Walmart Stock (WMT) Plunges as Safety Probe Exposes Marketplace Risks

Walmart's marketplace platform faces regulatory scrutiny after investigators uncover alarming safety violations—sending WMT shares tumbling.

Regulatory Fallout Hits Retail Giant

The probe's findings reveal systemic gaps in Walmart's third-party seller vetting process, exposing consumers to potentially hazardous products. Investors aren't waiting around to see how deep the rabbit hole goes.

Market Confidence Erodes

When a company that built its reputation on 'everyday low prices' gets caught cutting corners on safety, it's not just stock prices that take a hit—it's the entire brand promise. Another reminder that traditional retail's race to the bottom continues, while decentralized marketplaces keep gaining traction with transparent, community-vetted quality control.

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Online Surge

An investigation by CNBC has claimed that Walmart’s huge online growth – see below – has been driven by making it easier for third-party sellers to join and sell on its marketplace. However, CNBC said that has come at a cost.

It claims that as a result some of Walmart’s customers have received ‘counterfeit, potentially dangerous products’ via the marketplace. The investigation also found what it describes as dozens of third-party sellers who have ‘stolen the credentials of another business to set up an account, including some who were offering fake health and beauty items.’

CNBC said it found at least 43 third-party sellers who had used the identity of another business to set up their account.

CNBC also purchased and tested six beauty items for its investigation by sellers that were impersonating legitimate businesses. All of them were fake, according to brands and lab testing, CNBC reported.

Amazon Pressure

This has happened, CNBC claims, because Walmart has loosened third-party seller vetting controls as it looks to compete harder with Amazon (AMZN).

Walmart commented on the report stating that “trust and safety are non-negotiable for us.” It added: “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. 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.” 

However, CNBC claims that three weeks after CNBC shared its reporting with Walmart, it changed and enhanced some of its marketplace vetting policies for beauty and personal-care products in late July.  

Despite Walmart’s statement the investigation could be a huge blow to the company’s reputation as an All-American, family-friendly institution.

Is WMT a Good Stock to Buy Now?

On TipRanks, WMT has a Strong Buy consensus based on 30 Buy ratings. Its highest price target is $129. WMT stock’s consensus price target is $114.86, implying a 11.68% upside.