* The Original NYTimes article is below, and then a response:
(johnmac -- .. but the customer / citizen may benefit from this
... and is it worth it?)
From the New York Times --
http://www.nytimes.com/2004/11/14/business/yourmoney/14wal.html?th
What Wal-Mart Knows About Customers' Habits
By CONSTANCE L. HAYS
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, Ark., 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 M. 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,"
Ms. 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 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. 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.
It also takes pains to keep the information secret. Some of the
systems it uses are custom-built and designed by its own employees,
the better to keep competitors off the trail. Companies that sell
equipment and software to Wal-Mart are bound by nondisclosure
agreements. Three years ago, Wal-Mart summarily announced that it
would no longer share its sales data with outside companies, like
Information Resources Inc. and ACNielsen, which had paid Wal-Mart for
the information and then sold it to other retailers.
"When you look at their behavior, you can tell that Wal-Mart considers
data to be a top priority," said Christine Overby, a senior analyst
for consumer markets at Forrester Research. Over the years, she said,
Wal-Mart executives have spent handsomely for their systems, paying $4
billion in 1991 to create Retail Link and signing onto innovations
like bar codes and electronic data interchange, a forerunner of the
Internet, well ahead of the pack. Wal-Mart is also driving
manufacturers to invest in radio frequency identification. By next
October, the company will require its biggest suppliers to tag
shipments to some of its distribution centers with tiny transmitters
that would eventually let Wal-Mart track every item that it sells.
With so much data at Wal-Mart's corporate fingertips, what are the
risks to consumers? Most have no clue that their habits are monitored
to such an extent. There are no signs -- like the ones for Wal-Mart's
anti-shoplifting cameras -- advising customers that information is
being collected and stored. And there is no giveback: Wal-Mart doesn't
use loyalty cards and rarely offers promotions based on past
purchases.
It is aware, however, that shoppers are concerned about privacy. On
its Web site, Wal-Mart posts a privacy policy that states, in part:
"We take reasonable steps to protect your personal information. We
maintain reasonable physical, technical and procedural measures to
limit access to personal information to authorized individuals with
appropriate purposes."
NOT everyone agrees. "People don't know that Wal-Mart is capturing
information about who they are and what they bought, but they are also
capable of capturing a huge amount of outside information about them
that has nothing to do with their grocery purchases," said Katherine
Albright, the founder and director of Caspian, a consumer advocacy
group concerned with privacy issues. "They can find out your mortgage
amounts, your court dates, your driving record, your
creditworthiness."
One source of information can be a credit card or a debit card, Ms.
Albright said. Wal-Mart shoppers increasingly use the cards to pay for
purchases, particularly in the better-heeled neighborhoods where the
company has been building stores recently.
Some companies specialize in what is known as data enhancement, in
which a customer's name and address, or a telephone number, can open
the door to additional information. "If Wal-Mart had a customer
database and wanted to start e-mailing their customers, we could
append their e-mail addresses," said Sarah Stansberry, director of
marketing for AccuData America, a company based in Fort Myers, Fla.,
that specializes in such services but does not use credit card
records. With e-mail addresses, AccuData can track names and home
addresses, she added. Other information follows: "We can access what
they paid for their house, and their mortgage," though not driving
records. The company has not done any work for Wal-Mart, she said.
Ms. Dillman said that she did not think Wal-Mart had ever tried to
squeeze data from credit cards to learn more about customers' buying
habits. Indeed, she said, it wouldn't be necessary. "We can do that
without the credit card information," she said. "We can look at what's
happening in the market, and look at what's happening in other markets
that are similar."
WAL-MART uses its mountain of data to push for greater efficiency at
all levels of its operations, from the front of the store, where
products are stocked based on expected demand, to the back, where
details about a manufacturer's punctuality, for example, are recorded
for future use. The purpose is to protect Wal-Mart from a retailer's
twin nightmares: too much inventory, or not enough.
"They recognize that technology is a critical tool for them to have an
efficient supply chain," said Kathryn Cullen, a principal at Kurt
Salmon Associates, a consulting firm, who said that she has not
advised Wal-Mart. "They track the purchases and very quickly route
that back to their suppliers so they can be replenished. They are very
strict with their suppliers, but they give them the data that they
need."
Armed with sales results from past weeks and months, Wal-Mart meets
with each of its suppliers to establish sales goals for the coming
year. Suppliers are actively encouraged, so to speak, not to miss
those goals. A manufacturer that fails to meet its sales target -- or
has data-documented problems with orders, delivery, restocking or
returns -- can expect even tougher negotiations in the future from
Wal-Mart, which is renowned for its steeliness in such situations.
Still, achieving sleeker operations is not the whole story. In many
ways, data are used to forecast and drive Wal-Mart's business. "We use
it in real estate decisions, understanding what the draw is like and
what the customers will be like," Ms. Dillman said, referring to the
company's planning for new stores, including the number of shoppers it
expects to attract to each.
