Given the enormous amounts of data that Walmart captures, do you think that have been successful at converting them into an experience that serves as a competitive advantage for them?
When the majority of people think of “experience,” their minds usually jump to some deeply sensorial environment with free samples and personalized recommendations where the salesperson knows not just their name but also that of their family members.
Walmart is not that. Walmart does not give free samples. Walmart does not allow product demonstrations. Their employees are notorious for not knowing where things are (Suddenly this RFID technology doesn’t sounds so bad, does it?) and more than half the time their greeter stays slouched on his stool, staring at something behind you with his baggy, yellow eyes.
The closest thing Walmart has done to providing a sensory experience was in the fall of 2008, when Walmart stores underwent an impressive cosmetic transformation that we can only assume cost the company at least millions (exact figures were never released). They “softened” the warehouse look by adding a more modern color palette to their signage; they stopped keeping their back stock on the store floor and moved it to the back rooms; they changed the punctuations of their name from “WAL-MART” to “Walmart;” they changed their logo appeal more to feminine tastes.
What Walmart does do, however, they do better than anyone else. They take great pains in being the most dependable retailer by keeping an always-replenished variety of items in stock for the lowest possible price. And they do this thanks to the information they gather about the items you buy, not who you are.
Of course this has become a huge competitive advantage for them. Why else do you think other retailers and suppliers would give their firstborns to have a peek at their data? Here’s a fun thought: all the market information marketing practitioners rely on does not include Walmart’s data and for that reason is not nearly half as accurate as it could be.
As a personal example of how Walmart uses their consumer data, my family lives in Corpus Christi, Texas where Hispanics make up 59.6% of the population. If you were Walmart and you saw that your customers buy baskets full of tortillas, Goya beans, chorizo, horchata, and the latest Shakira CD, you’re obviously going to want to invest more in Hispanic products. As a result, consumers are more likely to shop at Walmart because Walmart was savvy enough to invest in stocking specialty items. Other companies, such as HEB and Target have been slower at realizing these trends because their data collection is not as streamlined and advanced.
In short, Walmart has successfully used the vast amounts of data they collect about what consumers buy, when, and how to bring forth a variety of benefits to the consumer:
- Item availability: maintaining brand dependability - both for Walmart and the supplier - by ensuring that items are well-stocked
- Item variety: offering items and choices that are relevant to the consumers
- Demand forecasting: predicting when certain products will see a spike or decline in sales and increasing or decreasing supply correspondingly
- Alleviation of store traffic: making more cashiers, salespeople, and managers available during peak hours as well as reorganizing the store layout for better shopping "flow"
- Procurement of better suppliers: responding to consumer demands for quality by introducing brand names (such as Martha Stewart Living)
These all sounds like things that, as a consumer, I appreciate and for which I am willing to “pay” my shopping information.
What do you think about the privacy issues associated with all of that data and the amount of personally identifiable data that they are able to capture? Does it bother you? Do you trust them with it?
Walmart’s ability to capture my personal information does not really bother me. Because of technology, personally identifiable information is so easy to get a hold of. Even so, Linda M. Dillman, Walmart’s chief information officer, explains that it is not necessary for Walmart to squeeze data from credit cards to learn about consumer buying habits. “We can do that without the credit card information. We can look at what’s happening in the market, and look at what’s happening in other markets that are similar.”
Consumer advocacy groups are quick to sound the alarm. “People don’t know that Walmart is capturing information about who they are and what they bought, but they are also capable of capturing a huge amount of outside information about them that have nothing to do with grocery purchases. They can find out your mortgage amounts, your court dates, your driving record, your creditworthiness,” says Katherine Albrecht of Caspian. My main issue with these statements is that these groups never say what can be done with this information. I, for one, cannot think of a single thing Walmart can do with my court dates.
From a business perspective, Walmart’s main concern is the products it sells, not the people to whom it sells them. This is mainly due to the fact that too many different kinds of consumers shop at Walmart; targeting specific consumers would be an inefficient business strategy on such a large scale.
I firmly believe that people fear Walmart because it is the largest, most visible collector of consumer data not because they actually know what Walmart does with that data. With 3,600 stores in the US alone and roughly 100 million customers each week, Walmart amasses more information about its products and shoppers than anyone else.
But here’s the real kicker: Everyone is collecting your data. Everywhere. All of the time. Whether you buy something or not.
That’s right, even if you chicken out and don’t buy those Twisted Pleasure condoms with your credit card there was a camera watching the way you move about the aisles, measuring how long you stared at the display, how long you considered your options, how you reacted when people passed by. (Why else do you think Walmart knows to stock them in the back, left corner of their stores? Because no one goes there.)
This by no means makes it “right.” But I think it is silly to expect Walmart not to when all other retailers are doing the same.
Some critics argue that Walmart should simply collect its consumer data like most other mass merchandisers do, with loyalty programs. I cannot stress this enough: Walmart does not participate in loyalty programs or discounts because that would undermine their business strategy. Walmart cannot claim to be the leader in the everyday-low-price business and then turn around and offer discounts on what is supposedly already the lowest price. Even if Walmart were to use a loyalty program to track consumer purchases, the information would not be as generalizable. And, more importantly, they would be accused of data mining their “most valued” customers.
These points aside, I do not trust Walmart with my information. That is, I would of course rather they not have my personal information – my shopping history they can keep, I see it as an implicit price I pay for shopping there – but they do and I would not be surprised that they use it. What I do trust is Walmart’s desire to stay ahead of its competitors (some people like to call this greed but I think we all prefer winning over losing). They are not going to sell that information, at least not while it is still a valuable competitive edge.
What impact do you think they are having on their suppliers? Making them better and more efficient, or driving them too hard and reducing their profitability?
Bruce Hudson of the Meta Group put it very succinctly when he said, “Walmart lives in a world of supply and command, instead of a world of supply and demand.” I won’t deny that Walmart pushes their suppliers to their limits – so much so that the ethics of production are often questionable (a whole other topic on its own) – but I think this question presents two situations that are not mutually exclusive.
Suppliers are faced with the problem that, if they are not in Walmart, they are invisible (or, at best, a niche product). Walmart presents a “big break” for companies who want to sell their products on a larger scale but with this access to millions of consumers comes a price.
Walmart does indeed make its suppliers more efficient and better at meeting consumer demands. Although they are tough in their negotiations, Walmart uses its advanced data-gathering technology to give suppliers sales numbers they need to maintain an efficient supply chain. (Never mind that these suppliers can use this same data as predictors for performance in other markets as well.) However, this exchange of information means that Walmart has the leverage to demand that suppliers keep up with technology.
The most recent topic of contention is Walmart’s RFID initiative. Walmart wants to implement RFID technology in its products but is passing that responsibility over to its suppliers. That is, suppliers are in charge of tagging each individual product with these $0.07 labels, which in turn, increases costs for the suppliers but Walmart is not willing to raise prices. In this sense, Walmart must be careful in how it chooses to pass savings along to its customers, lest suppliers begin taking drastic measures to ensure their bottom line.
However, the fact remains that it behooves suppliers to keep up with Walmart’s demands. RFID technology allows Walmart to alert its suppliers of when inventories are running low or predicting when there will be an increase in demand. Were Walmart not to do this, there would be a loss of selling opportunities that result in less money for the retail chain, suppliers, and manufacturers. And, of course, in the world of business, more money is better than less money.
As Walmart shifts to scan-based technology, whereby the manufacturers “own” the inventory until it is sold, suppliers will see a greater benefit to RFID technology. They will become more interested in loss prevention, keeping inventories well-stocked, how long items sit on the shelf, and tracking what sells and what does not.
