My Thoughts on Wal-Mart’s Data Gathering System

Competitive Advantage

As illustrated by the article, I definitely believe that Wal-Mart has been able to utilize customer data to the company’s benefit. First, data gathering allows Wal-Mart to better anticipate customer needs based on prior purchasing trends. The article mentions that in anticipation of Hurricane Charley, Wal-Mart was able to stock up on items that were expected to be in high demand by customers. Thus, the company has the ability to maximize sales by identifying customer needs in advance. Secondly, by identifying related purchases, Wal-Mart is able to capitalize on the pricing of its products. By offering deep discounts on certain goods, Wal-Mart not only boosts sales for those goods, but it also boosts sales for related purchases. As a result, this particular strategy prevents Wal-Mart from offering expensive brand loyalty programs and rock-bottom pricing for all of its products.

Moreover, both the sheer size of data gathered by Wal-Mart and the high capital investment in its data collection system represent one of the many advantages Wal-Mart has over its competitors. However, it is debatable whether Wal-Mart has a competitive advantage in forecasting customer needs based on collected data. Specifically, the article mentions that Wal-Mart’s competitors also have data gathering capabilities, but the article fails to show how well Wal-Mart utilizes consumer data compared to other retail giants. For instance, the case of Tesco defeating Wal-Mart in the British Market certainly illustrates that Wal-Mart does not have a competitive advantage with regards to the conversion of its data. In fact, the British Retail giant was actually able to maintain a larger market share than Wal-Mart based due to its superior ability in converting customer data into sales.

On a separate note, I strongly believe that because of its power as a purchaser, Wal-Mart has a competitive advantage in converting its data to improve logistics. First, the article mentions that Wal-Mart rapidly routes customer purchase data and places strict requirements on suppliers to restock those products. These stringent requirements are comprised of the most favorable terms related to product quantity, price, quality, delivery times, etc. In order to meet these high standards, manufactures are compelled to improve their operations. Secondly, the article also touches on the practice of “exception management” used by Wal-Mart. By keeping track of key information such as product delivery times and problems, Wal-Mart is able to hold its manufacturers accountable. Firms that do not meet their targets face harsher negotiation terms in the future.

Additionally, the reason why Wal-Mart is able to exert such influence on manufactures is because it is the World’s largest retailer; hence, it has the ability to choose from a multitude of global suppliers. All in all, I believe that by maintaining an efficient supply chain and reducing inventory cost, the company is able to provide consumers with the lowest cost products. In today’s globally competitive market, it is vital that Wal-Mart retains this key advantage.

Privacy Concerns

As of now, Wal-Mart has not misused private customer data and has placed safeguards to ensure the safety of such sensitive data. For instance, the article mentions that Wal-Mart shares only certain information with its suppliers. The company shares certain product information with these manufactures and retains other customer details within its database. I believe this is a legitimate use of customer data as its purpose is to solely enhance the supply chain. The company does not share any data with external parties that could exploit the data. Moreover, the article also mentions some of the controls Wal-Mart has in place to prevent outside parties from accessing sensitive data such as Social Security numbers. The firm exchanges information with its suppliers via a highly secured extranet called “Retail Link.” Wal-Mart also has nondisclosure agreements that bound sellers of software and equipment from sharing information. In addition, the article states some of the systems used by Wal-Mart are designed in-house by its own employees. All of these measures minimize the severe risk of hackers or unwanted users accessing mass private data collected by Wal-Mart.

RFID Tags

Wal-Mart could benefit enormously from the widespread and intensive use of RFID tags. The article briefly mentioned that Wal-Mart is asking some of its main suppliers to invest in radio frequency identification tags. If Wal-Mart were to require that all of its items have RFID tags, the company would significantly enhance its data capturing capabilities. These tags are more useful than the traditional bar codes as they hold more data and do not require the use of scanners. Instead these tags emit data through radio waves that can be captured from great distance. As a result of this technology, customer experience would be improved as customers would not have to wait in check-out lines. The supply chain would also be more efficient since shipment boxes would not have to be scanned individually. Although there are many significant advantages associated with RFID tags, they also have one major drawback. Specifically, I learned in my Management Information Systems class that these RFID tags are more expensive than barcodes. Economies of scale and advancement in research however will eventually drive these costs down.