When it comes to Sam's Club, Wal-Mart's membership warehouse chain,
"we know who every customer is," she added. So Wal-Mart does a kind of
outreach, contacting nearby convenience store owners, for example, to
let them know that "the items they buy, they could save money on by
buying at Sam's."
AT Wal-Mart, problems are referred to as "exceptions," and technology
is essential for what Ms. Dillman calls "exception management." Within
the company's empire, "we keep watching everything that just
happened," she said. "We are pretty near real time. We can tell people
that they need to go do something, and we are within hours, depending
on the event."
The "event" may be a truck's failure to drop off or pick up something,
or the delivery of a load of shoes missing their mates. It could be
the absence of an important product in a store's backroom, or in the
distribution center that serves that store. Or it could be an act of
nature like the hurricanes that descended, one after another, on
Florida and other parts of the Southeast this year.
Eventually, some experts say, Wal-Mart will use its technology to
institute what is called scan-based trading, in which manufacturers
own each product until it is 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."
The impact will probably be felt by suppliers, he added, but none are
likely to complain.
"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."
Consumers willingly turn over plenty of information. For example,
cashing a payroll check at Wal-Mart requires a two-step process, said
an assistant manager in a Wal-Mart in Saddle Brook, N.J., who asked to
be identified only by her first name, Mary. "First you enter your
Social Security number into the system, twice," she said, pointing to
the number pad hooked up to a register in the checkout lane. "The
cashier can enter it, but some people don't like to share that
information." Next a customer must enter his or her driver's license
number, the assistant manager said. If payroll checks are cashed
regularly at Wal-Mart, there is no need to keep punching in the Social
Security number, only the driver's license number: "The system will
recognize you the next time."
All of that information winds up at the company's office in
Bentonville, the assistant manager added.
Ms. Dillman said it was "separated out, along with any personal
identifiable information," and warehoused in a way that requires
special permission to gain access. For check approval -- when a
customer writes a personal check to pay for something at a Wal-Mart,
for example -- "we don't keep it any longer than we need it for that
transaction," she said. "All it's linked to is the checking account
number, when we scan your check," she added. "We don't mine that
data. We don't use it for anything other than the transaction."
Historically, Wal-Mart's focus has been on the products it sells, not
to whom it sells them. One of the most difficult pieces of information
to harvest is which customer bought what. Such information is
expensive, too.
"When you are in the everyday-low-price market, you tend not to gather
a lot of information about customers directly because you don't spend
a lot of time with them gathering name, address, telephone numbers
through a loyalty card," said Gene Alvarez, a vice president at the
Meta Group. "That is the proper focus, because when you want to get
customer-intimate, you have to offer a loyalty program, and there's
the cost of that loyalty program."
Wal-Mart has discovered the potential of its own Web site in learning
more about customers. Ms. Dillman said the site was beginning to allow
users to buy a product online and have it delivered to a store near
them, an option that Sears, Roebuck and other retailers have had for
years. Naturally, some personal information would have to be submitted
as part of the transaction. "You can do some association there, what
products are of what interest," Mr. Alvarez said.
But Wal-Mart executives tend to care more about how products sell as
part of a larger basket. "Me knowing what you specifically buy is not
necessarily going to help me get the right merchandise into the
store," Ms. Dillman said. "Knowing collectively what goes into one
shopping cart together tells us a lot more."
Analyzing what ends up together in that cart drives Wal-Mart's
pricing, other experts said. Shoppers might buy cold medicine along
with chicken soup and orange juice during flu season, but not all of
those products need to be priced at rock-bottom, said Ms. Overby, the
Forrester analyst. "They might say, 'If we get really good at pricing
the cold medicine and promoting it and letting people know that, hey,
we have that product in stock and also at the best prices,' then they
get people into the store," she said. "The other items in the basket
might not be the lowest price in town, but the entire basket will be
10 to 20 percent less."
STILL, as Wal-Mart recently discovered, there can be such a thing as
too much information. Six women brought a sex-discrimination lawsuit
against the company in 2001 that was broadened this year to a class of
about 1.6 million current and former female employees. Lawyers for the
women have said that Wal-Mart has the ability to use its
human-resources database to calculate back pay for the plaintiffs as
well as to determine whether women were fairly promoted and paid. The
judge hearing the case, which is pending in a federal court in San
Francisco, has agreed.
The database is unusually detail-rich, said Joseph Sellers, a lawyer
for the plaintiffs. "They've put into their work force database the
information that bears on virtually every facet of compensation," he
said. "They have performance reviews, along with seniority, the time
spent with the company, which store they worked in. So you can compare
people working in the same store, to measure whether men and women are
paid differently."
