"Willkommen zum Wal-Mart!"

Germans Get Wise to Wal-Mart

After a decade long attempt to crack the German market, Wal-Mart is pulling out, selling its 85 stores and abandoning its plan to become the country's leading retailer. According to a story in My Way, one of the reasons for its astonishing failure is the fact that Germans strongly dislike "some of Wal-Mart's signature features, like stores outside of town centers, employees required to smile and heartily greet customers. . . " Smart people, those Germans!

[The company plans to focus its efforts on greener pastures in China, South Korea and South America where, evidently, phony smiles still have an ineffable charm. -LW]

The New York Times also has a story on this development:

“They walked into a triple-witching hour in Germany,” said James Bacos, the director of the retail and consumer goods practice at Mercer Management Consulting in Munich. “They got into Germany at a time when the whole market was shifting away from their model.”

....Some of Wal-Mart’s troubles stem from the way it broke into the German market in 1998, according to analysts. Instead of starting from scratch, it bought two second-tier retailers, Wertkauf and Interspar, and found itself with a hodgepodge of stores, geographically dispersed and often in poor locations.

The company initially installed American managers, who made some well-intentioned cultural gaffes, like offering to bag groceries for customers (Germans prefer to bag their own groceries) or instructing clerks to smile (Germans, used to brusque service, were put off).

Wal-Mart later went tried German managers, and then appointed David Wild, a former executive at Tesco of Britain, to run its German operations. He tried to win over customers by selling organic meat and produce.

“They found they had some things to learn about the German market, and they did change, but maybe too late,” Mr. Bacos said. ....

[An interesting background condition seems to be that Germans are cutting back on their desire to buy the kinds of junk Wal-Mart sells. Again, from the NYT:]

While consumer confidence has picked up recently, Mr. Bacos said the proportion of household income that Germans spend on retail purchases continues to decline. Profit margins in German retailing are the lowest in Europe.