Why did Wal-mart fail in Germany?

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Fenris Troll Ripper JPA RT ATL Â®

In my guess it is because Germans are used to buying QUALITY BRAND products that last, not cheap bottom of the barrow scraps.

I am glad they are not a success there. It is a cheap place with cheap products and I do not mean inexpensive!

@Nekkra I am not gonna thumb you down but I am not going to totally agree with you either here. They are not the SAME customer service oriented as in the USA because many waitstaff get an hourly wage and do not have to bust *** to get tips from customers, why should we pay thier wages and our meals too!! So I have never had that problem of service there, I just SPEAK UP when I want something because I know they do not have the same service as we do but it is not due to being rude or such it is just a different way of life. When most go out to a restaurant there its for awhile, here in the US we rush every thing!! You know this!

Thats another reason it failed, its a rush kinda shopping. It is not their culture and I am glad it is not!

Jerry

There are two main factors:
- Walmart did not expect the very narrow win margin in Germany (about half as much as in the USA). This is caused by the high number of supermarket and discounter chains (Aldi, Lidl, Rewe, Plus, Edeka...), making competition very hard.
- Walmart used very unusual forms of service. They employed people to greet customers at the entrance, to pack the bags (most Germans don't like that to be done by strangers), and so on. This caused additional costs and scared away the Germans.

So, they failed in analyzing a foreign market before entering it.

Edit @dbdoit: Walmart entered the German market in the mid-90s. In these times, the USA under Clinton were quite popular. You can't blame antiamerican feelings.
@Meenzer: Their prices were too high, not too low. They were outrun by the other competitors and had an image of a rather expensive discounter.

mtboarder_68

I'm guessing because Germany has a good economy and is interested in quality, durable products, not cheap junk.

drink_pepsi

Germans value quality over "bargains" for their purchases. They don't like cheap stuff. It's a cultural thing. It's the exact opposite in US society.

t_maia2000

Jerry, Jaysin D, Alwin E and ShlomoNY have given you very good answers.

As a German I would like to add certain things.

Walmart got in over its head on what they called "union" issues. All the things that the unions in the USA fight for (paid leave when you are sick, 22 days of paid vacation, maternity leave, mandatory union representatives, mandatory health insurance partially paid for by the employer, etc) are a legal right for employees in Germany. When Walmart tried to branch out to Germany they completely neglected that. They had a hundred lawyers all over them for violations against German labour law. Only after that did they really look at the cost of labour in Germany.

They got a lot of bad press over "treating their employees like babies", ie the "no relationships between employees" policy and the "first name on name tag" policy - only children, relatives and close friends get adressed by first names in Germany. And relationships between co-workers are the norm in Germany. (ALDI for example encourages it when both partners in a marriage work for Aldi. ) Employees at the lowest level resented the US management for these policies. Union representatives were watching them like hawks too and they got some bad press from that corner. Environment activists protested against Wal-Mart handing out free plastic bags, something they had battled against for decades in German supermarkets.

The German food retail market is one of the toughest in all of Europe. The last thing the German retailers needed was another competitor. They closed ranks against Walmart. Since Walmart was just starting up in Europe it did not have the purchasing power of the oldtimers. In order to set themselves apart from German stores they also had to carry a lot of imported wares from the USA. This caused higher costs on the buying side of things.

Walmart choosed crappy locations. They would have been prime locations in the USA, but in Germany they were crap. Roughly 30 % of all households in Germany do not own a car. Therefore they prefer to do their shopping in the city, transporting things by bicycle or public transport. Cost of gas is much higher in Germany too. (Currently 8 USD per galleon.) Taking all this into account it makes more sense to built a mall inside the city, not outside. At the very least a mall needs to be easily reached by public transport and be close to a large residential area. Yet Wal-Mart built their stores absolutely in the middle of nowhere - for their Leipzig store (at Gewerbepark Leipzig West, 06254 GÃ¼nthersdorf) up to one hour of driving time away from Leipzig and Halle during normal afternoon traffic. The customers they had there were not people from Leipzig or Halle, but passers-by driving on A9 to destinations like Berlin and needing to do their shopping before the shops closed.

Walmart stores were completely oversized compared to German stores. When you are German and your job is over at 6 p.m. you want to spent no more than 30 min in a store before you head home to dinner. Ever tried to walk through a Walmart store, doing your shopping, in under 30 min? At Aldi, Plus, Lidl and other German discounter stores you can. They carry less products than Walmart (800 compared to 10,000+), but these products are exactly what 90 % of their customers need/want. They can purchase a lot less land to built their stores on and need less staff to run the shop, thus reducing costs. It is the McDonalds principle - fast turnover of customers and goods means more sales and thus more profit.

