Firms Look to Fill Wal-Mart Data Hole
The world's largest retailer has been selling POS data to at least six firms, including A.C. Nielsen Co., Information Resources Inc. and Sports Trend Info. The firms have used the information to predict purchasing trends for their respective industry clients, most of which are retailers, direct marketers and manufacturers offering packaged goods.
Wal-Mart has said its decision is final, but A.C. Nielsen and Information Resources have indicated they are trying to get the retailer to change its mind.
"We will continue to have a dialogue with Wal-Mart to see if we can work out another solution," said Matt Bell, spokesman for A.C. Nielsen, Schaumburg, IL.
Bell said it is too early to tell how the large retailer's decision will affect his company's clients or how A.C. Nielsen will make up for the lost market data.
Wal-Mart, Bentonville, AR, decided late last fall that it was helping its competition by releasing the information it collects from the electronic scanners in its checkout aisles. The retailer contacted the market research firms in December to alert them that it was considering halting the sale of its data.
Five of its clients have been on month-to-month contracts that will be phased out by July. Sports Trend Info, West Palm Beach, FL, has a contract that lasts through the end of 2001 and will continue to receive the information until then. The company lists large sporting goods manufacturers and retailers such as Nike, Adidas and Spalding as active customers.
Keeping those customers happy with accurate market assessments will be more difficult without Wal-Mart's help, said Barrett LaMothe Ladd, an independent retail consultant based in Arlington, MA.
"It's a little bit difficult to say exactly how much they will be affected, but you can't ignore that Wal-Mart is the biggest retailer on earth," she said. "Market research firms like Sports Info now have to replace that source of information so they can predict trends and forecast demand."
Robert Rubin, retail analyst at Forrester Research, Cambridge, MA, said market research firms should react to Wal-Mart's decision by bulking up their inhouse data collection and making their core service more lucrative.
"I think companies like A.C. Nielsen and Information Resources actually stand to benefit from this," he said. "Their services are going to be that much more valuable because people will be more reliant on them rather than Wal-Mart to get the information. The researchers will have to do more sampling and market tests to make up for the Wal-Mart data, but their information will be more valuable in the end."
Rubin advised retailers to digitize their supply-chain relationships with manufacturers because of the Wal-Mart development. He said electronic collaboration could help businesses keep the right inventory in stock.
"Manufacturers and retailers are going to want to develop closer relationships because they are going to have to find new ways of predicting demand," he said. "A lot of retailers are going to be scrambling."