This Is Not America: Why Wal-Mart Left Germany (2006)

http://www.atlantic-times.com/archive_detail.php?recordID=615

by Tomte • 11 years ago

48 75 11 years ago

_delirium• 11 years ago

While I wouldn't completely discount cultural and business-environment differences, this is probably the most relevant part,

Another fatal flaw was that Germany's retail market is already saturated with discounters such as Aldi and Lidl, meaning that any new arrival inevitably finds itself in the midst of a cutthroat price war.

Walmart's model is to do high volume at low margins with a highly optimized supply chain. But that is already exactly the model of Lidl and Aldi, and there's not a lot of room to beat them at that game.

amyjess• 11 years ago

If anyone can out-Walmart Walmart, it's Aldi.

When Aldi came to Dallas a few years ago (I'd like to say 2010-2011ish), they started a price war over milk that resulted in milk prices in Dallas plummeting to 1960 levels.

Edit: Source: http://www.wfaa.com/story/money/consumer/2014/08/10/13621020...

untog2• 11 years ago

I do wonder what the effect of this is on dairy farmers.

lnanek2• 11 years ago

I like the Aldi I used to go to in Kansas while working there. Cheap, clean and no one bothers you. It actually was a better experience than Walmart, even for this American. They had cool, better carts too!

kordless3• 11 years ago

Unfortunately Aldi in the States doesn't do as well as Aldi in Germany.

ctdonath3• 11 years ago

"Not a lot of room" in this case is basically zero.

FYI to those unfamiliar with Aldi: their (grocery) stores are fairly small, run in a seriously minimalistic manner. Products are usually presented either on their shipping palettes, and/or still in volume cases - customer does some of the unpacking. Most products are "made for Aldi" or otherwise sourced from bottom-price manufacturers. Variety is nearly nonexistent. Typically (at least in every store I've seen in USA) there are only two employees at any time - one acting clerk, other stocking/cleaning. Credit cards are not accepted; before debit cards, it was cash only. Aldi seemed the last store to use barcode scanners, clerks having literally memorized the codes for every product in the store and could process checkout nearly as fast (sometimes faster) than barcode scanning. Stores are very clean & simple.

You'd be hard-pressed to beat that cost-cutting business model.

vermontdevil2• 11 years ago

Don't forget $0.25 deposit for shopping cart and bags are extra.

pbreit2• 11 years ago

Possibly, but it would seem like there would be ample opportunity to compete on a number of other dimensions that would resonate with most humans. What you describe sounds a little like Trader Joes (some relation to Aldi) except that there are tons of happy employees around.

Zigurd• 11 years ago

WIthin a short drive from me there's a Wal Mart, with a grocery section, and an Aldi, right next to each other. I tried the Aldi out of curiosity. I don't know if Aldi screwed up their format for America, but it was baffling to shop there. Heavy on the canned food. Confusing layout. Etc. Trader Joe's gets the "limited selection" thing much much better. Wal Mart caters to ethnic shoppers better. I don't think it works in America.

Someone2• 11 years ago

Also (https://customerservice.aldi.co.uk/faq):

Q: "Why is my local Aldi store not listed in the phonebook?"

A: Because phones cost money for subscriptions, and store personnel that picks up the phone doesn't bring in money.

No, that's not what their FAQ says, but generally believed to be true. Shops also don't have toilets for customers, and I remember a story about a shop that didn't have one for its personnel, either, but that may have been an urban legend.

r3m6• 11 years ago

In addition, an important part of Aldi's recent success in Germany is that they do not compromise on quality. Often their products (say olive oil, toilet paper,...) win/score at the top of consumer reports. They have a great brand image (much better than Lidl).

Mithaldu• 11 years ago

That depends on which part of Germany you're in. There are two Aldi chains in Germany, run by brothers. South Aldis are great. North Aldis are understocked, dirty and generally don't provide a great experience.

pbreit2• 11 years ago

It still surprises me that a company like Walmart, with such massive advantages, cannot figure it out.

usrusr3• 11 years ago

As a german, don't even know enough about Walmart to tell if they are in the same game or not. There are two mutually exclusive ways of doing cheap: you either take pride in being cheap our you try to hide it in everything but the price tag, aping pricier retailers in all other aspects (something Aldi or Lidl would never do, minimalistic presentation is the core of their brand identity).

