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Sun, Nov 14, 2004 - Page 12 News List

Wal-Mart, meet Big Brother

A huge mine of consumer and inventory data is one of the keys to the retail giant's domination of the industry

NY TIMES NEWS SERVICE , NEW YORK

Checking out at the Saddle Brook, New Jersey, Wal-Mart earlier this month. Plenty of retailers collect data about their stores and their shoppers, and many use it to try to improve sales. But Wal-Mart amasses more data about the products it sells and its shoppers' buying habits than anyone else, so much so that some privacy advocates worry about the potential for abuse.

PHOTO: NYTIMES

Hurricane Frances was on its way, barreling across the Caribbean, threatening a direct hit on Florida's Atlantic coast. Residents made for higher ground, but far away, in Bentonville, Arkansas, executives at Wal-Mart Stores decided that the situation offered a great opportunity for one of their newest data-driven weapons, something that the company calls predictive technology.

A week ahead of the storm's landfall, Linda Dillman, Wal-Mart's chief information officer, pressed her staff to come up with forecasts based on what had happened when Hurricane Charley struck several weeks earlier. Backed by the trillions of bytes' worth of shopper history that is stored in Wal-Mart's computer network, she felt that the company could "start predicting what's going to happen, instead of waiting for it to happen," as she put it.

The experts mined the data and found that the stores would indeed need certain products -- and not just the usual flashlights.

"We didn't know in the past that strawberry Pop-Tarts increase in sales, like seven times their normal sales rate, ahead of a hurricane," Dillman said in a recent interview. "And the pre-hurricane top-selling item was beer."

Thanks to those insights, trucks filled with toaster pastries and six-packs were soon speeding down Interstate 95 toward Wal-Marts in the path of Frances. Most of the products that were stocked for the storm sold quickly, the company said.

Such knowledge, Wal-Mart has learned, is not only power. It is profit, too.

Plenty of retailers collect data about their stores and their shoppers, and many use the information to try to improve sales. Target Stores, for example, introduced a branded Visa card in 2001 and has used it, along with an arsenal of gadgetry, to gather data ever since. But Wal-Mart amasses more data about the products it sells and its shoppers' buying habits than anyone else, so much so that some privacy advocates worry about potential for abuse.

With 3,600 stores in the US 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. 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.

Information about products, and often about customers is most often obtained at checkout scanners. Wireless hand-held units, operated by clerks and managers, gather more inventory data. In most cases, such detail is stored for indefinite lengths of time. Sometimes it is divided into categories or mapped across computer models, and it is increasingly being used to answer discount retailing's rabbinical questions, like how many cashiers are needed during certain hours at a particular store.

All of the data are precious to Wal-Mart. The information forms the basis of the sales meetings the company holds every Saturday, and it is shot across desktops throughout its headquarters and into the places where it does business around the world. Wal-Mart shares some information with its suppliers -- a company like Kraft, for example, can tap into a private extranet, called Retail Link, to see how well its products are selling. But for the most part, Wal-Mart hoards its information obsessively.

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