If that comes to pass, it will be a rare moment indeed, with
Wal-Mart's carefully assembled data being channeled for a purpose
Wal-Mart did not desire.
Copyright 2004 The New York Times Company
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==------------response below--------------
From Cherie Price on the OSINT discussion list
-----Original Message-----
From: CodeTen7 < >
To: discuss-osint@yahoogroups.com
Subject: Re: [discuss-osint] The End of Privacy -- It's not the FBI or
CIA -- What Wal-Mart Knows About Customers' Habits
Date: Sun, 14 Nov 2004 09:50:38 -0700
I am NOT a Walmart fan. When they first started opening huge numbers
of stores in and around the area in which I live(d), I shopped there
because I was suckered into their "everything we sell is made in the
U.S.A.". That sure didn't last long.
I've read all about their unfair and downright unethical practices
used against their employees and have read all the info ciruclated
about their overseas "sweat shops". I've further read about their
tracking policies of which customers purchase what items. The only
thing I can't fault them on is their unique and brilliant (and very
expensive) technology of knowing what to stock their shelves with.
That is simply 'good business'.
So why do I continue to shop there when I dislike 'them' so much?
Prices, of course. Though as a regular (and former) Walmart shopper,
I could testify under oath that their prices are going up, up, up.
A couple of years ago, I sought out and complained to a Walmart
manager that they don't put 'shelf prices' on a huge percentage of
their items. I was laughingly told that they were working on it (like
hell) and I always had in-store price scanners available to me to
check the price of an item I might be intersted in. Trust me, by not
putting up shelf prices, most people will buy the wanted items anyway
thinking "it will be cheaper here" than elsewhere. Wrong, people!
3 weeks ago, while grocery shopping in Walmart, I was on the other
side of the store and found a couple of GI Joes that are missing from
my grandson's collection. Trust me, it's difficult to find a toy he
doesn't own! No shelf price. I take them to a scanner and they
scanned at $9.96 each. Though they were basically the same toy, I
scanned both of them -- just to make sure. When they were rung up at
the checkout register, they rang up at $13.96 each. STOP, I told the
cashier and explained why. She called management at my request. We
ended up having 3 'managers' at my register and I accused them of
unlawful practices. An in-store scanner and the cash register ringing
up different amounts in a period of 45 minutes?? I don't think so.
They finally ended up generously (gag) "offering" me the toys at
$9.96. I told them where they could put them and it wasn't into my
shopping bag.
A week ago, against my own better judgement, I returned to Walmart.
There ARE some things that are cheaper ... snacks for the kids, hair
spray etc. Let me back up a minute. When I walk into a store ... ANY
store, my brain turns into a very functionable and extrememly accurate
caluculator. Whether I buy 12 things or 212 things, when they are
rung up, I know to the penny whether the items are being rung up at
the right price. In Walmart, you are required to take your purchases
from your cart and put them on the conveyor belt. What I do that I've
never seen anyone else do, is turn the "customer-view-register" (or
whatever it's called) to face me. I then put my items on the counter
by touch as my eyes are on the register. When the cart is empty and I
have to move a couple of feet forward, I again turn the register to
where I can see it. I would suggest everyone do this.
OK ... back to shopping a week ago ... I again bought a toy. My 5 yr
old was with me and had 'worked and earned' a treat. He wanted a new
Star Wars figure (said he'd been wanting this one for 200 years ;-)
) ... It was $4.96 ... on the SHELF. It rang up at the register for
$9.96. BULL! Needless to say, since the child was with me, I HAD TO
buy the action figure ... but I bought it for $4.96.
Sorry this is so lengthy, as well as personal, but I'm trying to warn
all Walmart shoppers ... BUYER BEWARE. I, for one, will NOT return to
this store. Take a look around you when in Walmart and see how many
items are in everyone's shopping carts ... A LOT! Now, think how many
people are paying $9.96 for a $4.96 toy and don't even know it
happened.
Walmart soared to leading the pack in the category of 'discount' stores
and I am waiting for the day when their self inflated balloon bursts.
BUYER BEWARE.
I am bcc'ing this to all of my friends (especially the toy shoppers
who have kids/grandkids) as holiday shopping has begun. If you shop
at this consumer unfriendly store, watch your back.
[TELECOM Digest Editor's Note: I have had the same problems when I
have been in Walmart here. Shelf price says one thing, check out clerk
says another; the clerks are told not to budge on the price; your only
alternative is to have them call a manager over to the register all
the time they are condescending to you and six or eight customers in
line behind you are giving you dirty looks. And unless you can match
up the exact product number at the sales sign in the aisle with the
product number on the item itself, they'll keep insisting the sales
sign pertained to a 'different model' or a 'different size'. PAT]
Marcus Didius Falco (falco_marcus_didius@yahoo.co.uk)