Wal-Mart's Consumer Data Collection

Wal-Mart is able to create a competitive advantage through their massive amounts of collected customer and product data. The stored data allows this giant retail company to successfully predict which products needed to be delivered to where at a specific time in virtual real time. For instance, Wal-Mart predicted and shipped the most sought-after products: Pop-Tarts and beer to Florida residents in preparation for Hurricane Charley. Being able to predict the flow of products and customer needs and wants in real time allows Wal-Mart to operate at virtual peak efficiency. With the use of such technologies as RFID and consumer behavior video cameras, the company is able to effectively predict future sales and analyze consumer behavior. This analysis can then be used to drive strict and specific negotiations with suppliers. Other companies that lag superior techniques in data collection will not operate as efficiently as Wal-Mart. Small Mom and Pop stores that compete with Wal-Mart will lack the insights to supply their consumers with the needed products as Pop-Tarts and beer in time for the hurricane. Additionally, Wal-Mart analyzes the collected data and predicted specific product groups that consumers will buy during their visits and generate low price deals that also maximize profitability. For instance, the super store giant might offer unique deals on chicken soup and cough medicine for a customer who has a cold.

As learned from readings in Marketing Analysis class, Wal-Mart experienced sluggish sales in its newly opened stores in comparison to Target’s newly opened stores. The super store giant Wal-Mart realized that their emphasis on low costs pushed away consumers from buying their luxury items such as fashion. Most consumers of Wal-Mart would purchase the low cost products, while purchasing such luxury items as fashionable clothing and high-tech gadgetry from higher ended stores as Best Buy or Dillard’s. Thus, Wal-Mart now emphasizes affordable, quality living through designing better fashion lines, introducing more high-tech products as iPhones, and redesigning their aisle space and store displays. Wal-Mart, with its immense technology and data collection technique that resembles virtual real time, analyzed their success with these changes and experienced a profound insight on consumer behavior in relations to low price values.

Although Wal-Mart might have a present competitive advantage over its competitors in terms of consumer insights and data collection, they might lose this competitiveness over time. Competitors such as Target might implement similar ways of collecting data or find possible, more efficient means in gaining the same insight as Wal-Mart, such as developing loyalty programs. Thus, Wal-Mart must continue to innovate and develop new strategies in collecting insights or lose the competitive advantage in the long run. Since Wal-Mart tries to maintain its competitive advantage in this field by making its collected consumer information private from other data mining companies like ACNielson, this exclusivity might erode Wal-Mart’s success in the long run. As learned in world history, the great Chinese empire, way before the words United States was invented, was at its prime power, yet decided to cease trade with the rest of the world because this empire believed that its people and technologies were already superior to the rest of the world’s. And as time passed, the great Chinese empire deteriorated and must learn to rebuild itself in good relations with the rest of the world. Thus, Wal-Mart, like a great empire, should also learn how to be innovative in other ways and not just through hoarding massive amounts of information.

Being in a capital market, companies must learn to operate as efficiently as possible. As learned in economics, profits in business will eventually be driven down to null, as more competitors enter the market. In the near future, Wal-Mart can implement scan-based trading that helps suppliers provide products to the consumers instantly. The retail giant, with their strict negotiations with its suppliers, is simply selling the products at peak efficiency. If suppliers cannot handle the strict demands imposed by Wal-Mart, then those suppliers are not operating as efficiently as other competitors and will lose business. Other suppliers might be just as willing to supply Wal-Mart at the requested negotiations. Although Wal-Mart might be too hard on its suppliers and reduce suppliers’ profits, the superstore giant is actually creating effective sales with the suppliers’ products, which in turn will generate an overall successful and still profitable business cycle in this demanding business world. Through the massive amounts of consumer data, Wal-Mart’s negotiations can also provide insight on consumer trends and demands for suppliers. Suppliers must respond to Wal-Mart’s needs to create products based on consumer trends and wants. For instance, Kraft can extract data on the success of its products from Wal-Mart database and determine what products need to be improved. Thus, Kraft can then create a newer and innovative Kraft single cheese in the future that further satisfies its target customers. Suppliers are also motivated in creating better products with less operating costs. For instance, Proctor and Gamble created the Swiffer Wet Jet that eliminated the need for traditional mops and other cleaning agents. With its technology and data collection process, Wal-Mart, in a sense, is driving suppliers to create new, innovative products that will satisfy the consumer trends and wants of now and the future. Wal-Mart's data collection technology, although intrusive to consumer privacy, provides great insight and innovation that promotes the overall well-being for the consumers, when used with great care and intentions.