Wal-Mart's Data Deluge

The retail giant Wal-Mart - with customer traffic of 100 million shoppers per week - has been collecting customer data through check out scanners for years. The company paid $4b for data infrastructure in 1991 and goes to great lengths to keep its data secret from suppliers and competitors. This customer and product data is segmented by store geography and is used to model tests to improve operational efficiency and product availability. Wal-Mart currently holds twice the data of the entire internet and gives the company an advantage in tailoring product availability to the right customer at the right time.

Based on this article and my knowledge of Wal-Mart's shopping experience, these data collection efforts are helping Wal-Mart make products available at the right time and help with supplier relationships but there isn't anything radical with these practices that is giving the company a competitive advantage. All businesses should aim to better understand their customers in order to make strategic decisions like new stores, product availability, and the offering of new products. The reason is that other retailers such as Macy's or Target are just as able to study their customer's buying habits, store performance, and inventory availability just as easily. Most retailers offer data collection efforts through loyalty programs and credit cards. It is up to them how much they are storing and analyzing this information to make business decision. I think that Target has a very similar effort to Wal-Mart's because of what Wal-Mart has been doing. The only true advantage that Wal - Mart has it that it doesn't share the scanner information with Nielsen or IRI, which makes it difficult for specific Target stores to better price match against Wal-Mart. Wal-Mart also collects data on more transactions than anyone else because it receives the most customer traffic. Additionally, it is important for any business to meet the needs of its customer base but I find it disturbing that Wal-Mart is looking to profit from unfortunate natural disasters like the gulf hurricanes. This is how their pop tart and beer response to Hurricane Frances was spun.

There are privacy concerns with what Wal-Mart is able to collect and I hope that steps have been taken to prevent personal data such as social security numbers, credit scores, mortgage balances, and driver's license numbers from being compromised. This article was not specific on how Wal-Mart might be using these pieces of information to offer new services, however this may be unknown. The fact that these pieces of information are available to Wal-Mart and the potential for abuse does disturb me. However, if I were to buy anything from a retailer with a credit card, then I surmise that they would collect this information as well. The key question is whether my household is receiving more credit card offers in the mail due to my shopping habits. This I am not sure of. Overall, I believe it is the moral responsibility of every business leader at Wal-Mart to not abuse the company's comprehensive data collection efforts.

Wal-Mart's data collection and technology efforts has effects beyond the company's customer base; Wal-Mart's suppliers are impacted as well. In order to improve inventory efficiency, the company uses RFID technology to keep track of inventory pallets. However, it does this by forcing its customers to invest in the RFID technology in order to continue to do business with the retail giant. With this technology they are able to become aware of supply outages up to the minute and relay this information back to suppliers for fulfillment. It can also notify suppliers of missed shipments or errors in delivery to get these problems corrected quickly. All of this contributes to the customer experience because items are in stock when needed - however, I don't think this is a radically different practices than other retailers. Wal-Mart is also gaining more power over its suppliers due to this information because it shares only what is needed for the supplier. The retail giant is moving towards scan based trading, where the inventory sold at Wal-Mart stores is owned by the manufacturer until it is sold - reducing the massive amount of inventory that Wal-Mart now holds on its books. This would be a massive change, putting Wal-Mart in a similar position to Ebay - another company that serves as that marketplace for goods but doesn't own the actual items being sold.