Business
5 takeaways from CNBC’s investigation into Walmart Marketplace
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.
European stocks rallied on Wednesday as comments from both sides of the Middle East war gave some conviction for a near-term end to hostilities.
“The market appears increasingly optimistic that an end to the war in Iran is in the offing as big gains in the US and Asia were matched in Europe,” said AJ Bell investment director Russ Mould.
The FTSE 100 closed up 188.34 points, 1.9%, at 10,364.79. The FTSE 250 ended up 484.48 points, 2.3%, at 21,688.19, and the AIM All-Share advanced 22.13 points, 3.1%, at 739.25.
On Wednesday, US President Donald Trump said that Iran had asked for a ceasefire but that the US would only consider this once the Strait of Hormuz, the vital oil and gas shipping route which Iran has effectively closed for most exports, is clear for shipping.
This came after Mr Trump told reporters on Tuesday the US would end operations in Iran “very soon”, perhaps within “two weeks, maybe three”.
The US president is due to make a televised address later on Wednesday.
Meanwhile, Iranian President Masoud Pezeshkian said the Islamic republic had the “necessary will” to end the war, provided its enemies guaranteed it would not flare up again.
But Israeli Prime Minister Benjamin Netanyahu insisted that Israel would press ahead with its military campaign and that “we will continue to crush the terror regime”.
Brent oil traded lower at 101.83 dollars a barrel on Wednesday afternoon, from 107.38 dollars late on Tuesday.
In European equities on Wednesday, the CAC 40 in Paris closed up 2.1%, while the DAX 40 in Frankfurt rose 2.7%.
Stocks in New York were higher, extending Tuesday’s bumper gains. The Dow Jones Industrial Average was up 0.9%, as was the S&P 500 index, and the Nasdaq Composite advanced 1.3%.
Michael Brown, senior research strategist, at Pepperstone pointed out that amid the “euphoria, exuberance, and relief” which has driven a rebound in risk appetite over the last day or so, the surge in energy prices means that a rise in headline inflation over the next few months is, essentially, “baked in”.
“Added to which, considerably higher energy prices, and continued supply chain disruption, are likely to bring with them substantial growth headwinds, in turn amounting to a notable negative demand shock, which will likely weaken what is already very anaemic economic momentum, most notably in Europe,” he said.
Mr Brown does not think financial markets have “ignored” these risks, but are essentially “parking these worries, to be dealt with on some other day in the future”.
Reflecting these concerns, the Bank of England said the Middle East war had caused “a substantial negative supply shock to the global economy”, increasing risks to the financial system.
The central bank said the fallout will also weigh on economic growth and tighten financial conditions, such as restricted lending by banks.
“Adverse impacts on the global macroeconomy increase the likelihood that multiple vulnerabilities could crystallise at the same time, amplifying their effect on financial stability,” the Bank said in a quarterly update on identifying risks to financial stability.
Bank governor Andrew Bailey sought to dampen expectations of interest rate hikes.
In an interview with Reuters, Mr Bailey responded to market expectations for higher rates by commenting “that is a judgment markets have to make but I think they’re getting ahead of themselves”.
Prime Minister Sir Keir Starmer said the UK could weather the economic storm caused by the Iran conflict but acknowledged the crisis will “affect the future of our country” as households faced higher fuel costs now and the prospect of energy bill hikes later this year.
The UK is leading a diplomatic initiative to reopen the Strait of Hormuz, but restoring the flow of global trade will not be easy, Sir Keir admitted.
Foreign Secretary Yvette Cooper will host an international meeting on Thursday to “assess all viable diplomatic and political measures” to reopen the strait, after 35 countries signed up to a statement expressing willingness to contribute to efforts to ensure safe passage for shipping.
The yield on the US 10-year Treasury narrowed to 4.31% on Wednesday from 4.33% on Tuesday. The yield on the US 30-year Treasury ebbed to 4.89% from 4.91%.
