Soon, Hill confirmed their suspicions. “It is not my palette,” she said on Twitter. “They are FAKE!” The counterfeit palette had infiltrated Walmart’s website, but it wasn’t being shipped from Walmart warehouses. Instead, it was “sold and shipped by Mallroom Global Inventory LLC,” one of tens of thousands of “third-party sellers,” independent businesses that list their wares on Walmart’s app and website. Walmart is famously hands-on with the merchandise in its physical stores, working with manufacturers on design, packaging, and pricing. Its website and app are different. There, more than 35,000 third-party sellers are listed alongside the carefully vetted Walmart products. Third-party sellers were responsible for 92.5 percent of Walmart’s online inventory at the end of 2019, according to Marketplace Pulse, which tracks marketplace data. You can see this in action on Walmart.com. Search for “toothpaste,” and you’ll get more than 500 options “sold and shipped by Walmart” plus more than 500 from places like #1 DEAL, 55Dental, and a seller called “SAME DAY SHIPPING”—all third party sellers, like Mallroom Global Inventory LLC. If you make a purchase from one of these third-party sellers, your deal is with them. If the product never arrives, arrives broken, or turns out to be counterfeit, you can’t get a refund from Walmart. You’ll have to talk to Mallroom Global Inventory LLC. Walmart.com’s capacity as a meeting ground for buyers and outside sellers to do transactions among themselves is called the marketplace model. Walmart did not return The Markup’s request for comment. Many of the biggest brand-name retailers have added marketplaces to their websites, including Target, Sears, Office Depot, Crate & Barrel, Urban Outfitters, J.Crew, Macy’s, and Barnes & Noble. How can you tell if a product is coming from a reputable company you’ve heard of, or an unknown seller that you might want to know more about? The platforms don’t make it obvious, but look for language like “sold by,” “sold and shipped by,” or simply “by” and the company name. Who you’re really buying from should be disclosed by the end of the checkout process.
An unsustainable craze?
Marketplaces became popular because they quickly increase inventory, said David Spitz, CEO of ChannelAdvisor, a company that helps sellers manage their listings across marketplaces, but he thinks the marketplace craze is unsustainable. “The challenge is, if you take that to its logical extreme, then every retailer opens a marketplace that’s wide open and every seller sells on every retailer and there’s zero differentiation,” Spitz said. “Everybody sells everything.”
Risky business
The problem is that customers don’t always understand that they are not doing business with the big brand name whose website they are visiting. “Broadly speaking, consumers don’t understand the difference,” said Andrew Lipsman, retail analyst for eMarketer. “You have a different level of trust when you’re engaging with the retailer you know directly versus just engaging with a conduit to some unknown merchants that may not have standards in place.” Best Buy launched a marketplace in 2011 but shut it down five years later in part because customers were confused when they could not return third-party goods to stores, the company said. (The marketplace is still operating in Canada, however.) There are other risks in addition to consumer confusion. Counterfeits, faulty products, dangerous toys, and expired food have popped up on marketplaces, harming customers and undermining trust that companies built during the years when they vetted their merchandise more closely. Third-party marketplaces allow companies to earn income on sales but avoid responsibility for the products they list, Lipsman said. “You can draw parallels to what we’re seeing with news and disinformation on Facebook,” he said. “What happens is that these new platforms are built where they’re able to privatize the gains but socialize the cost. So they can claim, ‘Hands off, I’m not the seller who delivered this faulty product to you.’” The law needs to catch up to the way business is done online, Wilk said. “Literally, we were citing cases from the ’80s,” he said. This article was originally published on The Markup by Adrianne Jeffries and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
