Germany is a country that, generally speaking, enjoys aspects of American life- or things that are perceived to be American. American culture is very popular, such as books, movies, TV shows or music. Wal-Mart expanded to Germany in 1997, thinking that Germany with its big economy and large population would be an easy market to conquer. In 2006 Wal-Mart gave up and left Germany, the company lost about 1 billion Dollars in the process. What happened?
Do Germans not like discounters? Do they prefer small neighborhood grocery stores? No, that was not the problem. In fact, grocery costs in Germany are about 40% lower than they are in France or Great Britain. However, at the time Wal-Mart tried to enter the market Germany already had a large number of well-established grocery store chains, among them Aldi (which also operates in the US and owns Trader Joe’s) , Lidl and Real. That means competition for low prices is though - profit margins are slim. Germany also has much stricter laws protecting workers and the cost for labor is higher. That meant that Wal-Mart could not translate the US concept entirely to Germany because they had to abide to the worker protection laws. It also meant that employing people just to bag groceries was very expensive.
Another aspect that caused the defeat of Wal-Mart in Germany was the company’s ignorance towards cultural differences. In German supermarkets you have to bag your own groceries (labor is more expensive in Germany, labor laws are stricter). Most people also bring their own bags and stores charge you if you need plastic or paper bags. Wal-Mart still insisted on employing people to bag customer’s purchases, a practice that many Germans did not like. Customers were also irritated by the “overly-friendly” Wal-Mart employees. They were instructed to act the way a Wal-Mart employee would act in the USA.-smiling and asking customers “How are you?”. Germans are used to the cashier at the check-out not being all smiles and when someone asks you how you are in Germany the person generally really wants to know how you are. Wal-Mart also tried to ban their employees from dating co-workers, which caused an outrage in Germany and led to an employee lawsuit, which Wal-Mart lost. The company also ignored simple things, for example, they tried to sell American-size pillows in Germany, were pillows are a different size, and so nobody bought pillows at Wal-Mart.
Wal-Marts complete failure in Germany illustrates how important cultural sensitivity is. Just because something works well in one country does not mean it will work in another, even if the countries might seem similar at first glance.