What Wal-Mart Knows About Customers' Habits

Based on the “What Wal-Mart Knows About Customers' Habits" article by Constance L. Hays and my prior knowledge of and experiences with Wal-Mart, I would say there are more pros to their innovative technology than cons. As a result of their massive amount of data collection, they are able to successfully utilize this information to gather customer insights that serve as a competitive advantage. In addition, their pioneering technology and the data collected from it have a positive impact on suppliers for the most part, making their manufacturing/distribution processes and business operations more efficient and improved. And although there are some privacy issues with the information they have access to, I believe there are more benefits of these data than risks, and that there is not too much need for concern over their motives.

Using the vast amount of data Wal-Mart collects through various technology sources, they are able to capture insights to forecast future business and create great experiences for their customers. They use forecasting methods to plan for a new store (both the products it will need and the number of shoppers it expects to attract) and to determine how many cashiers will be needed at a store during a particular time. And by analyzing trends, they are able to predict popular items for specific situations, such as the increase in sales of strawberry Pop-Tarts and beer during Hurricane Frances.

Wal-Mart has also begun to use their Web site to learn more about their customers’ buying habits. Not only do they gain knowledge on what certain customers purchase (as a result of the personal information required to process an online order), but more importantly, they are able to analyze what collectively ends up in one shopping cart. This helps Wal-Mart know which items are needed and should be grouped together in-store, as well as guiding their pricing strategy. For example, when I shop online on Amazon, I notice a section of the page that refers me to other products I may want to buy based on my current item I chose or even products that typically go with the item I want. This is all made possible through their database which holds information on what products customers bought in the past, individually and collectively with other items.

Wal-Mart’s ability to forecast future business and utilize their Web site to gather data and develop valuable insights has definitely been a major component of their competitive advantage. Effective analysis of their data is what helps them constantly achieve low prices, which is Wal-Mart’s key selling point.

Although Wal-Mart has high standards (that may seem too demanding at times) for their suppliers, it is what makes them more efficient and improves business operations for both Wal-Mart and their suppliers. This is largely made possible as a result of Wal-Mart’s enhanced information technology. Wal-Mart’s innovative technology allows them to share information with suppliers over private extranets to show how their products are doing. They can also track products through bar codes and electronic data interchange that enter their system. And to help Wal-Mart in their efforts to gather data, they are requiring manufacturers to invest in radio frequency identification so that they can track the items they sell.

In addition, Wal-Mart uses their enormous amount of data to attain more efficiency with their business operations. For instance, information is used to decide which products are stocked in the store based on expected demand while details about a manufacturer’s punctuality, or lack of, is recorded in the back of the store for future reference. Their purpose is to “protect Wal-Mart from a retailer's twin nightmares: too much inventory, or not enough.” As one consultant stated, "They track the purchases and very quickly route that back to their suppliers so they can be replenished. They are very strict with their suppliers, but they give them the data that they need." Their technology has also served to help them keep in real time, or close to it, in order to manage their suppliers more effectively. If a truck fails to drop-off or pick-up something, they will be notified within hours to handle the situation.

As further proof of their impact with suppliers, Wal-Mart meets with each of their suppliers to discuss sales goals for the year, where suppliers are encouraged not to miss sales targets. If sales goals are not met, suppliers can expect difficult terms with Wal-Mart in the future. This may seem too demanding, but I believe it is Wal-Mart’s tough stance that allows them to be more efficient and successful. Even at my job at Sushi Sake, my manager is extremely strict with the details of the processes and methods required to perform my job effectively. This work environment pushes me to be more efficient and pay attention to details. Therefore, although my managers are demanding, I believe it is necessary and it is what helps me be more successful in the long run.

For the most part, I am not too concerned about the privacy issues associated with the amount of personally identifiable data they gather about customers, but there are limits to what I feel is necessary versus going too far. Because Wal-Mart is a huge multi-national global corporation who has a lot at stake and because I have shopped at Wal-Mart all my life, I do trust them with my personal data. In the article, it states that Wal-Mart is “capable of capturing a huge amount of outside information about them that has nothing to do with their grocery purchases,” but it never said that they actually do that. Similarly, Ms. Dillman said that “she did not think Wal-Mart had ever tried to squeeze data from credit cards to learn more about customers’ buying habits” because they could still do that by analyzing their market and competitors’ markets without the credit card information.

If all of this is true, I am not concerned with the ability of Wal-Mart to gather information unrelated to my buying habits and will also continue using my credit card to make purchases. And if I needed to cash a payroll check at Wal-Mart, I would even enter my Social Security and driver’s license number, because I feel that information is necessary for this situation to keep appropriate financial records. Then again, if Wal-Mart began to take advantage of their access to personal information, I would definitely become more concerned and not wish to use my credit card. Although it is essential to collect some personal information, especially with online purchases, I do feel it is somewhat unnecessary for Wal-Mart to even have the capability to access our court dates, driving record, creditworthiness, etc. because they do not need this information to develop customer insights. If Wal-Mart’s true focus is on the products it sells and not to whom it sells, personal information unrelated to buying habits to gain customer insights, in my opinion, is never necessary.

Overall, Wal-Mart is doing a good job of employing a wide variety of technology to gain information in an efficient manner, but there is always room for improvement. Their immense data collection serves them as a competitive advantage through the insights and experiences developed and their innovative technology aids to improve business operations with suppliers by increasing efficiency. As for the privacy issues associated with the personally identifiable information they have access to, I am not too concerned as long as they do not begin to use this information or take advantage of their access to it. If it became known that Wal-Mart accessed the personal information frequently or have alternative motives, they can expect to face tough repercussions with unhappy customers worldwide.