While your premise is true, any supplier giving Walmart seconds has their days numbered. Walmart runs such a tight ship around their supply chain that it'd neither go unnoticed nor unpunished.
What appears to be Walmart getting factory seconds is usually Walmart demanding a custom variant of a product. Walmart uses their own consumer research and sales (and just as importantly, returns) data to form strong opinions on optimal price points, margins, feature requirements, warranty periods, materials, etc for a given product/category, and they'll use their volume to get a manufacturer to create a custom variant of a product with what Walmart considers an optimized design/bill of materials.
It's true the "Walmart version" of a product is likely less robust than the non-Walmart version, but that is the result of explicit and precise demands formed from actual consumer behavior. Manufacturers then have to consistently and reliably fulfill Walmart's orders to those exacting demands; that's rarely achievable by binning seconds to Walmart. Especially so for product variants that require actual BOM changes. Rather, it usually entails dedicated production runs, with all of the level of care and QC as the original product's manufacturing.
While this worked before, I think this is going to get wrecked by the efficiency of Amazon’s process.
Where a generic product like a selfie light ring smartphone holder is improved by various merchants until a winning design and price point is clear.
THEN Amazon selectively considers making their own version and pricing it. Or Amazon just keeps pulling their fees.
If IP protection prevents an Amazon Basics version, Amazon doesn’t have to create a version in cooperation with the brand—-it just promotes it to compete with the brand’s own e-commerce.
With Nike, it is only recently the checkout and delivery came anywhere near what Amazon would do for the same shoes, same price.
There's the type of generic/private label stuff you mentioned, which both Amazon and Walmart do. Amazon originally had a major competitive advantage here in that they could leverage insights from their own sales and third party sellers in order to inform decisions for AmazonBasics (and their other private label brands). But Walmart also introduced third-party sellers to their ecommerce platform. Amazon's sheer volume of third party sales still gives them a leg up over Walmart in this area, but the type of risk-free consumer intelligence Amazon gets from third-party sales data is no longer something only they have.
Then there's retailer-specific SKUs of branded products, which is what I was referring to before. Amazon does this as well, but they take a fundamentally different approach to it that doesn't really impact the effectiveness of Walmart's approach. Amazon-specific SKU variants will likely have the "same" product as the standard SKU, but have unique packaging that's optimized for shipping. Walmart-specific SKU variants are optimized to sell the greatest volume possible while being considered "good enough" by consumers, and usually result in actual product changes in order to meet the price point, reliability, and feature set Walmart deems necessary to do so.
Because they have different optimization functions in their approach to retailer-specific SKUs of branded products, Walmart's approach is likely to continue working for Walmart, at least for their B&M sales. They'll start to have some of the same optimization concerns as Amazon as their ecommerce sales grow, but will be able to benefit from all the experience manufacturers and packaging companies are currently gaining from their current work with Amazon.
Is this still true? I recently went to a Walmart for the first time in a decade+, and it was obvious most of the items weren't seconds, they were just cheaply made. Even higher-end retailers with outlet stores have just started making lower-end merchandise specifically for outlet stores.
I meant seconds in the sense of second-quality items: ones that wouldn't pass QA for their primary distribution channels, whether that's high-end department stores or their own storefronts.
That's different from secondhand items, which are items that had been previously sold, used, and then refurbished to be sold again.
Walmart doesn't sell 'seconds' as you might normally consider. They do often receive inferior quality merchandise from their suppliers, often under the same SKU. This is how they compete on price. It's like the mattress business, at scale.
When it comes to some products, especially the more expensive ones like televisions, certain retailers will get custom SKUs. The products will have a feature added or removed or be in a slightly different color.
The idea is to short circuit the price match guarantees that they heavily promote.
If the SKU is the same, wouldn't this open everyone up to the problem in which a buyer buys one item from the expensive retailer (better product) and one from the cheap retailer (inferior product), then returns the inferior product to the more expensive retailer (keeping the better product at the cheaper price)?
This can and does happen. Though, for most items, the net gain you'll realize probably isn't worth the effort.
Consider this from Walmart [1]. Mobile 1 5W-30. Something I buy frequently, but not from walmart. Walmart's site doesn't list a SKU, but you can see the UPC code from one of the pictures.
Same exact SKU as Advance Auto [2]. The problem? I know for absolute fact that the containers that hold the oil look totally different (and Walmart's online photo does not reflect reality). I don't buy motor oil from Walmart because this is the crap they pull. And it's not like this just recently happened or the manufacturer recently switched. I've compared the containers across years and several states now.
Maybe the packaging is just different but it really is the same oil on the inside. I don't trust Walmart enough to find out.
An even sneakier trick is changes to product models without changing the model name.
I’ve seen Camelbak use cheaper parts on the “same” backpack, for example.
This happens on Amazon a lot, you see reviews saying “I bought this three years ago it was great, new one uses cheap xyz.”
I think you largely are going to see every business, Amazon merchants, brands, etc get away with whatever they can to cut costs, so long as it doesn’t have widespread effect on brand perception.
I've seen this a lot with clothing/footwear. Things like logos that used to be stiched on are now printed, material type will change, etc. Some of these don't really matter (like logos) but are easily noticed and indicative of design changes you don't see.
Repackaging, or even directly steering imperfect merchandise to online orders is happening all of the time.
“Model” or perfect versions are sent to retailers where consumers will interact with the product is purchased.
Online, photos and videos show the same “perfect” products.
I’ve seen clear examples of this by Fossil and Pendleton. I believe Apple does this in some cases, at least in repackaging.
There are rational reasons to do this as a business but it can be a bad thing for consumers.
Fwiw, Amazon has among the best return policies and the least friction in completing a return.
Return friction is where a company‘s selective inventory quality steering borders on anti-customer.