Thursday, January 19, 2006

Information Rules: Why Walmart's King

Without duopolies, Wall Street would be a rather boring place.

It'd be like Macbeth without the Lady -- and that's no fun.

Duopolies on the Street are rife: Coke and Pepsi. Boeing and Airbus. Home Depot and Lowes. And our favorite: Walmart and Target, rivals till death do them part.

Retailing behemoth Walmart (WMT) does the gargantuan revenues it does precisely because it is better at IT and supply chain management than its rival Target (TGT) is.

Walmart is faster to adopt the latest retailing technology, like RFID.

An RFID tag is a small object that can be attached to or incorporated into a product, animal, or person. RFID tags contain antennas to enable them to receive and respond to radio frequency queries from a transceiver.

RFID is like a bar code, but better. A lot better.

As a data collection technology used to identify items, RFID saves companies like Walmart a ton of dough.

Since January, 2005, Wal-Mart has required its top 100 suppliers to apply RFID labels to all shipments.

RFID enables better inventory control and customer management.

For instance, on any given day, Walmart can tell you exactly what day a certain repeat customer is due back to the store, as well as what shampoo they're most likely to purchase.

Currently, the success rate for most RFID applications runs at 80% -- meaning, once the technology improves, Walmart's due to become even more efficient than it already is (hard to imagine, we know).

As much as Walmart has been villified for its sourcing practices and employee maltreatment, Walmart remains a prototypical example of operational perfection.

As such, when Walmart stock falls under $40, you can bet the ranch on one thing: we'll be overweight.

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