Walmart’s marketplace has changed significantly since its launch. What was once a cautious approval gatekeeping vendor product became a wide-open free-for-all that threw open the door to identity theft and counterfeit products. Additionally, Walmart took major steps to ensure seller legitimacy. They needed stamped invoices from vetted distributors, vetted and double checked inventories, and red tape like you wouldn’t believe before approval was granted. This level of scrutiny – vastly greater than that applied to other competitors such as Amazon – was considered unacceptable.
In the beginning, Walmart’s marketplace was extremely strict, requiring sellers to show documentation that they had purchased each of their 100+ units. This included huge, household name brands like Lululemon and Nike. We confirmed vendor identity by calling on the phone. We made sure that their businesses had been around long enough. To see just how strict the rules were, consider the very high-profile case where Dell tried to sell through Walmart’s online marketplace. Unfortunately, they did not pass the very high vetting standards.
At the end of March, that started to change as Walmart started easing its tone and approach. Gone are the days for applicants to upload their W-9 and Employer Identification Number (EIN) forms in order to apply. Even there, they still need to issue their EIN. The policy change resulted in a truly historical explosion of new seller sign-ups to the platform. As a result, a deluge of innovative new products hit the market for consumers. Walmart’s 3rd party marketplace has exploded on the scene in the last five years. By the end of 2021, the cumulative number of vendors increased almost 58% over 2020. As of March of this year, almost 700 million products were available for sale on the site. This beautiful number marks a whopping 67% leap since May.
For one, Walmart’s marketplace is growing by leaps and bounds. This expansion allows them to sell tens of thousands of skin-care products, makeups, and fragrances by exclusive labels. One seller has even listed luxury beauty products on sales of more than 90% off regular retail prices. With this growth comes questions about the legitimacy of products being sold on the platform.
Walmart maintains a zero-tolerance policy for prohibited or noncompliant products and invests in new technologies and tools to ensure that only trusted items reach consumers. The company’s online marketplace is quickly approaching $100 billion in sales each year. It is slated to take at least 10% of all domestic online sales by 2026.
Barchiesi, an industry expert, emphasized the importance of proper vetting, stating, “It’s easier to keep people off the marketplace if you do the proper vetting.” He pointed out that once these shady sellers get on, it’s a lot harder to safeguard consumers. This sentiment is echoed by a former employee who remarked on the potential profitability of operating within a gray market, stating, “There’s a lot of money to be made in the gray market.”
This growing ease of access to Walmart’s online marketplace has led to expressions of concern over fake or counterfeit goods. One former employee pointed out that some sellers might overlook the risks associated with counterfeits, saying, “If we’re going to make [millions] in sales on these Nike products, the percentage of counterfeit from that is probably small enough that it’s worth us doing this.”
Dangerous conditions Industry insiders have compared the situation to a “Wild West” due to the lack of organization compared to the safe environment at Amazon. Paul, an observer of marketplace, said the incumbents’ increasing obstacles as sellers attempted to cut through the cluttered platform. In fact, customers have raised alarm bells about the authenticity of products as well. One individual shared her experience: “My daughter bought these at Sephora before. We ran out and saw these were a good price and decided to purchase,” only to find that the product caused adverse reactions, stating, “She broke out in hives each time she used the drops.”
Damo, another stakeholder in the industry, remarked on the broader implications of such issues: “There’s a domino effect, and it trickles and affects everyone.” This may be the most important revelation of all — that counterfeit products not only affect the safety of individual consumers, but can erode trust in the overall marketplace.