Tuesday, February 19, 2013

Big Brother is Watching Us!

During the last years companies have invested billions of dollars to improve their supply chain technology. Three macro-processes have been identified as crucial for decision-making and that must be included in the supply chain management. These processes are: customer relationship management (CRM), internal supply chain management (ISCM) and supplier relationship management (SCM) (1). In order to boost the presence and the integration in the customer relationship management (CRM), many retail companies have put their efforts (and investments) on having the adequate information to provide users with a better buying experience. The web has been one of the areas in which these companies have invested to improve their sales and therefore their profit. E-commerce websites have been great sales platforms that enable companies to reach a broader audience with a reduced cost. With the internet and other innovative technologies, company’s supply chains have been flooded with information. The internet has given the ability to identify the different shopping activities and interests that a customer has. If you go to Amazon, the website knows which the products that you bought recently are; it shows you what products you have been searching during the last days; and it even gives you suggestions about products you may be interested in. The new challenge is to identify, use and exploit further that information. The analyst and operators of a supply chain should be able to analyze external and internal data to make the correct decisions in a reduced timeframe.

Brick-and mortar retailers don’t have that information. They don’t know what the buying habits of a person that just entered the store are, and they don’t know how to make the buying experience better. Retailers are changing this aspect; they are trying to acquire as much information of each person that enters a store. Loyalty programs that work through cards that may accumulate points and give rewards to customers for their purchases are the main mechanism used by brick-and-mortar businesses to gather information about their customers’ interests and shopping habits. However, besides sending emails and direct mail with offers related to those interested, this method is limited in its capability to provide ways in which to improve customers’ shopping experience, because the customer is identified at the check-out. This is also limited in the information gathered because it only provides data about the products purchased, but not about what customers are looking for. Identifying the gap between the store’s current offer and customers’ interests is the main way to implement a leading supply chain management instead of a lagging one. It provides information about business opportunities and allows the supply chain to be managed according to a forecast of the market’s future requirements.

In a recent article by The Economist, Stacey Shulman, CIO of American Apparel said that they are doing some tests with their security cameras and Wi-Fi networks to gather information that can help them understand customers better, offer them a shopping experience better tailored to their interests, and consequently increase their profits (2). Knowing how many people are in a specific aisle or in a store at a specific time, helps retail companies to determine how many salespeople should be available, in what part of the store they are needed, or what specific products should be in display. Companies such as ShopperTrak or RetailNext have started using their security equipment to gather user and store information. With this type of technology store managers have been able to identify which displays have better results than others and to forecast better the demand of products which result in a better supply chain management process.

These innovations in the management of customer shopping habits raise conflicting points. On one hand, are the security concerns: Should there be any privacy issues with this type of practice? Is it legal to use cameras for other types of activities besides security? Retailers may tend to use this information to distinguish users between casual browsers and active buyers; they can even combine it with external information that can help determine if a person has purchasing power. It is somewhat disturbing, as it sounds like retailers know more about me that what I know about myself. Just like the case of the how Target figured out that a high school girl was pregnant before her parents knew (3).

On the other hand are the endless possibilities for businesses to better understand and predict customer behavior, and to offer products, services and a shopping experience better tailored to customer needs. This will allow companies to optimize their supply chain management, increasing their margins.

But it can be argued that not only companies benefit from these practices: offerings will be better aligned with what customers want, and a more efficient supply chain can result in lower prices. But are customers willing to pay a price, sacrificing their privacy? What is the limit; what information is within the acceptable boundaries of customer privacy, and which one trespasses them?


1. Meindl, Chopra and. Supply Chain Management. Information Technology in a Supply Chain - Chapter 16. s.l. : 4th Edition.
2. The Economist. We snoop to conquer. The Economist. [Online] February 9, 2013. [Cited: February 18, 2013.] http://www.economist.com/news/business/21571452-security-cameras-are-watching-honest-shoppers-too-we-snoop-conquer.
3. Hill, Kashmir. How Target Figured Out A Teen Girl Was Pregnant Before Her Father Did. Forbes. [Online] February 16, 2012. [Cited: February 18, 2013.] http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/.

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