EDIT: Sorry, the failure of Wal-mart in Germany had nothing to do with Bush. When they entered the German market they made big words and promised better service at cheaper prices than Aldi, Lidl and Co. They failed to deliver, simply bc when you offer better service (like a person to greet you or baggers) you normally need to have higher prices. They did not do their homework, or they would have known that lower prices for food articles than their German competitors were outright impossible.

BTW, I absolutely disagree that baggers are a good thing. I much rather bring my own cotton reusable shopping bags than have a company like Walmart throw a ton of plastic bags at me. In the end I have to pay for this "service" with higher prices for the goods I am buying. And I am not willing to pay for something that litters the environment. It took Greenpeace Germany over 10 years to get German shops to abolish the practise of handing out free plastic shopping bags. And just at the point when selling plastic and cotton bags to customers had become the standard, Walmart busted in and and said "free plastic for all". Environmental activists were soon howling for Wal-mart's blood - and most normal, slightly environmental sensitive customers were howling along with them.
You can complain about the lack of service in Germany as much as you want, but in the case of baggers I (like many other Germans) am glad we do not have free plastic bags at Aldi, Lidl, Rewe and Co.

frackledJJ

I can't say it any better than t_maya. While I enjoyed going to Wal-Mart because I knew it would have a couple of US things I couldn't get at any other store, the drive there was extremely long, and I never did my complete shopping there, because produce was just way more than in Penny or Lidl.
I think, though, that the bad press Wal-Mart had in the US before it even started to come to Germany was also a factor. The Union-people were looking at them with Hawks eyes and basically waiting for them to make a mistake, which - surprise, surprise - they didn't have to wait long for.
They really hadn't done their research well. I guess they thought they'd come as a relief to German people, who would just have to make one stop for their weeks worth of shopping, since they had everything from clothes to shoes to appliances and sports gear, but German people like to have, and are used to, a bigger range of offers. And we have special stores for everything, where expert advise is not only available, but basically thrown at you. In a Wal-Mart, you mostly found yourself all alone in a hugh long isle, and if you did spot a shop attendant, you mostly had to chase him down before he would talk to you. That was not "Service" as Germans are used to it.
Plus, Germans are not quite used to the idea of shopping cooped up in hughe buildings. The innermost part of cities is mostly were you go shopping, with the farmers markets, different clothes stores, a nice caffee, where you can sit outside and enjoy the sunshine during your shopping break. Busy cafeteria-style food stalls, where all you get is fast food, while you sit under artificial light and can't talk to anyone because the music is blaring is not appealing.
And: For stuff like camping gear, small pieces of furniture and so on, that Walmart also offered: Walmart was mostly located in the "Commercial areas" on the outscirts of town, where home-depot-like stores like OBI, Hagebaumarkt and so on are usually also located, who have the same stuff, usually cheaper, year round, and, like I said, with advice to be had.

I was not surprised when Wal-Mart said they'd pull back from the German market. I was surprised they lasted as long as they did!

Alwin E

In addition to what Jerry and Shlomo said, there are three more points:

- German workers' unions have more power and influence than in many other countries, and they were strongly opposed to Walmart reducing costs by lowering their employees' wages and social standards.

- The (potential) customers didn't accept Walmart as quickly as they would have liked. I remember some of the TV commercials broadcast here, and they were all something like "hooray, here we come". Germans don't like to be overwhelmed; they want to be persuaded.

- They came to Germany at a time where many existing supermarket chains were expanding rapidly, so competition was high, and Germans are very conservative in their shopping habits. They rather stick to the well-known brands.

I'm sure they did some market research, but just didn't take the psychological factors into account, and their timing was really bad. I don't think they necessarily had to fail, but they would have needed a lot more patience and a lot more adaptability to German habits which they obviously didn't have.

ShlomoNYC

There is not just one answer - but:

Groceries are very cheap in Germany - there are strong competitors such as ALDI; Kaufland LIDL and Tengelmann. Profit margins in that industry are lower than in the US. Then German consumers are very price sensitive. They usually compare prices in several stores.

Germans did not like the "no relationship between empoyees" policy.

German wages are higher than US wages.

Walmart did not adjust to the German way of life:

example: name tags with the first name - in Germany people always use the family name.

American way of "writing" - Germans simply could not read some of Walmart`s signs

JERRY D

So many great answers to this one! I'm U.S. born and raised (as are my parents and grandparents) but I've visited Germany several times. Some things about German culture I really love, and some things would leave me missing the U.S. if I were living in Germany. Overall, though, I think we have a lot in common.
Having said that, it sounds like WalMart really missed an opportunity to do good business in Germany. It seems that they thought Germans would embrace the "American way" when they should have done MANY cultural studies and learned the norms from Germans and adjusted their business plan. I can't imagine Aldi in the U.S. putting up signs in German, so why would they think English signs saying "Price Rollback!" would work in Germany? Yes, most Germans have English language skills, but it still seems arrogant on WalMart's part. And although I love having my groceries bagged for me, anyone who has visited Germany even once would know that they are very environmentally responsible and WalMart should have done everything possible to encourage the use of reusable bags and minimize the waste of plastic bags.
Like I said, I've been to Germany several times, last October was my latest, and NEVER experienced anti-Americanism towards me. I've had talks in bars and restaurants about our government, but they know that the American people are not the government, and that probably half of us also wonder how Bush was voted in twice.
And I've pretty much only been to mid-size and large cities in Germany, but I never had a problem with getting service for food or drink. In fact, I can't remember a single instance other than having to ask for the bill at the end, but that is because they don't rush you. Again, I like that when I'm there, but at home I appreciate when they put the bill on the table without being asked because I'm usually ready to move on to whatever is next on my agenda.
Just my two cents!

