WAR IS PEACE - FREEDOM IS SLAVERY - IGNORANCE IS STRENGTH

The NY Times article on Wal-Mart's hidden customer data mine came as a big surprise to me. I knew that large retailers did collect some data on their customers' buying habits, but 460 terabytes of data? C'mon man!

To Wal-Mart's credit though, they are absolutely correct in their perspective that the data represents very powerful information and I believe they have exploited this data to gain a competitive advantage over their competition. Wal-Mart's most significant core competency is supply chain managment and as such, they realize that matching supply with demand is a critical challenge they can use this data to overcome. Imagine knowing the precise amount of inventory that will consumed in a month... in a week... in a day... in an hour. Wal-Mart recognizes that given enough statistics (gender, age, race, geography, looming natural disasters) they can reasonably accurately predict the demand for certain goods. For the customer this represents a positive experience. Most people are well aware of how frustrating it can be when they go to the store and an item they really want or need is sold out. Wal-Mart is trying to create a situation in which this will never, ever happen. The data should also lead to reasonable pricing and the "right" merchandise being available. That is, if the demand for a product is low, the data will probably support either lowering the price of the product or replacing it outright. So this is the positive experience in a nutshell: the item I want, at a reasonable price, on the shelf when I want it.

Another benefit that this data gives Wal-Mart is an even greater amount of power over their suppliers. According to the article Wal-Mart may be moving to a system in which suppliers own merchandise until it's sold to the end-user. With the data Wal-Mart has, they should be able to statistically ensure suppliers that their merchandise will be sold and that the supplier will not be left with an excess amount of inventory on their books. Given Wal-Mart's sheer size and this guarantee, I think suppliers will have no choice but to conform to the mandate. This is clearly not a financial benefit to the suppliers, as it could increase their working capital, but many companies depend on Wal-Mart to remain intact and profitable, so they will have no choice but to continue to do business with this merchandising monster.

There certainly are some potential privacy issues that this data collection raises, and I'm certainly not in a position in which I trust Wal-Mart. In fact, I don't trust big businesses in general, because as a business student I realize that company's mandates are to be accountable to its shareholders. Simply stated, companies will attempt to create value by any means necessary. The problem is that if this means finding a loophole in the law in which they can sell off data (a practice Wal-Mart used to partake in) to make an efficient buck, then the management will not think twice about it. I guess I see both sides of the coin. On one hand it is reasonable for Wal-Mart to collect data in an effort to understand its customers' purchasing habits. Isn't this what every retailer should do? On the other hand the data could be used for sinister motives a la 1984 (did you recognize the reference from the title of this blog entry?). Overall I'll admit that this issue does not bother me too much because I think the laws in North America are too restrictive to allow extreme misuse of this data towards the collective population. I'm confident that some lobby group will scream "bloody murder". After all, isn't democracy all about having your nation run by special interest and minority groups? Okay... sorry I'm getting carried away. Politically charged Norm "OFF".

One important segment of data I believe Wal-Mart is missing lies with the end-user. Wal-Mart tracks where merchandise is bought, but how satisfied is the customer with their physical purchase, not to mention the experience they had in parking their car, interacting with the greeter, comandeering their cart or basket, finding what they were looking for, waiting (or not) in line, interacting with the cashier, returning their cart or basket, finding their car, then finally leaving the lot. These are very crucial pieces of information that (as far as I know), Big Brother... I mean, Wal-Mart is not capturing. I feel Wal-Mart could be an even more powerful entity if they had value propositions beyond just EDLP. So anyone want to answer an e-mail survey? $10 off your next purchase at Wal-mart! Anyone??

Let's end with a quote from a song I've been listening to while I've been writing this blog... relevant perhaps? So long!

"Relapse, fall backwards and slide, are you suggesting that I repress, repress and disguise?"

-The Honorary Title