Whistleblower claims Walmart inflated e-commerce reporting

Tri Huynh, a former director of business development for Walmart’s marketplace division, said he was wrongfully terminated in early 2017 after filing a complaint with the retailer’s Global Ethics hotline alleging  the company was “manipulating various operating levers” to inflate its e-commerce numbers.

Huynh filed a civil suit in federal court Thursday (March 15) in the Northern District of California. The 69-page filing, first reported by Bloomberg News, detailed how he repeatedly told supervisors of problems with Walmart’s goals to ramp up its online offerings to better compete with Amazon, where he worked before joining Walmart in 2014.

Huynh, once  considered a rising star by the retailer, said Walmart had serious problems with how marketplace sellers uploaded their products, like the system’s inability to correctly categorize items, acknowledge returns and police the quality of items uploaded. He said management was so concerned about adding online inventory quickly they did not properly police or address issues like charging third-party marketplace suppliers too much commission, or failing to process returns which inflated the retailer’s sales numbers.

“Wal-Mart’s senior leadership knew they had to manage the market’s perception of its current and short-term progress in achieving its long-term goals. Wal-Mart thus endeavored to paint an overly-optimistic picture of its current and short-term progress in the catching-up in the E-commerce space,” the filing noted.

OVERINFLATED ONLINE ITEMS
It’s no secret Walmart has been chasing Amazon with its online efforts, and in the past few years invested an estimated $5.5 billion on acquisitions and fulfillment centers to support the online business. The payoff looked as if was happening last year as Walmart reported sales volume growth in excess of 63% by mid-year, with an expectation that would continue. But, Walmart came in short of the 40% expectation for the fourth quarter of fiscal 2018 with sales growth at 23%. For fiscal 2019, the retailer said it will get to 40% by year-end with a slower ramp up in the first half of fiscal 2019 which began Feb. 1.

Huynh said he was challenged to add 3,000 new marketplace sellers to Walmart.com during 2016 and again in 2017. He also noted in the filing that incorrectly categorized items overinflated the number of items available online. He said entire product catalogs were counted as “available items” even if they were not eligible for sale to the public.

When Walmart purchased Jet.com there was an overlap of items when the systems were connected. The filing claims Walmart.com reported the bigger number without clarifying the possibility of duplications, which misled the public. Huynh said he made his supervisors aware of system faults that made the sales results look better than they were. He claims nothing was done to correct the issues.

WALMART RESPONDS
In December 2016, Huynh sent a formal and detailed complaint to Walmart’s Global Ethics hotline, alleging primarily that “Marketplace Business and Walmart Labs leadership team members have been manipulating various operating levers to portray an inaccurate picture of the state of Walmart in the long run.”

On January 10, 2017, Huynh was informed he was no longer an employee, with the company citing layoffs for his dismissal. Ironically, on Jan. 9, RetailLeader.com published a list of “17 Leaders to Watch in 2017.” Huynh was the only Walmart employee on the list.

Walmart told Talk Business & Politics that Huynh is a disgruntled former employee and the allegations are untrue. The company provided the following statement:

“This litigation is based on allegations by a disgruntled former associate, who was let go as part of an overall restructuring. We take allegations like this seriously and looked into them when they were brought to our attention. The investigation found nothing to suggest that the company acted improperly. We intend to vigorously defend the company against these claims.”

Huynh’s attorneys noted in the filing that complaints also have been filed with the U.S. Department of Labor and the State of California under the Whistleblower retaliation statute.