Why Walmart Failed in Germany

Walmart, the most successful retail operation in the US, failed to make even a dent in the largest and most vibrant European economy (Germany) after losing a billion dollars in the process of bungling their German market experiment with so much failure it is now the stuff of local urban legend..  Let’s examine the reasons.

Update: Latest American Fail here.

Cultural Hubris

“The problem was the company’s business philosophy, which had always worked so well,” wrote Frankfurt’s Börsenzeitung in what pretty much amounted to an obituary. “It’s people-centered – but that doesn’t actually work when the people aren’t American.

The company gave the job of masterminding Wal-Mart Germany to an American who didn’t speak a word of German.

The Germans weren’t fond of the Walmart practice of hiring old people to accost greet them at the door, nor were the German workers impressed with morning warm-up sessions (“Higher Profits Uber Alles! — Can I get an Amen there Fritz!!”)

Economic Hubris

They have all kinds of laws over here against the kind of disruptive market “capitalism” that has decimated small towns across America, (and still threatens the world economy IMHO):

1. You can’t sell below cost in the Eurozone countries just to run your competition our of business, even if you have a billion dollars to give it a go.  Helps to level the playing field.  Gives the small guys half a chance to compete with the bigger players.

2. You can’t abuse the workforce with “falling wages” and expect the government to subsidize your slave-wage workforce with food stamps and healthcare just to make ONE corporation rich at the expense of the society at large.  Something else the German workers were repulsed by?  A ban on flirting in the workplace.   Germans to Walmart: You Don’t Own Us.

Playing by the same rules as everybody else proved FATAL for Walmart here in Germany.  This Atlantic Times summed up Walmart’s German problem nicely back in 2006,

One consequence was less competitive prices than those of their rivals.

I don’t think the American business community learned much though.  The same US based recap of the Walmart fiasco quoted above, also said this:

The third problem was bad press. The media reported that shoppers were turned off by Wal-Mart staff hired to greet them at the door and bag their groceries. This sort of thing was and still is unusual practice in Germany, so it was done away with.

Dam you media.  If only you hadn’t highlighted all of Mitt Romney’s lies Walmart’s practices, we would have Seal Team Six deployed alongside the IDF right now Walmart in Germany!

There is a full thirty five pages of Walmart Schadenfreude, (apparently written as a German business college research paper) at the end of the abstract reprinted here from linked English language PDF following.

Clearly dominating the US retail market, Wal-Mart expanded into Germany (and Europe) in late 1997. Wal-Mart’s attempt to apply the company’s proven US success formula in an unmodified manner to the German market, however, turned out to be nothing short of a fiasco. Upon closer inspection, the circumstances of the company’s failure to establish itself in Germany give reason to believe that it pursued a fundamentally flawed internationalization strategy due to an incredible degree of ignorance of the specific features of the extremely competitive German retail market. Moreover, instead of attracting consumers with an innovative approach to retailing, as it has done in the USA, in Germany the company does not seem to be able to offer customers any compelling value proposition in comparison with its local competitors. Wal-Mart Germany’s future looks bleak indeed.

Walmart Fiasco in Germany (35 page PDF)

Enjoy.

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