Walmart: Dominence through Information

When people think about Walmart, they think of low prices and a wide variety of goods. Their goods are not considered to be of very high quality, despite the fact that they are often no different than what you might find at Target or Best Buy, but the low prices justify this perceived lack of quality. This is the type of experience that customers expect when they enter a Walmart store. But what they often neglect is that these low prices are only possible through Walmart’s data collection, IT infrastructure, and supply chain efficiency.
Walmart has been very successful at leveraging their extensive amount of data and transforming it into useful information that can help them create a customer experience that provides important competitive advantages. The low prices that are associated with Walmart are only possible because of the extensive data they collect on every purchase. Their costs are dramatically reduced because of their excellent supply chain management, which emphasizes minimal inventories and just-in-time delivery of goods. Customers expect the shelves at Walmart to be fully stocked with the goods they need, so an information system that knows what product inventories are being depleted and can make predictions about future demand is incredibly valuable for creating an ideal experience where all of the customers’ needs are met. Personally, I can remember a number of incidences at HEB where I would be looking for a particular item that would be sold out, and as a result I would be required to make an additional trip to the store at a later time to finish my grocery list. I cannot remember ever experienced this when doing my shopping at Walmart. I also tend to get through the check-out lines at Walmart faster than I do at HEB, which, as the article mentions, is likely due to the fact that Walmart has collected data on when their busy and slow times occur. These things has saved me time and money, and enhanced my customer experience at Walmart; if the HEB weren’t so much closer to my house I would strongly consider doing my grocery shopping at Walmart because of these advantages.
Because Walmart collects such an extensive amount of data on its customers, many have argued that it threatens consumer privacy. While this argument has many valid points, I am personally not bothered by these facts. I understand that there is a tradeoff between the lower prices Walmart offers and the amount of data they must collect (more data = lower prices), and I am willing to make such a sacrifice in this case. I feel that the chances are very small that I would be damaged by Walmart’s usage of my information. As a result, I do not worry that Walmart may use my information for purposes that I would find distasteful, because if they did anything that truly crossed the line people would become outraged and shop elsewhere, thus hurting Walmart’s profitability. Their data collection policies have raised the ire of numerous people, but they have yet to do something that has had a dramatic impact on their bottom line. As long as the majority of people are happy or blissfully ignorant of the fact that they are being studied, there will be little incentive for Walmart to change its policies.
As the largest retailer in the world, it is easy to say that Walmart commands a great deal of power. This obviously strengthens their position within their industry, and hurts their suppliers in many ways because the suppliers must be submissive to Walmart’s will. If Walmart demands lower prices or shipping costs, their suppliers have little choice but to comply, as otherwise Walmart will simply find someone else to do the job. Suppliers must also invest additional resources into technological innovations and hire highly skilled employees to keep up with the requirements of Walmart’s information systems, thus creating an addition cost for the suppliers. However, on the positive side, while the suppliers may generate less profitability per item as a result of Walmart’s demands, their overall profits are likely to be quite high because they can sell a much greater volume of goods through Walmart. They are also likely to develop competitive advantages in their field because of the technological and performance excellence that Walmart demands of all its suppliers.