The pound rose to 1.3324 dollars on Wednesday afternoon from 1.3205 dollars at the equities close on Tuesday. Against the euro, sterling firmed to 1.1476 euro from 1.1463 euro.
The euro stood higher against the greenback at 1.1608 dollars from 1.1523 dollars. Against the yen, the dollar was trading lower at 158.66 yen compared to 159.02 yen.
On the FTSE 100, the risk-on mood saw gains for banks Lloyds, up 5.8%, NatWest, up 5.4%, and Barclays, up 5.1%.
British Airways owner, International Consolidated Airlines, flew 5.7% higher, budget airlines easyJet and Wizz Air soared 5.0% and 6.2% respectively.
But housebuilder Berkeley Group plunged 9.7% as its decision to halt land buying amid the uncertainty sparked by the Iran war sparked significant profit downgrades.
In an unscheduled trading update, the Surrey-based housebuilder said its fears, expressed in a recent trading statement, that the economic consequences of the conflict in the Middle East could reduce confidence in a near-term market recovery has “now become a reality”.
The builder said it is reducing work in progress investment to match current sales levels and will not acquire new land.
Berkeley anticipates delivering above £1.4 billion of pre-tax profit, over financial 2027 to 2030, which analysts at RBC Capital Markets said was 29% below Visible Alpha consensus of £1.98 billion.
Mr Mould said Berkeley has a “long-standing reputation for being adroit at calling the ups and downs of the property market”.
“In that context, the moves the company has announced today will make others sit up and take notice,” he said.
Rightmove fell 1.4% as it said it will “defend vigorously” a proposed class action claim filed against it, as estate agents accuse the firm of charging excessive fees.
The London-based online property portal confirmed it is aware of reports that an application to commence collective proceedings has been filed with the UK’s Competition Appeal Tribunal.
On the FTSE 250, Trustpilot climbed 7.3% as Panmure Liberum upgraded to “buy” from “hold”, while Raspberry Pi extended Tuesday’s bumper gains with a further 13% rise.
Gold traded at 4,781.92 dollars an ounce on Wednesday, up from 4,613.15 dollars at the same time on Tuesday.
The biggest risers on the FTSE 100 were Babcock International, up 110.0p at 1,268.0p, Rolls Royce, up 75.0p at 1,207.0p, 3i Group, up 146.0p at 2,584.0p, Endeavour Mining, up 260.0p at 4,720.0p and Fresnillo, up 192.0p at 4,720.0p.
The biggest fallers on the FTSE 100 were Berkeley Group, down 332.0p at 3,104.0p, BP, down 30.3p at 576.0p, Shell, down 139.5p at 3,443.5p, Rightmove, down 6.0p at 422.9p and British American Tobacco, down 58.0p at 4,313.0p.
Thursday’s global economic calendar has trade figures in the US and Canada, and US weekly jobless claims.
Thursday’s domestic corporate calendar has half year results from Baillie Gifford Japan Trust.
– Contributed by Alliance News
Britain’s manufacturing sector has seen the biggest monthly jump in input prices for more than 30 years as the Iran war wreaks havoc on supply chains, according to a survey.
The S&P Global UK manufacturing purchasing managers’ index (PMI) survey, watched closely by economists, showed that the input price inflation index jumped by 15 points between February and March – the biggest rise since the UK withdrew from the European Exchange Mechanism (ERM) on so-called Black Wednesday in 1992.
The report also showed that delivery delays worsened due to the Middle East conflict as ships have been forced to re-route around the blocked Strait of Hormuz, which is a key shipping route.
Manufacturing production also contracted for the first time in six months in March, according to the survey.
Overall activity slipped back, with the PMI recording a reading of 51 in March, down from 51.7 in February and lower than the 51.4 flash estimate earlier this month.
Any reading above 50 indicates that activity is growing while any score below means it is contracting.
Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing output contracted for the first time in six months in March, as the war in the Middle East and ongoing concerns about domestic economic policy led to a scaling back of production.
