Wal-Mart and the Information Age

Wal-Mart and the Information Age

Since it was founded in the early 1960s, Wal-Mart has been committed to being a successful retailer in the United States. Throughout the years, Wal-Mart has changed its business practices to take advantage of the ever-changing global digital economy. By introducing several uses of information technology and information systems, the company started a track which would lead them into becoming one of the nation's largest and most profitable companies. Wal-Mart's past, present, and future have all been affected by the deployment and integration of information technology.

During Wal-Mart's early years, the use of technology was very limited, which restricted growth and profit. In 1962, Wal-Mart was founded by Sam Walton in the small town of Rogers, Arkansas, and by 1970 thirty stores were in operation (13). Wal-Mart was built upon the philosophy of providing value for the customer and empowering employees (4). By implementing this belief, by 1979, Wal-Mart reached the level of one billion dollars in annual sales faster than any other company (13). Throughout the 1970s, David Glass, who would succeed Sam Walton, insisted that the company invest in more advanced merchandise-tracking and distribution systems in order to handle the increase in sales as the number of stores increased (7). These systems would be needed for Wal-Mart to go beyond its localized stores in the South and Midwest. By 1988, ninety percent of Wal-Mart stores had barcode scanning capability, which aided in tracking of merchandise (13). While this new system reduced costs, employees who used to stamp items by hand were displaced, and there were several occasions in which the bar code scanners did not accurately scan the price of items (4). By the late 1980s, with the development of "supercenters" that combined a supermarket with general merchandise, it was clear that Wal-Mart had the need for connectivity among their information systems in order to improve their effectiveness and efficiency (7).

Starting in the early 1990s, Wal-Mart aggressively developed advanced information technology systems that have improved efficiency and increased profits. According to BuisnessWeek Magazine, "Wal-Mart's aggressive adoption of information technology to improve logistics and back-office efficiency has also been a major driver of productivity" (8). For example, every Wal-Mart store is connected via a secure private network to the company's headquarters in Arkansas. Through this, the company is able to track the sales volume of each item at each store, and then reorder to replenish the inventory for that item at Wal-Mart stores across the country (3). Instead of having to manually track items, information technology has allowed this process to be quicker and less expensive. Wal-Mart shares its sales data with its suppliers, and has recently implemented a web-based product, Retail Link, that allows the company and the suppliers to monitor what products are selling and where they are selling (10). In this way suppliers are able to anticipate Wal-Mart's restocking needs. Wal-Mart uses these telecommunications techniques to allow Wal-Mart and its suppliers to stay connected and communicate electronically. Wal-Mart also uses computerized techniques in their warehouses to ship items faster, as many goods arrive and leave without ever sitting on a shelf (4). On a smaller scale, Wal-Mart uses information systems to make sure that in any given store, the number of staff matches the current needs in the store (6). By utilizing these systems, Wal-Mart has been able to collect, transform, and distribute information within the company.

Wal-Mart utilizes a global information infrastructure in order to provide a framework for new services and activities based on information acquired worldwide. With over 1,270 stores outside of the United States, Wal-Mart has proven itself as an international company (14). With the development new stores overseas, Wal-Mart moved to increase its investment in logistics capabilities. Wal-Mart uses globally the same technology it has deployed in the United States (5). The following table demonstrates the effect of Wal-Mart internationally:

International Facts (14) International Numbers

(as of March, 2003) (1)

* In 1991 Wal-Mart became an international company

* In 1993 Wal-Mart International was created. It monitors growing opportunities for the company across the world * There are over 1,270 Wal-Mart stores overseas

* 40% of those stores are in Mexico

* International sales make up 17% of the company's total income

By being able to send, retrieve, and use information on a global basis, Wal-Mart has used information technology to establish an international presence.

One of Wal-Mart's greatest jumps into the digital economy came with the introduction of Wal-Mart Online in 1996. The opening of an online presence marked the beginning of Wal-Mart's move to e-commerce. Wal-Mart's first website, however, failed to capture the online retail market as the company had hoped. In a Media Metrix survey, Wal-Mart was ranked 47 out of 50 retail sites retail sites based on the number of visitors (15). The site had several problems associated with it. For example, in February, 1999, the site had a very slow downloading time and an inadequate search engine (15). Wal-Mart.com's CEO Jeanne Jackson led a team to redesign the site. The redesign was completed in January of 2000. Jackson explained the need for a stable website by saying, "Studies show that two of the top reasons people aren't parting with their cash on the Net today are about ease and reliability. We want to win the prize for the most usable e-commerce site" (15). Their new online store offers over 600,000 items, compared to about 100,000 in a physical store location (9). Wal-Mart.com offers a personalization area where, based on a customer's shopping habits and preferences, specific products are targeted and suggested (9). The company tries to tie physical stores and their website together by offering emails that tell of special deals in a customer's area, and by letting customers return items bought online to a store near them (9). By increasing functionality and efficiency, Wal-Mart.com has become a predominate presence online. In 2002, USA Today reported that Wal-Mart ranked in the top five shopping websites in terms of the number of visitors (11). In addition to serving consumer interests online, Wal-Mart now distributes investor