The pretend-premium version of cheap simply would not work in Germany, because kills trust in the value of the actual products sold. Over decades, the (maybe at most semi-true) idea that products bought at Aldi or Lidl will provide high value despite their low price because all the saving comes only from cheap presentation has taken deep roots in the public consciousness. And this is where cultural differences really put Walmart in a pinch: even if they are firmly in the proud-cheap camp (which neither I not the general public would know), transplanting American service ideas like excessive greeting or the whole bag-packing thing (even just getting a bag for free is considered borderline wasteful) would give the exact opposite impression. Premium presentation, that combines with cheaply sourced goods into a very toxic "faux-quality" image.

woodpanel5• 11 years ago

"Over decades, the (maybe at most semi-true) idea that products bought at Aldi or Lidl will provide high value despite their low price"

I hate to be defending Aldi's rep (or the allegedly faux idea), but as a regular shopper in Germany'S four major chains (Edeka, Rewe,Lidl, Aldi), I must insist: Aldi/Lidl ARE providing a good price-to-value ratio for customers :-)

Of course, with the organic & premium chains popping up the last decade(s) you can get better quality. But those high-quality shops are making up just a small share of the market [1].

Their competitors (REWE/EDEKA) will offer you a wide range of [lets say Beans], ALDI/LIDL will offer you just one. But while that one usually has the quality of the competitor's most expensive version it comes with the price-tag of the competitor's cheapest.

[1] http://de.statista.com/statistik/daten/studie/4916/umfrage/m...

thisisblurry• 11 years ago

Site appears to be overloaded. Here is a mirror: https://web.archive.org/web/20110511182424/http://www.atlant...

shanemhansen• 11 years ago

503 Service Unavailable.

mmphosis• 11 years ago

https://web.archive.org/web/20110511182424/http://www.atlant...

raverbashing3• 11 years ago

"The company gave the job of masterminding Wal-Mart Germany to an American who didn't speak a word of German. This should surely have been indispensable to finding out what the German salespersons would need to know about local shopping habits."

Well. Culture beats strategy

I love when people think they can learn about a new market from their comfy office an ocean away

VLM• 11 years ago

"Germany enjoys a healthy pro capita income"

Locally walmart means absolute junk quality for poor people who wait in long lines. The description of Germany is a good fit for retail in general, but not walmart. This truth can't be stated in a commercial publication, walmart spends too much money on advertising, but I think it fairly obvious.

Now Target could have possibly made it. Or maybe walmart could have made it in far southern or eastern Europe in very poor areas.

riffraff• 11 years ago

lidl is the epitome of junk quality for poor people who wait in long lines, and it's the quintessential german supermarket.

TillE• 11 years ago

Lidl seems to have a terrible reputation in the UK and Italy (and possibly elsewhere), but in Germany they're just another discounter.

We do have some more upscale supermarkets, but there's generally little variance in quality among the discounters. Although Lidl does have by far the best store brand (J.D. Gross) chocolate.

slight• 11 years ago

The food in Lidl isn't junk quality, most of it is fine. They have some junk quality non-food stuff quite often but there's nothing wrong with the food in my experience.

leoedin• 11 years ago

I can't comment on Lidl in Germany, but the quality of goods at Lidl in the UK is actually fairly high. You do generally wait in long lines though...

woodpanel5• 11 years ago

In Germany, Lidl and Aldi do attract higher income brackets as well. It's not considered a freak accident to see a Mercedes/BMW/Maserati/Audi/Tesla parked in front of them. Also small-family diner owners buying there as well, as Aldi/Lidl often beat wholesale prices (Metro Group).

Of course, if you visit one in the red light district it's going to be a different experience.

barkingcat• 11 years ago

This reminds me of the Target retreat from the Canadian market.

http://www.theglobeandmail.com/report-on-business/small-busi...

john_fushi• 11 years ago

That was such a failure. They baited people in with the promise of a good selection of products at a low price when they had actually a pitiful selection and jacked up prices.

Half of the shelves were actually empty. Clothes were of extremely low quality.

They just did not do anything right.

jleyank• 11 years ago

While I fully agree with the empty shelf point (it WAS pretty pathetic), I don't accept the jacked-up price argument. Yeah, Target Canada did not have the prices one sees in Target US, but then Walmart Canada doesn't have the prices, either. Maybe in spots, but for the stuff I buy there's still a noticeable price reduction down south. Even factoring in the currency difference...

I think it's because Wal-Mart's been in Canada and people have grown used to the stores being there. Target was new, and it's way harder to overcome a screw up when new. Once the competition disappeared, things got more pricy in Wal-Mart so the Canadian consumer lost in various ways during this process.

