Despite having a great history of success, Walmart couldn’t do much in Germany.

In the year 1997, Walmart made its way into the German markets launching 85 outlets and buying two German retail chains,

• Interspar for (Deutsche Mark) DM 1.3 billion
• Wertkauf for €750 million

The global fame didn’t make much of a history in Deutschland. Therefore, they had to leave Germany in 2006 after a huge loss of $1 billion.

Let’s dig deeper to understand why Walmart failed.

1. A failed understanding of the German culture

Not all businesses can get chatty and friendly with their customers. One of the biggest barriers that caused Walmart business to fail.

The American business nurtured a habit of being friendly with their customers and assumed it will work even in the other regions.

With this belief, they started training their German employees working at retail stores to do the same. The cashiers were asked to smile at customers while they check out. This strategy didn’t turn out as expected. Most American businesses believe being friendly and chatty with their customers could drive better business revenue, but they were wrong. This is one of the reasons why Starbucks was a failure in Australia.

Putting up a smile at random customers is not so “German.” At times, it was alright to address customers with a smile, but it still isn’t an integral part of the German culture.

The regular German customers of Walmart found this practice very “non-German.” You do not pretend to be a German customer’s friend if you aren’t one. At least that is not how the Germans operate their business during that era.

A renowned union secretary, Hans-Martin Poschmann said, “People found these things strange; Germans just don’t behave that way.”

2. German employees were asked to do unconventional tasks

A Walmart outlet in Germany starts their day with an exercise where employees were had to do a chant. They were asked to shout “Walmart! Walmart! Walmart with a little jumping like calisthenics.

This may be one of the corporate strategy they believed would cheer the employees before starting their shifts. But the German employees at Walmart found this rather embarrassing.

All in all, employees had to strictly follow the rule of not being romantically involve or date. However, the chances of not developing feelings for someone you’ve been working with for 40 hours in a week are rather low. Perhaps this rule was made to save employees from getting themselves involved in office politics.

To make things worse, Walmart made it mandatory for employees to report anybody who is seen breaking the rule. If they don’t, they might well be fired from their jobs. Sadly, the German court had to intervene and remind the Walmart that they were in Germany and not in America. In 2005, an order was sent to Walmart by the industrial court to discontinue their practices at work.

3. Walmart had a messed-up pricing setup

The 4Ps (product, place, promotion, price) of marketing plays a huge role in any retail business. As a business strategist, you need to strategize all the 4Ps to have a successful business.

Well, Walmart definitely had a tiff with the “Pricing.” While setting up pricing, you need to be careful about “penetration pricing.” This happens when a product is sold at a much cheaper price as compared to the normal market price to attract new customers. This is exactly what Walmart followed. They reduced their product cost, even lower than the German stores. However, the German business owners didn’t appreciate this technique by Walmart. Further on, Walmart had to raise their prices as an order by the German high court.

The giant retail store later realized the German market will not easily accept their domination over the market. They were even willing to fight it out in the court if at all Walmart charge back again.

4. American companies and German unions were never an ally

The German Union didn’t appreciate Walmart’s intrusion and were against their organizational culture. Both were like oil and water, they could never get along. As said by Hans-Martin Poschman, they thought we Germans are communists. They didn’t understand that in Germany, companies, and unions are closely connected.

All in all, Walmart had a micromanagement culture. They didn’t even spare to keep an eye out from who was dating who. This along with other practices made Walmart a heartless employer who in return only cares about the returns and profits and not about the employees’ job satisfaction or happiness. These acts were a big no-no in the eyes of the unions.

5. The root of all losses

The resentment kept increasing. First, with their predatory pricing tactics, they tried to rob the German locals. Second, with their strange and odd rules.

During the time, both local, as well as foreign competitors, were present in the market. The foreign competitors had their share of the market, while Walmart had only 3 percent. Moreover, the overall profit Walmart made was merely 1-2 percent. Instead of waiting, Walmart had to leave Germany in the year 2006 while passing on its 85 outlets to the local competitor called Metro.

Endnote

Taking the above experience as an example, we can clearly say that free-market capitalism always dictates the majority of the market across the globe. Anyone, from any place, can easily start a business and mint money from any part of the world. However, this does not mean that the business should travel to foreign lands and trouble the locals.

Despite being a success in your home country, you should never underestimate the power the locals have over the market.