Looks like they did so by mistake.

Seems likely that they got duped by a scamming customer, but they should really take it off the shelf.

It wouldn't make sense for Walmart to be in any kind of dealings with a company like Friendship Star International Limited, whose knockoff media players look much like the one above, and it's even more unlikely that they'd permit such blatant copyright and trademark infringement in their stores. What has most likely happened here is that some enterprising young individual purchased an iPod, replaced it with a much cheaper knockoff and returned it to the store for a full refund....

 

http://gizmodo.com/5059293/walmart-unwittingly-sells-ipod-nano-knockoff-as-actual-ipod