5 key takeaways from CNBC investigation

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.

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. 

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. 

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.” 

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…