Wal-Mart's German Misadventure


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Case Details:

Case Code : BSTR082
Case Length : 13 Pages
Period : 1990 - 2003
Organization : Wal-Mart
Pub Date : 2004
Teaching Note : Available
Countries : Germany
Industry : Retailing

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"I don't think that Wal-Mart did their homework as well as they should have. Germany is Europe's most price-sensitive market. Wal-Mart underestimated the competition, the culture, the legislative environment."

- Steve Gotham, Retail Analyst - Verdict Retail Consulting, in October 2002.1

"We screwed up in Germany. Our biggest mistake was putting our name up before we had the service and low prices. People were disappointed."

- John Menzer, Head - Wal-Mart International, in December 2001.2

German Blues

For the world's largest retailing company - Wal-Mart Inc (Wal-Mart), the German market was proving difficult to crack. By 2003, even after 5 years of entering Germany, Wal-Mart was making losses.

Though Wal-Mart did not reveal these figures, analysts estimated losses of around $200-300 million per annum in Germany, over the five-year period.

According to analysts, the main reason for Wal-Mart's losses was its failure to understand German culture and the shopping habits of Germans.

Though Wal-Mart was famous the world over for its Every Day Low Pricing (EDLP),3 which turned it into the world's number 1 retailer, it could not make an impact in Europe's most price-sensitive market - Germany.

Wal-Mart also ran into series of problems with German regulatory authorities for its pricing strategies and faced considerable opposition from German suppliers to its centralized distribution system.

It had problems with its German workers too. However, Wal-Mart was not the only retailer to do badly in Germany in the 1990s.


German retailers too faced losses in the period because of the flat economy and rising unemployment.


Though Wal-Mart was confident that there would be a turnaround in its fortunes in the German market by late 2003, this opinion was not shared by most independent analysts.

Wal-Mart's German Misadventure - Next Page>>

1] Pommereau, Isabelle de, Wal-Mart lesson: Smiling service won't win Germans, www.csmonitor.com, October 17, 2002.

2] Rubin, Daniel, Grumpy German Shoppers Distrust the Wal-Mart Style, www.gaccwa.org, December 30, 2001.

3] EDLP was a pricing strategy adopted by Wal-Mart to ensure lowest prices among all retail chains on its products.

 

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