I'm not sure they could have screwed up Target more if they tried. Perhaps this was all a tax write-off?

werber• 11 years ago

Has any foreign chain been able to really take off in Germany?

skrebbel2• 11 years ago

Fashion chains, plenty of them. H&M, Zara, etc.

joezydeco7• 11 years ago

TJ Maxx operates in Germany under the name TK Maxx for some reason.

domrdy• 11 years ago

Fast food chains

wink3• 11 years ago

I even checked all of the ones I could think of on Wikipedia, and no, I didn't find any. Interesting indeed.

joezydeco7• 11 years ago

IKEA.

wink3• 11 years ago

True, but I think werber was referring to grocery stores (or the like).

legulere• 11 years ago

One of the two netto chains is Danish. It's only active in some parts of Germany though.

usrusr3• 11 years ago

Ah, the cute dog Netto, always a nice surprise when you come to the north from the south. And not half as weird as seeing wrong-colored Aldis ;)

woodpanel5• 11 years ago

As some have mentioned, yes. But in general: Why must someone push his brand and store concept into another country, instead of buying/creating a local chain?

How often will grocery-buying customers from one country be shopping groceries while on vacation? And would a recognizable brand really leave the customer with an advantage? E.g.: If I were an American in Germany, yearning for Twinkies, which are nowhere to be found in regular stores in Germany, would I or Walmart be really better off, by also-not-finding-them in the German Walmart too?

raverbashing3• 11 years ago

Why must someone push his brand and store concept into another country, instead of buying/creating a local chain?

Exactly because they want to do it their way

It's not about foreign people, it's about a different way of doing stuff

Walmart may be bad for groceries, but it sells a lot of other stuff, which is an area Aldi/Lidl doesn't touch

wink3• 11 years ago

The Wal-Mart in Munich, Germany introduced me to the concept of "hot dog relish" (must have been ~10 years ago) which I had never heard of before. So if not for other reasons, for getting ingredients for sandwiches and stuff I mourn their parting :)

exeterfan• 11 years ago

This reminds me of Tesco trying to crack the US. No language barrier, and spent ages studying US shopping habits but gave up in the end. Supermarkets are hard.

http://www.bbc.co.uk/news/magazine-13190124

kordless3• 11 years ago

The company also scrapped the staff warm-up sessions scheduled at the start of every day, on the grounds that German employees found them ridiculous.

Ah, Germans. Gotta love the directness of the culture. Keeps things real.

joezydeco7• 11 years ago

Germans I've asked about this say "why do you need to perform a cheer to begin your work?" It's not just the directness, it's the attitude that you show up on time and work. No screwing around, no hand-holding needed.

buster• 11 years ago

Just wondering.. i never heard of this (I'm german) but i have seen a documentary about Japan, where employees (in this case salesmen) gathered in the morning, did some kind of sports and some motivational speech and things like that. Is that also something i'd find in the US? I must admit, i smiled at it and found it ridiculous. I'd think all the time "stop wasting time with this shit and get some work done"...

zer00eyz• 11 years ago

As an american I find this kind of thing "ridiculous" as well. I think a lot of folks share that sentiment. The question is why are we still doing it.

I also have to ask what they entail at walmart? Ya for no heath insurance, Ya for working but having to be on food stamps, Ya for not enough hours to support my family?

Oletros3• 11 years ago

Ah, Germans. Gotta love the directness of the culture.

I don't know any Spanish, Portuguese, French or Italian that doesn't find that ridiculous

woodpanel5• 11 years ago

When Walmart came to Germany I've actually kinda hoped, they would succeed with that warm-up thing. But as most (if not all) stores were just bought up from other German chains - their employees were bought with those stores and remained as unmotivated, bored and sometimes aggressive as they were before :-)

When you write about "the directness of the culture" I find it telling, that Wal-Mart sees its methods as "people-centered" while the competitor's German CEO sees them as "all about budgets, not customers"

cygnus_a• 11 years ago

There were a lot cultural misses in Walmart. For instance, nobody bags your groceries in Germany. When you're not expecting it, it's fucking weird to have some employee come up and grab your food.

Also, Germany has places like Kaufland and Rewe (in addition to Aldi) that have certain items much cheaper than Walmart. I found that milk, rice, bread and cheese were all cheaper there than in the US... and better quality for some reason too.

This Is Not America: Why Wal-Mart Left Germany (2006)

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