Given the enormous amount of data that Walmart captures, do you think they have been successful at converting into an experience that serves as a competitive advantage for them?
I think their data has definitely given them a competitive advantage. I think if you ask your average person what they think of Walmart, they'll tell you that it's "cheap." MBA students will generally say the same thing, but in fancier terms - Every Day Low Prices (EDLP). I feel that Walmart's customers truly value EDLP and the fact that they can get almost anything they want at EDLP. Walmart can't make this happen without its hoards of data.
Any MBA can tell you that the reason that Walmart can offer EDLP is because of its enormous bargaining power with suppliers. I don't think Walmart could have this bargaining power unless it knew exactly what its customers wanted. For example, maybe it could negotiate a massive discount for cheeseburger flavored Doritos (incidentally, these are really gross, in my opinion), but if it can't get them off its shelves, then what good does it do it? The bargaining power is useless unless the products it purchases are actually generating cash flows and it can't generate cash flows unless it knows exactly what the customer wants, hence the need for the data.
In addition to pinpointing customer wants, the data has also helped Walmart become a master of operational efficiency, which also supports the existence of EDLP. Walmart gains operational efficiencies via inventory. Knowing when certain products are needed and where they are at any given time helps Walmart free up its working capital by keeping low levels of inventory and it also helps it manage its shrinkage.
Lastly, in our strategy classes in the MBA program, we learn that sustainable competitive advantage often derives from having a quality that is difficult to imitate by your competitors. Walmart's obsession with data is definitely a quality that is difficult to imitate.
What do you think about the privacy issues associated with all of that data and the amount of personally identifiable data they are able to capture. Does it bother you? Do you trust them with it?
I really don't have any issues with Walmart collecting all this data. So what if they have my social security number? I mean, what exactly are they going to do with it? I think one thing that privacy watchdogs miss is that data, per se, is pretty much useless. If you study information theory, you'll learn that data is only useful if it's turned into information and information is only useful as the recipient because the recipient ultimately digests the information and turns it into knowledge. My social security number might give Walmart access to hoards of other data, but what good is it going to do them? It might be useful to them if it was somehow linked to the contents of my refrigerator and pantry.
I also think it's somewhat hypocritical to bash data hoarders like Walmart and yet reap the benefits from its efforts. I know people that won't shop at Walmart because of this privacy issue and many other reasons, but if you're truly worried about your privacy, Walmart isn't the only culprit.
Furthermore, in this age, if you're concerned about your privacy, then you might as well stop being a consumer. One could argue, especially if you're an affluent, well-educated individual (at least these are the individuals I always hear these arguments from), that it make sense to buy local, etc., but honestly, even a small business wants to get as much information as possible about it customers. I mean, why wouldn't it, why wouldn't it want to know exactly what its consumers want so it can generate revenue? Here's a Catch-22 for you: consumers want privacy, but they still have to consume. OK, so it's not immediately apparent why this is a Catch-22, but it is because as a consumer you must willingly reveal something about yourself so someone else can meet your needs.
Ok ok, I'll stop with the MBA pro-business at any cost rant. I do worry about my privacy, too. Not so much in the context described above, but I do worry about it getting into criminal hands, i.e.. people out to defraud you and take your identity. I feel that if we should be worried about anything is cyber security. But I'm an optimist and I feel that the cyber security technology evolves at a rapid pace just like any other technology. Honestly though, I don't wake up in the morning and think to myself: "Oh my, am I going to be cyber secure today?" Some people do though and thank goodness we have them in our society. Ultimately, the privacy watchdog groups and other worriers help implement reasonable policies and create the technologies that make us safe. I take back calling them hypocrites. I may find them annoying, but in the end, good things do come from them.
What aren't they doing with technology that they could; that is, are they using all of the technology that is available to them to capture insights and create great experiences for their customers and, if not, what could they do?
In my answer to the first question, I suggested that EDLP was the experience that Walmart is providing. Especially in these tough times, I'm sure this is an experience that is valued by many customers. Personally though, maybe because I am a little better off (even though I have no income now, in the future i'm hoping this MBA pays off), EDLP just doesn't do it for me. I think Walmart is ok, but one of the reasons that it doesn't get more of my business is that the experience shopping there just drains me. The thing that bothers me the most is how long the whole process takes. I mean, I'm ok with the fact that buying cheetos and buying an ironing board requires me to walk across a football field, but after I've walked around the store for an hour, I want to check out quickly! I usually spend about 15-20 minutes waiting in line at Walmart. And don't get me started on those self-checkout things, I hate those. I think the wait bothers me so much because my opportunity costs are so high. Time spent at Walmart means time not studying. Once I start working, it'll mean not charing clients X amount of minutes. Any savings I may have gotten through EDLP are totally negated by my opportunity costs.
I guess all the above was a long-winded way of saying that Walmart hasn't figured out how to use its technology to figure out how to make me happy. Walmart can figure out in real-time what's selling, but can they figure out how many lost sales it has incurred because customers don't want to wait in line for so long? Maybe they have collected this data and realized that the amount of checkout counters and people required to make the line shorter isn't really worth the cost of gaining business from more people like me. Maybe I'm just not their target demographic.
