The Power of Data

After reading the article, I am truly amazed by the powerfulness of information. I think those data would definitely serve as a great competitive advantage to Walmart. None of any other retailers in the world is able to access to such big amount of customer base and large customer base means huge sample size, the most critical factor for accurate prediction/forecast.

However, it is because its database is huge, Walmart is facing a key challenge of how to make the full use of those data to its strongest advantage.

The article mentions several single strategies Walmart uses from the data. I would recommend it to combine those strategies into ONE integrated strategy. For example, while it uses data to predict what people buy in react to the upcoming hurricane and brings in the popular product mix accordingly, it can reinforce the business gain by applying another strategy mentioned at the same time: feature one specific product with the best price in the market while making profits from other items that customers would buy together. The one integrated strategy would allow it to further improve the overall profitability than if it focuses on any single strategy once a time.

In terms of privacy issues, I think Walmart does not do the right job since it does not make a full disclosure to its customers and make them aware of all the possible risks involved from those data application. It is certainly not enough for Walmart to just declare something about privacy protection on its website because the way it uses the data is far beyond the imagination of the customers and customers have the right to know. Someone may argue that if Walmart just uses the data to ensure sufficient stock on the shelves as it does currently, there’s no hurt to customers at all. However, there’s no abuse for now does not mean there will be no abuse forever- what if one day the profit incentives for the abuse of those information are so great that Walmart is willing to take risk on its reputation? In addition, though we have no idea about how many people have access to those data within Walmart and how Walmart regulate internally, it is a fair assumption that data leakage could be a potential risk for all the Walmart customers. With all that said, customers have the right to know what kind of information Walmart is able to access from them and for what purposes Walmart would use it for.

I personally do not trust Walmart not because that I assume it will abuse my personal data but because its failure to make all the information transparent to its customers to build sufficient foundation of trust. And such distrust will affect my willingness to shop at Walmart for sure.

Finally, I am actually worried about how this technology will hurt the suppliers of Walmart since it will definitely allow Walmart to drive them even harder and eventually reduce all suppliers’ profitability for the gain of Walmart itself. Here are my points.

First, with the data and the technology, Walmart is able to almost capture every movement on the shelves in real time or even before it happens (think about the hurricane case). Walmart therefore will exert its command power and ask suppliers to match up those movements accordingly. This may either increase the frequency of suppliers’ trucks to some stores or add extra routes to accommodate the additional requests. All these efforts, however, may not be cost-efficient from the suppliers’ stands point. For example, to accommodate a special need of a specific store, the truck may need to go replenish without having a full-truck load. Will such cost be compensated by the avoidance of the out of stock on the shelves? Maybe not, since customers could possibly try another Walmart to get the items they want if they cannot find it on the shelf in this particular store.

Second, while Walmart is able to leverage the data to know beforehand what customer may want before they even come to the stores under certain circumstances (think about the hurricane case again), is that possible that it would replenish the “hot” items more from its private labels instead of major manufacturers to make profits from the surge demands? For example, if the data tells that the oreo demand will surge by 7 times versus normal before a big snow storm, isn’t that possible that Walmart does not even inform Nabisco to replenish for the surge demand but simply stuff the shelves with the oreos from its own label since customers might not care too much on the brand under some unusual circumstances. ( ie: They don’t have too much time to visit other retailers for the Nabisco oreo before the storm comes).

In sum, I think it is a wise way to leverage the technology and huge database for business purposes and they will definitely be a competitive advantage to Walmart. However, I do think Walmart need to address more clearly on how it deals with privacy issues to maintain long-term trust from its customers. For suppliers, while they may not be able to afford the loss of not doing business with Walmart, it’s essential for them to come out with strategies on how to deal with this ever demanding retailer without undermining their profitability.