While Wal-Mart's traditional strength is in the smart and severe management of its supply chain in order to maintain "everyday low prices," one should not underestimate its growing knowledge of the demand side -- who its customers are and how they behave.
"With 3,600 stores in the United States and roughly 100 million customers walking through the doors each week, Wal-Mart has access to information about a broad slice of America - from individual Social Security and driver's license numbers to geographic proclivities for Mallomars, or lipsticks, or jugs of antifreeze," according to a New York Times article last week. "The data are gathered item by item at the checkout aisle, then recorded, mapped and updated by store, by state, by region. By its own count, Wal-Mart has 460 terabytes of data stored on Teradata mainframes, made by NCR, at its Bentonville headquarters. To put that in perspective, the Internet has less than half as much data, according to experts."
With exception of its Sam's Club brand (which builds individual customer profiles), WalMart does not tend to watch each customer as an individual. It is more important for the company to understand the "basket" of goods that were purchased together. "Me knowing what you specifically buy is not necessarily going to help me get the right merchandise into the store," says Linda M. Dillman, Wal-Mart's chief information officer. "Knowing collectively what goes into one shopping cart together tells us a lot more."
Of course, the company's supply chain expertise has not finished evolving either. The company is moving toward a near future where its suppliers will own the products on WalMart shelves and will not be able to collect until they are sold. "Wal-Mart will never take those products onto its books," said Bruce Hudson, a retail analyst at the Meta Group, an information technology consulting firm in Stamford, Conn. "If you think of the impact of shedding $50 billion of inventory, that is huge."
Although customers won't complain, Hudson contends that this will squeeze suppliers even further. "You can see the pattern of Wal-Mart's mandates, and as Wal-Mart grows in power, it is getting more dictatorial," he said. "The suppliers shake their heads and say, 'I don't want to go this way, but they are so big.' Wal-Mart lives in a world of supply and command, instead of a world of supply and demand."