Wal-Mart Leaves Germany

When Wal-Mart comes to town, the story goes, all the other retailers head for the hills. Apparently, this story doesn’t translate into German. Wal-Mart has taken a $1 billion pre-tax loss to leave Germany. The company is selling its 85 stores in the Bundesrepublik to its rival Metro AG. Coming on the heels of a similar departure from South Korea in May, it appears that the Wal-Mart-ization of global retail is not yet a done deal.

Wal-Mart Vice Chairman Michael Duke said in a statement, “As we focus our efforts on where we can have the greatest impact on our growth and return on investment strategies, 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.” What he means by that is the existence in Germany of "value retailers,” who largely occupy the niche Wal-Mart likes to move into. In places where Wal-Mart has had the most success (e.g., rural America), that niche is vacant and Wal-Mart effectively operates as a local monopoly. In Germany, it has to actually compete for that market position.

Another error, which is not unique to Wal-Mart, was using Americans rather than Germans in some of the more culturally sensitive positions. David Wild, CEO of Wal-Mart Germany, recently told the Welt am Sonntag newspaper, “Many of our buyers in Germany were Americans. Some real goof-ups occurred as a result. Like, did you know that American pillowcases are a different size than German ones are?” Guess what kind Wal-Mart tried to sell in Germany, and guess why they didn’t sell.

In another area, Wal-Mart had trouble with its workers. Germany still has significant labor-union influence operating throughout its economy. Not only do German workers command higher wages, but they will resist moves they believe impinge on their rights as human beings more than American workers do. In Germany, Wal-Mart tried to introduce a hotline to allow employees to report wrong-doing by their co-workers; a German court ruled that the company couldn’t set up a system of informers (perhaps de-Nazification worked after all). In America, there wouldn’t have even been a court case.

However, the resources that were being directed to a failing German operation can now be deployed elsewhere. Wal-Mart’s UK subsidiary Asda, a food and clothing superstore, has been losing market share to Tesco’s and missed revenue and profits targets last year. This gives Wal-Mart a chance to fix that. And if that fails, at least Wal-Mart will get its explanation in English.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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