or manufacturer.
Numerous beauty and personal-care listings were taken down from the platform after the change, some sellers said.
Legal landscape
The nature of online marketplaces makes it difficult to get rid of counterfeit goods entirely, partially because of a lack of regulation. While selling counterfeit goods is a crime, platforms face almost no liability for facilitating their sale, as long as they take down listings for fake goods after brands bring them to their attention.
The Shop Safe Act, a bipartisan federal bill, is designed to curb the sale of fakes online by incentivizing platforms to better vet sellers and the products they’re offering. When platforms comply with certain anti-counterfeiting measures, they could be shielded from liability if a seller offers a fake product.
Brands widely supported the legislation, but it has so far failed to pass at least three times, partially because Walmart and other online marketplaces like Amazon, Etsy and eBay have lobbied against aspects of it, two U.S. Senate aides, who spoke on the condition of anonymity because the discussions were private, told CNBC. The legislation is expected to be reintroduced in the current Congress, they said.
In the absence of more concrete policy changes, legal experts said the argument that certain platforms could be held responsible for the sale of harmful products like counterfeit body lotion or faulty fire alarms is gaining momentum, even if they were technically sold by a third party.
