In Their Brilliance, Wal-Mart Forgot One Thing: The Consumer

By idfive \ June 9, 2006

Wal-Mart has made oodles of dollars by applying some smart and consistent strategies to their operation. They have made significant investments to their infrastructure, information technology, inventory management and distribution. It has paid off. They are a machine.

To play with Wal-Mart, suppliers have to follow strict rules – and when they don’t, they lose access to millions of customers worldwide. If you don’t believe me, ask Rubbermaid about their run-in with Wal-Mart several years back.

Competing against Wal-Mart is as promising as the future of broadcast radio. But in their glory, if you take a close look at what they have done to get to the top, their consumer value proposition is one dimensional: price.

Wal-Mart has made an ungodly investment to understand, predict, and adjust to inventory. Imagine where they would be if they made a similar investment to understand, predict and adjust to their customers’ needs and preferences.

U.K.’s Tesco is as committed to tuning their business supply chain as they are to understanding their consumers. Suddenly, competing with Wal-Mart is not as silly as it first seemed. In fact, Tesco has Wal-Mart on the run in the U.K.

How? They developed an affinity program that tracks and analyzes customers’ purchases. The data are mined in ten billion dimensions, generating personalized coupons. For example, parents of newborns are offered diaper and beer coupons at the same time – because new parents stay home and can’t go to the pubs as much.

With this sophistication, companies can not only offer lower prices, but also make more meaningful connections that result in loyal customers. Simple, huh?

In an age where traditional advertising is just not working as well as it used to, data-driven strategies such as Tesco’s take center stage. The data and the analysis Tesco is producing is so strong, that companies such as Coca-Cola and P&G regularly purchase it.

Soon, Tesco might find itself selling groceries so that it can sell data.