Trillion-dollar retail giant selling counterfeit goods? Estée Lauder sues Walmart

21st Century Business Herald Reporter Gao Jianghong Intern Zhang Heyun

Trillion-dollar retail giant Walmart allegedly selling counterfeit products?

On February 9th, U.S. time, Estée Lauder filed a lawsuit against retail giant Walmart in the U.S. Federal Court in California, accusing it of selling counterfeit perfumes and skincare products on its official website. The products involve well-known brands such as Aveda, Clinique, La Mer, Le Labo, and Tom Ford. Many Chinese consumers also complained on social media platforms about purchasing suspected fake skincare products on Walmart’s platform and Sam’s Club Global.

In the lawsuit, Estée Lauder alleges that Walmart engaged in trademark infringement, sale of counterfeit goods, and false origin labeling. Walmart allegedly used Estée Lauder’s trademarks for search engine optimization to attract traffic and profit. The complaint states that some products sold on Walmart’s website bear brand logos identical or nearly identical to those of Estée Lauder’s genuine products, which could easily confuse consumers. Specifically, these include Aveda hairbrushes, Clinique face creams, La Mer lotions and moisturizers, and Le Labo and Tom Ford perfumes.

Estée Lauder stated that it has purchased and tested some suspected counterfeit products, confirming they were not produced by the company. It also accused Walmart of severely inadequate oversight of the authenticity of products sold on its website. Despite knowing that counterfeit products existed, Walmart failed to take sufficient measures to verify the authenticity of its products, allowing fake products to circulate freely. The cosmetics company is demanding that Walmart pay unspecified monetary damages and has requested a court injunction to prohibit Walmart from selling the aforementioned suspected counterfeit products.

In response to the lawsuit, a Walmart spokesperson said the company has a zero-tolerance policy toward counterfeit products and will respond appropriately according to law after receiving the court summons. As of press time, Estée Lauder has not responded to inquiries from reporters.

Chinese consumers complain about suspected fake products

Headquartered in New York, Estée Lauder’s perfume business is popular among Generation Z consumers, with brands like Le Labo and Tom Ford experiencing continuous growth—these are the main brands mentioned in the lawsuit. In the second quarter of fiscal year 2026, Estée Lauder reported strong overall performance, with net sales increasing by 6% to $4.2 billion, and a profit of $162 million for the quarter, turning a profit from a loss the previous year. The core drivers of this growth are skincare and fragrance businesses, with skincare accounting for the largest share of total sales. Driven by La Mer, Estée Lauder, and The Ordinary, this category saw a 6% increase in organic net sales. The fragrance segment also grew by about 6%, mainly led by Le Labo and Tom Ford.

All these brands are high-end, light-luxury, or premium beauty and fragrance brands that rely on genuine quality, ingredients, and experience to justify their prices. However, counterfeit products circulating at lower prices through other channels can directly divert target customers and cut into genuine sales. If quality issues arise, they can quickly erode the brand’s premium image built over many years. Some consumers shared their previous purchase experiences, such as “I bought La Mer from Sam’s Club Global once, and the packaging was very loose,” or “I bought a small bottle of the ‘Little Brown Bottle,’ and it caused facial itching and allergic reactions.”

Meanwhile, some consumers mentioned purchasing the same products at Walmart at prices lower than official counters or flagship stores. “I bought Estée Lauder eye cream at Walmart, and I thought it was so cheap—turns out it was fake,” they said. Generally, large retailers can obtain brand products at “wholesale prices” through global direct procurement and bulk purchasing, then reduce operating costs via warehouse-style logistics.

Walmart, as the world’s largest retail chain, offers consumers high cost-performance and convenience with its “Everyday Low Prices” philosophy. With the expansion of its e-commerce platform, Walmart recently became the first retail company globally to surpass a market value of $1 trillion. Its other core retail format, Sam’s Club, requires an annual membership fee for entry, akin to Walmart’s “premium flagship,” and its global shopping service is more like a high-end beauty membership channel.

Many Chinese consumers say they trust Walmart and Sam’s Club’s reliability, which is why they choose to buy through “global shopping” channels on these platforms. When news of counterfeit products broke, many exclaimed, “No! You’re telling me Walmart sells fake products?”

The risk of counterfeit goods at retail giants like Walmart also raises consumer caution about purchasing from unofficial channels. “Are there fake products on Taobao, Tmall, or JD.com?” “From now on, I’ll only buy luxury brands at official counters.”

Counterfeit proliferation impacts Estée Lauder’s performance

As a major cosmetics giant, Estée Lauder’s sales depend on diversified channels, including platforms like Walmart. Now that the company has taken legal action against Walmart, it appears to be “fed up” with the rampant counterfeit products online.

Since Walmart’s strong retail performance overlaps with Estée Lauder’s growth regions, counterfeit products sold by Walmart could significantly hinder Estée Lauder’s performance.

Estée Lauder’s financial report indicates that in the U.S. market, the overall share of high-end beauty sales has increased, especially in skincare and haircare. The company noted that “Clinique and The Ordinary have driven growth in our skincare segment, ranking first and second in that category.” In mainland China, Estée Lauder achieved double-digit organic net sales growth for the second consecutive quarter, outperforming the overall high-end beauty industry with a 13% increase. In the 2025 fiscal year, the company expanded its market share across all categories, both online and offline, with La Mer, Tom Ford, and Le Labo performing particularly well.

Walmart’s 2025 annual report states that the U.S. market is Walmart’s largest segment, with retail revenue of $462.4 billion, accounting for 67.9% of total revenue. Walmart has maintained its position as China’s top supermarket chain for many years, with net sales in China reaching approximately $20.3 billion in fiscal year 2025, up from about $17.9 billion in 2024, setting a new record. Sam’s Club also contributed significantly. The potential sale of counterfeit products in Walmart’s most rapidly growing and most relied-upon market could drag down Estée Lauder’s performance, prompting the company to pursue legal action.

In fact, Estée Lauder does not oppose boosting sales through e-commerce. Its latest financial report states that the company continues to expand consumer reach through multiple platforms and retail formats. From October 2025 to January 2026, Amazon expanded to 10 markets with 12 brands; during the same period, TikTok’s e-commerce channels added 7 markets and 12 brands.