“The impact of the war also caused noticeable shifts in the cost and supply chain backdrops.
“Delivery times lengthened to the greatest extent since mid-2022, while the acceleration in input price inflation was the steepest since the aftermath of the UK’s withdrawal from the ERM in 1992.”
The survey found that almost half of companies (49%) reported an increase in purchase prices, while only 2% saw a decrease last month.
It said the Iran conflict had a “marked” impact on supply chains, with average vendor delivery times growing by the most in more than four-and-a-half years.
The survey also showed an impact on jobs in the sector, with the latest round of cuts the steepest since last September.
But there was a chink of light with new orders remaining resilient as they rose for the fourth successive month in March, albeit at a slower pace than in February.
Mr Dobson said: “This suggests that the drop in production is currently more of a supply issue than one caused by an outright downturn in demand, though it’s hard to see how demand can prove resilient in the face of current high energy prices and economic uncertainty unless there’s a swift resolution to the war in the Middle East.”
Expert Mike Thornton, head of industrials at RSM UK, said: “The control of the Strait of Hormuz is one of the biggest commercial issues for manufacturers and issues will pile up the longer access is blocked.
“The increase in energy costs will be a persistent headwind, but worries relating to supply chain disruption are growing.”
A separate report from banking giant Barclays on Wednesday showed firms are already taking action to offset trading and cost pressures from the Iran war, with 43% seeing shipping and logistics costs hitting their profitability.
The lender’s business prosperity index revealed almost four in 10 (37%) are reducing their energy use or boosting supply chain efficiency, while nearly a third (32%) have changed their pricing to offset rising costs.
More than a third (34%) of the 500 business leaders polled for the survey are planning to pass on higher costs to consumers.
And over a quarter (29%) are cutting non-essential spending or wider operational costs, according to the report.
The U.S. Food and Drug Administration approved Eli Lilly‘s GLP-1 pill, the company said, a major milestone for the Indianapolis-based drugmaker and one that will test the market for new weight-loss medications.
Lilly said the once-daily pill, Foundayo, will start shipping from direct-to-consumer platform LillyDirect on Monday and will be available at pharmacies and on telehealth platforms “shortly after.” People with insurance coverage could pay $25 a month with a coupon from Lilly, while people paying out of pocket could pay between $149 and $349, depending on the dose.
The approval comes just a few months after Lilly submitted the drug to the FDA as part of a program that grants speedy reviews for drugs that are considered national priority interests. That means Lilly will introduce its Foundayo only about three months behind Novo Nordisk’s Wegovy pill, setting the stage for the next battle between the rival drugmakers in the next frontier for GLP-1 drugs.
“It’s a big moment,” Eli Lilly CEO Dave Ricks said in an interview with CNBC. “We’ve obviously been working in this category of medicines for a while with the first GLP-1 medication 20 years ago and improving ever since. Here is an option that’s not more effective … but it’s more accessible, it’s easier to fit into your daily routine.”
Lilly licensed the molecule, orforglipron, from Japanese drugmaker Chugai in 2018, paying just $50 million upfront for global rights to the drug. But there are still questions about how big the drug will become. It doesn’t produce as much weight loss as Lilly’s best-selling shot Zepbound. Millions of people are already used to the routine of injecting themselves once a week.
Eli Lilly Foundayo GLP-1 weight loss pill.
Courtesy: Eli Lilly
Analysts estimate Foundayo sales will reach $14.79 billion by 2030, according to FactSet. That compares to expectations of $24.68 billion for the weight-loss drug Zepbound and $44.87 billion for Mounjaro, which is marketed for diabetes in the U.S. and obesity and diabetes in the rest of the world.
Ricks said shots haven’t been as big of a barrier to uptake as Lilly once thought they would be. He still sees Foundayo as an attractive option for people who would rather take a pill or who are searching for a lower price than the injectables.
