One First Class Ticket to Bentonville, Please!

I should start out this blog post by saying that I am absolutely fascinated with Wal-Mart.  It’s a fascination that started in the early 90’s – when I was ten and living just outside of Seattle.  All of my extended family lived (and still does live) in rural Mississippi.  When I would go visit my grandparents for the summer, my suburban friends would ask me to bring them a souvenir from – no joke – Wal-Mart.  One summer I actually found a manager in the Starkville, Mississippi Wal-Mart and asked him for some pens and office stationary printed with Wal-Mart logos.  We didn’t have Wal-Mart’s where I lived, and getting to set foot in one was almost as cool as going to Disney Land.  Ok, maybe not quite as cool… but it was still something to talk about on the first day back at 6^th grade.

              My fascination with the retail giant has continued over the last two decades, but I haven’t always held a positive opinion.  I am well aware of the controversy surrounding Wal-Mart – lawsuits and allegations of unfair wages, sexual harassment, and “running the local guys out of town.”  But I believe big business will always be met with critics, and it has only been in the last year that I’ve really started learning about Wal-Mart from a marketing and business point of view.

            There is no doubt that Wal-Mart is everywhere.  According to the book The Wal-Mart Effect, more than half of all Americans live within 5 miles of a Wal-Mart, and ninety percent of Americans live within 15 miles of one.  The book was originally published in 2006, so we can assume the distance from me to my closest Wal-Mart has shrunk considerably in the last 5 years.  The book also states that the average Wal-Mart stocks about 60,000 items – which means you could put 50 different items in your cart every day for three years without buying the same thing twice.  And that doesn’t include the increasingly popular “Super Centers” which have an average of 120,000 different items stocked at one time.  With so many items coming and going on any given day, it makes perfect sense to me that Wal-Mart has such a vast collection of data gathered from customers. 

            The article “What Wal-Mart Knows About Customers Habits” does a good job at highlighting what I think is a very important point – Wal-Mart’s focus is now, and has always been, on products and low prices, not on the people buying those products.  I’m no expert on customer tracking data, but I would guess that every time we make purchases with credit cards or buy something online, we are giving out the exact same information to retailers everywhere.  I think that the sheer size of Wal-Mart is what is causing anxiety for some.  100 million weekly customers naturally just result in huge amounts of data.  And to me, shopping at Wal-Mart is no different than shopping at Target, Macy’s, or even Bergdorf Goodman… well, from a data gathering perspective at least.  I strongly feel that every time we swipe our credit card we are volunteering information about ourselves.  If you’re that concerned about privacy, pay with cash.

             But what about the other type of data they collect?  Wal-Mart keeps track of the number of items each checkout clerk scans at each cash register… at every store… in every state… for every shift (roughly 6-8 items per minute, fyi).  This means they know how many cash registers to have open during “rush hours” and I, as a busy consumer, appreciate that.  Because Wal-Mart is also carefully monitoring purchases in real time, they also know WHAT I might want and WHEN I might want it, which is another thing that I, the busy consumer, appreciate. 

A good example of Wal-Mart using customer data to provide a competitive advantage happens every August – Back To School season.  When I moved to Austin last August, I came with essentially nothing but the clothes I had in a suitcase.  Maybe it was her rural upbringing, but my mom (who was helping me with the move) insisted that our first stop was Wal-Mart.  Sure enough, we filled up two carts with everything from towels to measuring cups to pots and pans.  I even got a few groceries and some school supplies.  Sure, a trip to Target might have resulted in about 70% of the same items being purchased – but the fact that Wal-Mart seemed to have everything that I needed – and more – was astounding.  There are times when I would prefer going to Target, but when I need mass quantities of “stuff” and I want the lowest price possible, Wal-Mart is a surer bet.  As Charles Fishman (The Wal-Mart Effect) puts it, you “buy things” at Wal-Mart, you “shop” everywhere else.

So now that you know I actually don’t mind giving away my information to Wal-Mart, what about some of the tougher issues that always seem to encourage debate surrounding Wal-Mart?  It seems like just about everybody has an opinion on how Wal-Mart is able to keep prices so low – and if forcing suppliers to meet such strict demands is a good or a bad thing.  For me, the jury is still out.  I see the value in it, for sure.  The opening chapter in The Wal-Mart Effect talks about how a simple request changed deodorant packaging forever.  Instead of being sold in boxes – boxes that consumers throw away anyway, boxes that take up shelf space, boxes that cost money to produce – why not just get rid of the box?  A simple request to suppliers literally changed the industry forever.  Good news for Wal-Mart, who could now fit more varieties on its shelf.  God news for consumers, who shared in the savings of a few cents per stick.  Bad news, though, if you were a box manufacturer. 

I see the power that Wal-Mart has because of its size alone.  Even if you’re a big consumer goods player like P&G, when Wal-Mart asks you to lower your price on something, you’re probably going to listen.  But there’s a catch – the more business a supplier does with Wal-Mart, the less money they make.  Some suppliers simply can’t keep up with the demands, and this is where I think Wal-Mart needs to keep itself in check.  They claim to have “partnerships” with all of their vendors, but if they are not careful it will turn quickly into a dictatorship.  Using insights to say, hey, we really DON’T need that deodorant box is a great way to improve efficiency and pass savings onto consumers, but Wal-Mart must be careful not to go too far in the demands it makes or they will be left with empty shelves.

I could go on an on about my fascination with Wal-Mart… ethical and societal implications is another blog post or two on its own.  In summary though, I think Wal-Mart has done a great job with managing the data it collects from its army of consumers and is  using it to our benefit.  I think they have used customer insights to give their consumers what they want – low prices and convenience.  And, for now at least, they have used some of that data to positively influence their suppliers.  Wal-Mart is still relatively young though, and only time will tell if data collected to give consumers low prices is really worth the cost.