We do have some stores with quite similar strategy like Walmart, but those are more like a mix of Walmart and Costco, I would say: You can buy everything from vegetables to camping gear and groceries come in a bigger size than in usual grocery stores. Those stores usually require a membership card, which allows only the cardholder to purchase in the store and in some of them only business owners can become members.
I simply think the business strategy of Walmart just disn't work in the environment of German consumerism and the German retail market. But I wanted to find some facts about Walmart's failure in Germany...
In 1998, Walmart took over the stores of Wertkauf and Interspar and entered the German market with 85 locations. After 8.5 years of trying, Walmart sold all 85 location to METRO, one of Germany's biggest retail companies.
Labor Management: Walmart's tried to apply the company's US success strategy in an unmodified manner to the German market, which especially wasn't appreciated by the German employees. Morning exercises might work in America to boost the employees' morale and inspire their loyalty, but Germans become rather annoyed than motivated. The management of Walmart threatened to close certain stores if their staff didn't agree to work longer hours than stated in their contracts and did not permit video surveillance of their work. But, spying as well as reporting of employees' misbehavior is illegal in German. Besides the trouble with the German standards in labor management and law, Walmart struggled with the high labor cost in the country.
Misreading the Market: Walmart lacked in knowledge about the market they were entering. That the company tried to sell the same (American) products in Germany. For examples pillow sheets or paper block have a different sizing in Germany than in America. Walmart ended up with huge amounts of both products they couln't sell to the German customers. David Wild, CEO of Wal-Mart Germany, stated: "It does not good to force a business model onto another country's market just because it works well somewhere else."
Different Culture & Customers: Germans don’t like employees handling their groceries at the check-out, they prefer to bag their own groceries into reusable bags. Especially male customers were put off by the clerks, who were instructed to smile, and thought they would be flirting. Germans are rather used to brusque service. Like many Europeans, German consumers prefer to shop daily at local markets instead of weekly shopping in a hypermarket. At the same time, they are one of the most parsimonious and price-conscious consumers in Europe with an in average increasing income in their households.
Competition: Germany is the home of discounters. The profit margins in German retailing are the lowest in Europe. Two German discounters, Aldi and Lidl, dominate the grocery market, with smaller shops that feature cut-rate food with a still pretty high quality. Aldi also heavily promotes one-week sales, featuring deeply discounted merchandise, ranging from wine to garden hoses, which draw customers back. A limited critical mass, insufficient square meter productivity and a too aggressive pricing policy made Walmart loose this competition.
Walmart never got traction in Europe's biggest market characterized by an incredible price competition, well-established discounters and the cultural resistance of German shoppers to hypermarkets, which sell fresh vegetables a few feet away from camping gear.
Other countries in which Walmart also failedto succeed are India, South Korea and Russia.
www.kwintessential.co.uk, www.nytimes.com, www.businessinsider.com, www.dw.de
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