He sees it playing a role in maintenance, for people who achieve their goal weight with a shot and want to keep the weight off. And he sees Foundayo as a way to “reach the planet” without manufacturing constraints or cold-chain requirements that come with Zepbound.
Foundayo is a small molecule whereas Zepbound and Wegovy are peptides, which require more intensive manufacturing processes, a barrier Ricks thinks will hinder generic versions of Wegovy that have recently launched in some other countries like India.
“[Foundayo] does allow for scalability, and that will allow us to launch this globally on the first instance,” Ricks said. “So today, you can get the oral [Wegovy] in the U.S., but you really can’t get it elsewhere. This will be marketed around the world. As soon as we have regulatory approvals, we essentially have as much scale as we need to supply the world with an oral GLP-1 inhibitor.”
Lilly expects approval for Foundayo in more than 40 countries over the next year. The company since 2020 has invested more than $55 billion in manufacturing, which includes opening new sites and expanding existing plants to produce the pill.
In the U.S., Lilly will compete with Novo’s newly launched Wegovy pill. Early demand for that pill has been stronger than expected, with Novo reporting more than 600,000 prescriptions in March.
Novo CEO Mike Doustdar told CNBC in February that one of the earliest takeaways from the launch is that the pill appears to be expanding the obesity treatment market, drawing in new patients rather than converting existing ones from injections. Ricks agreed with that assessment and said Lilly doesn’t care whether people take Foundayo or Zepbound.
“We want people to be on the medicine that meets their health goals,” Ricks said. “If it has Lilly on the box, that’s the goal we have.”
Novo plans to argue that the Wegovy pill is more effective than Foundayo. The Wegovy pill showed around 16.6% weight loss on average in a late-stage trial, while Lilly’s oral drug caused roughly 12.4% on average in a separate study, when analyzing patients who stayed on treatment. Lilly’s Zepbound has consistently shown it can help people lose more than 20% of their body weight.
Meanwhile, Lilly plans to tout the fact that Foundayo can be taken any time without any restrictions, while the Wegovy pill needs to be taken first thing in the morning on an empty stomach with only a few ounces of water.
Where the two drugs are the same is the starting price. The lowest doses of both drugs will cost $149 for cash-paying customers thanks to an agreement the companies struck with the Trump administration last fall. And price is the most important factor for patients, said Dr. Nidhi Kansal, an obesity medicine doctor at Northwestern Medicine.
“Unfortunately, price is what is driving the decision making between clinicians and patients for these drugs because they’re all excellent drugs and we have lots of options now, but it’s still a financial decision at the end of the day,” Kansal said.
The lower price point and the approachability of a pill versus a shot opens up the market to casually interested patients, said BMO Capital Markets analyst Evan David Seigerman. Seniors on Medicare will be able to access Foundayo and other GLP-1 obesity medicines for $50 a month starting this summer as part of Lilly and Novo’s deals with the Trump administration. Ricks expects a “pretty robust” response to the program, which Lilly built into its financial guidance for the year.
Analysts say a successful launch of Foundayo is key to Lilly’s stock recovering from recent weakness. The company’s shares have fallen about 14% this year after a meteoric rise that briefly made Lilly the first trillion dollar market cap health-care company. Sales are a lagging indicator, so analysts will be tracking prescriptions to monitor uptake of the pill, said Cantor Fitzgerald analyst Carter Gould.
“If scripts are going in the right direction, and you’re seeing the continued gains, my guess is people will look through any sort of choppiness around [the first or second quarter],” Gould said.
Another factor for Lilly’s performance this year is a forthcoming readout for its more potent obesity shot, retatrutide. The company has already shared some late-stage data on that drug, but the most important trial is one studying the treatment specifically for weight loss. If retatrutide lives up to its expectations, Lilly would be on its way to creating a portfolio of obesity medicines.
“The future will be more choices, and that’s a great thing,” Ricks said. “And we hope Lilly is the one presenting those choices.”
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