Culture clash confounds Wal-Mart in Germany

Culture clash confounds Wal-Mart in Germany

By Daniel Rubin Inquirer Staff Writer
POSTED: December 29, 2001
BERLIN — Entrenched and conservative, German shoppers are used to things the way they are.

To them, friendliness smells like a sales pitch. Helpfulness should not be intrusive. And, as a rule, they don’t like it when people touch their things.

So when Wal-Mart Stores Inc., the world’s largest retailer, started unrolling its super-size plans across Germany nearly five years ago, it ran into a little culture shock. Grumpy Teutonic shoppers recoiled when employees greeted them in the aisles. Customers, used to fending for themselves, resisted when cashiers tried to pack their purchases in free plastic bags.

The marriage of American hominess and German frostiness has been rocky so far for Wal-Mart. Expansion plans have been scaled back, and staffing reductions have been ordered. Company officials are no longer predicting when the adventure in Germany will turn a profit.

With its first two custom-built “hypermarkets,” or superstores, already open, Wal-Mart is under pressure to make its huge investment pay off in Europe’s largest economy. Much of its challenge lies in coaxing attitudinal changes in the country where the customer traditionally comes last.

“I hate it when someone walks next to me carrying my stuff,” said Matthias Queck, a Frankfurt journalist who compares shopping experiences on his Internet home page. “It’s like he’s my slave. My next thought is, ‘Do I have to tip him now or what?’ ”

As founder of the Cologne-based Agency for Friendliness, Tanja Baum has coached thousands of Germans who are trying to break sour habits in the workplace. “We have a society problem, not a service problem,” she said.

Germans sometimes hesitate to be too friendly because that could be perceived as hypocrisy or currying favor, Baum said. “That’s why they look down on American ‘synthetic friendliness.’ They accuse the United States of doing everything for a purpose. ‘They want to sell me something. That’s why they are so friendly.’ ”

Baum attributes the trouble to the social revolution of the late 1960s, when politeness was deemed “a bourgeois relic.” This, she said, is the reason cashiers scowl at customers who approach near closing, or why clerks ignore shoppers when they approach, even turning on their heels if they persist.

“We also have the customers from hell, so this is a vicious circle,” Baum said. “Grumpiness breeds grumpiness. And we are teaching employees to try to break the circle. Someone has to make the first step.”

For Wal-Mart, which prides itself on price and service, Germany has been a challenge.

The American retailer arrived in 1997, buying 21 hypermarkets from Wertkauf and adding 74 slightly shabby Interspar stores a year later. The stores have large grocery departments and dry goods.

“Grocery shopping determines where people will go,” said Martin Heymann, a retail analyst with Jeni, a consulting firm in Ettlingen. “Wal-Mart could have a very nice assortment of non-food. If people don’t like the food, though, no one will come for the non-food.”

The company slapped its logo on the new stores and imported the practices that had made it a worldwide retailing force. Germany wasn’t impressed, and Wal-Mart’s losses here have been between $200 million and $300 million a year, analysts say.

Company officials would not comment for this article. Saying the holiday season took too much of their energy, they invited a reporter to see their two new German stores in February or March.

Wal-Mart plunged into a market where profit margins were notoriously tight – as low as 1 percent to 2 percent for food – due to stiff competition. When it tried to push prices lower to gain market share, rivals followed, creating a war that benefited shoppers but pinched all but the largest competitors.

The German government stepped in. In September 2000, the Federal Cartel Office ruled that Wal-Mart and others were selling staples such as milk, margarine and sugar below cost. This is illegal in Germany because the government feels it puts smaller stores at a disadvantage. Prices then rose.

Meanwhile, with no other attractive stores to acquire, Wal-Mart tried to grow on its own, but it ran into more German red tape. In 2000, it announced plans to add 50 stores. Since then, it has opened only two – both in November, outside Leipzig and Hannover. The reason: German regulations limit the number of hypermarkets to protect smaller stores. Heymann, the analyst, said Wal-Mart did not have “the political muscle” in Germany to make such decisions go its way.

So with its 95 stores, Wal-Mart is only 13th in sales among retailers in Germany.

Having inherited most of its stores from a company not known for festive shopping environments, Wal-Mart needed to remodel heavily, and even that proved troublesome. In Germany, remodeling costs are about five times what they are in the United States. Throw in well-entrenched unions and a supplier network loyal to its old customers, and Wal-Mart has had its work cut out for it.

“We screwed up in Germany,” John B. Menzer, chief executive officer of Wal-Mart’s international division, said in an article this month in the Economist magazine. “Our biggest mistake was putting our name up before we had the service and low prices.”

After the opening of an expanded hypermarket in Dortmund, a sales publication called Absatzwirtschaft gathered 10 shoppers in a focus group and found a lot to like about the new Wal-Mart. They praised the staff that would lead a child to the bathroom; shopping carts for people with disabilities; the ample space and relaxed atmosphere.

But the pollsters also encountered a classic German attitude toward possessions.

“At the cash desk, they ask whether they can pack your bags. I was frightened at first!” one shopper confided. “I’m not used to someone carrying my bag. I can do that myself.”

Knight Ridder researcher Claudia Himmelreich in Berlin contributed to this article.