Walmart Leaves Germany: Blame Smiles, Love or Plastic Bags?
Regardless of whether you are a Walmart basher or activating optimistically for Walmart leadership in environmental and sustainable philosophy, the news on Friday in Germany is of interest: Walmart has ended its long battle to survive in Germany's $370 billion retail market. So did the Germans' preference for shops run by local businessmen and stocked with organically grown food kill Walmart? Nice angle for TreeHuggers, but the fact is: probably not.Competitors, like the low-cost chains Aldi and Lidl, continue to grow and succeed in Germany. In fact, the competition from a surge of low-cost chains is attributed with keeping average food costs as much as 40% lower in Germany than in France or Great Britain. Walmart entered the German market in 1997, at the outset of the upswing in discount retailers, taking over 95 stores and initiating a price war. Since then, that number has dropped to 85 stores which will now be taken over by a mega-competitor (Metro) happy to grab the supercenters at a discount price. So what is behind Walmart's struggle in Germany?
The main factor being cited by many analysts is the cultural philosophy. Walmart tried to relocate the American model: service with a smile from the bag-packer at the end of the band, employees chanting W-A-L-M-A-R-T to raise morale and an ethics code which included banning sexual relations between employees. The latter was overturned about a year ago by the German courts, which supported the German custom by which man and wife can often be found across the hall from each other in the same firm after romance blossomed in the workplace. And clerks ordered by supervisors to smile at customers are reported to have discovered their smiles often interpreted as invitations to unwanted social interaction in a country where smiles are exchanged between friends, but not between strangers. And raising morale? Well, in Germany that is the job of the works' council, a group of employees quite akin to a union, which ensures employee concerns are represented during management meetings on the one hand, and organizes employee activities such as the company soccer competition or discounted access to mind and body classes.
Where does this leave practical TreeHuggers looking for lessons in environmental sustainability which Walmart might take away from this experience? First, Germans do tend to shop frequently and locally. Although more and more often, local might mean the discount market chain rather than the friendly neighborhood grocer, the fact remains that Germans did not drive the extra miles to save a few euro cents. Second, Germans prefer to bag groceries themselves into reusable carriers, or at least to pay a small fee for the avoidable sin of needing a plastic bag. These are cultural misunderstandings as well, but one could say the cultural philosophy of Walmart could not survive in the context of a German culture with a Happy Planet Index significantly higher than America's.
But that is the "public interest" story. It remains a cold hard fact of the discount retailing world that critical mass was never reached. Blame the German building code, as some analyst do, which significantly reduces Walmart's ability to expand quickly. Blame the takeover of existing stores which were scattered and not particularly well located, in contrast with competition which has sprung up on every corner (Aldi has 550 retail locations competing with Walmart's stores). In the face of the analysis that will surely issue from the respected business commentors, it will be hard to draw conclusions that Walmart's exit from Germany is due to rejection of globalization, unsustainable business culture, or even disinclination towards buying American goods. Okay. But we hope that if Walmart regroups to return to the German market, they will do it with a message of sustainability leadership that German TreeHuggers will be happy to hear.