Did Germany’s Wal-Mart Babes look this good?!
Wal-Mart, the world’s biggest retailer, is selling its underperforming German stores to the country’s leading retail chain Metro, marking a major retreat that will cost it about $1 billion.
The U.S. retail giant has struggled to capture market share ever since entering the cut-throat German retail arena eight years ago, frustrated by razor-thin margins and tight labor and trade laws in a country still marked by tepid consumer spending.
The exit from Germany marks the second time in two months that Wal-Mart has pulled out of one country to focus on more promising opportunities elsewhere — such as in China, South and Central America, or India.
“It has become increasingly clear that in Germany’s business environment it would be difficult for us to obtain the scale and results we desire,” said Wal-Mart’s vice chairman Michael Duke.
Could it be that Wal-Mart doesn’t like playing when the rules are enforced?
Aric, that’s not true at all. All bigger chains in Germany have a certain percentage (usually around 25%) of union employees and the wages/ benefits/vacation time is virtually identical between all of them. The playing field is level, so to speak.
The reason Wal-Mart failed in Germany is because they made a mess of the whole undertaking from start to finish. They took over two second-tier chains which had nothing in common and tried to merge them, were far too small to have enough leverage with suppliers and the (largely US-based) management didn’t have a clue about the market, culture and laws.
For example they employed American buyers who had so little knowledge of the market that they ordered piles and piles of pillowcases which couldn’t be sold because German pillows have a different size than US ones. In a market with razor-thin margins you just can’t afford blunders like that.
Wal-Mart pulled out of Germany because they’ve been losing money hand over fist for several years with no end in sight. You don’t retreat from the 3rd biggest retail market in the world because someone may or may not use your presence there as an argument in court.
Thanks the above all comments, I learn from all of you. I think the defeat of Wal-Mart may be little bit about the living style of European and mostly in the cost of running business. German has a history long of high cost in its market for any business as I heard from my friend who study economy major in German university in her thrid year.
Well to sum your very elaborate posts in this thread up, I would like to put it as follows: Wal-Mart overestimate its own relevance to the German retail market: It was zero.
Nobody ever needed Wal-Mart as a new shopping outlet here. when I was in rural Pennsylvania as a student, there simply would be another place to go for getting groceries, so everybody went to Wal-Mart (killing the main street businesses within months).
Germany is the most competitive retail market in the world. It is virtually not possible to make a horserace out of this market. The average profit margin is about 0,5%, if a company like Aldi can make 1,5% it is considered as excellent. German retail chain are successful worldwide (notably Metro, Lidl and Aldi) because they have long time experience in dealing with harsh market conditions. Wal-Marts shear size put them in a favorable position in many U.S. communities, as the stores are big enough to suck up the entire buying power of a neighbourhood, creating natural monopolies which can be exploited by the company.
Now Wal-Mart comes to Germany and pretends to offer something new: low prices for good quality. Overlooking that these thing have been around for decades due to the said market conditions. I have never seen such an extent of cultural naivety and ignorance before. The American consumer culture was simply transferred to Germany. In Cologne, customers complained, that they were approached by “unknown” people in the parking lots. It was just the greeter! These folks never showed up again. Cashers used to start fake conversations with the customers (How are you? Did you find every item you wanted?) embarrasing the customers, as being talked to be complete strangers is considered highly improper in Germany.
Wal-Mart tried to convey their image of shopping: an event for the whole family in the close neighbourhood. In Germany shopping is a highly unemotional and rational thing. You go where the greatest bargains could be had, no frills, no service at all please as this only raises the prices. German shoppers use to be very informed about quality and prices before the shop, so the are in no need for customer guidance whatsoever. They are not willing to accept greaters, baggers, talking cashers and most of all smiling sales personnel. Who smiles with no reason at all, has something to hide! German society tends to scrutinize new products excessively by independent research institutes to know about quality, endorsements by the retailer itself is highly distrusted. The next thing is, that you wont get German consumers to believe shopping can be a rewarding activity. Shopping is something you have to do in order not to starve tomorrow so you get where things are cheap, grab your things ( not puzzling multitude of product varities please) and leave.
Only IKEA has managed to create a kind of a feel-good-atmosphere where people like to go, but no other company so far. Everyone failed over German rationality and service refusal.
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