puddles78

Ha! What is this about Germans wanting quality products and not "cheap junk" like what Walmart sells?? I'm living in Berlin right now and I can tell you there are tons of stores here selling "cheap junk"!! What about Real??? That store is basically like Walmart, just way dirtier and smaller! Trust me the Germans have tons of stores selling "cheap junk".
Although, I'm sure the idea of having greeters - people smiling at you and welcoming you into their store- really threw the Germans off as friendliness is just NOT part of their culture. Now, I'm not saying the Germans aren't nice, they just aren't friendly and open. Having someone smile at the them and welcoming them probably scared the sh** out of them! Im not trying to German bash here, I'm just saying there are many cultural difference between Americans and Germans and I'm sure Walmart did not take that into consideration. Walmart probably just assumed the Germans would take to the American way of life, without doing any cultural studies first. But dont let the Germans tell you they only want "quality stuff" cuz I see tons of white trash people here buying crappy junk all the time!

eddievanhalen

I am really impressed with most answers here. Here are some great analysis' of the Wal-Mart debacle on german soil. They pretty much screwed up everything that they could, and the market was in turmoil (constantly sinking prices) to begin with.

One point from me: in the German market, they concentrated on food sales, whereas in the US market their forte has always been non-foods. The entire logistics are different, and they just didn't "get it right" - ever. Therefore they were going up against the best - Aldi, Lidl & Rewe - all who have it down to a science.

Ishtar

They have a similar chain of stores called ALDI - which carries better products, it's more affordable and to a budding nation of nationalists its German ! So Wal-Mart lost its appeal.

dbdoit

I am no expert, but I had to add my '2 Cents' worth to this question.
One of the answers mentioned a culture thing, that is one of the reasons and just plain bad timing.
With the Culture thing Wal-Mart came barging in with the American Way of doing things is better and ignoring many factors of the way German shop.
As mentioned many of their store signs were in English and sometimes made no sense to your typical German. Then they tried selling the same items they were selling in Kansas. For example dish towels with hangers for American styled refridgerator handles do not work in Germany.
Then there was the timing. Bush is not the most liked man in Germany. I mean Germans still like America they just wonder how Bush became president. Then you have Wal-Mart running their stores and marketing like they were in the US. There was the trouble with the German Unions which Wal-Mart did not like and handled badly. It just added the Anti-American feelling at the time and Wal-Mart suffered for it.

Nunziosoprano

I heard Walmart has been alot more successful in Latin America than it has been in Europe. I wonder why that is.

Jaysin D

because, they didn't have advertisements, they didn't sell what the germans wanted, like good clothes or soemthing, and the blue didn't to appeal, that why.

Nekkra

Sadly, this answer will get many "thumbs down" from the German crowd. But, it's the truth. I'm an American and have lived here in Germany for the last 20 years. Here is my take on why WalMart didn't do well in Germany.

Germans are not very service oriented. Customer Service over here is a joke. The odds of dying of thirst before you get a drink in a resteraunt are very high. There is very little chance of being greeted at any retail store and even less of a chance of being asked if you would like any assistance. There is no such thing as a "bagger" in any German store (Germans just reload their shopping carts or baskets and then put it loose or in boxes in their cars).

Germans were intimidated by the "antics" at WalMart. Too much selection, too much service, and far too many choices to make. For some strange reason, Germans will go to 5 different stores on a grocery trip to get the same stuff they can get in 1 store. Strange? Yes. But I swear they (and my German wife) do this and it drives me crazy driving around all over the city to all these stores. Just go to friggin WalMart and be done with it!

Well, WalMart is gone now. Real took over and is basically the same kind of store but on a cheaper scale (catering to the Turks, Poles, other eastern Euros, and low income people).

starcloud.2007

It was because how Wal-mart used to work.
I have a friend who used to work for Wal-mart and she told me how their strategy was - and it wasn't good.
And we do have enough discounters ourselves and don't need Wal-marts.

Meenzer

Unfortunately, they didn't make it because their prices were too low, they had too young managers.

See this link:
http://news.bbc.co.uk/2/hi/business/5223432.stm

Andrew

Europeans are anti Americans.
What do you expect to your competitors?
Would you?

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