Wal-Mart has decided to exit from Germany, eight years after entering the market. German retailers beat Wal-Mart with low prices. From the W$J:
After Wal-Mart acquired two small, struggling German retail chains eight years ago, it ran up against several problems. It found itself being underpriced by local retailers called hard discounters, such as Aldi. German shoppers flock to these stores, which sell a limited selection -- often 850 to 1,000 items, compared with 100,000 at Wal-Mart -- and stock mainly their own store brands.
Some 80% of German consumers are about 20 minutes from an Aldi, according to Nestle's research. The hard discounters account for about 40% of the German retail market, compared with Wal-Mart's share of less than 2%, analysts say.
German shoppers are accustomed to buying merchandise strictly based on price, German retail consultants say. They are willing to buy laundry detergent at one store and then go to another to get a better price on paper towels. That behavior is called "basket splitting." It is the antithesis of what American shoppers like: one-stop shopping. A big plank of Wal-Mart's strategy in the U.S. and elsewhere is getting shoppers to turn to it for an increasingly wide array of goods.
According to the article, this is not the only international problem for Wal-Mart. It's worth a read.
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1. Posted by Peter Rip on July 29, 2006 @ 8:36 | Permalink
The point was not
-to enumerate all facets of all business models, nor
-to condense all of business strategy into a single, casual blog post, nor
-to suggest the relative importance of any particular facet in any given situation.
The point was simply to say that the question of "what's your business model" can be deceptively simple and providing an equally simple response can lure the entrepreneur into an intellectual trap.
2. Posted by Fred Tung on July 30, 2006 @ 8:11 | Permalink
Back to Wal-mart . . . apparently German consumers weren't the only constituency that had issues with Wal-mart. Employee relations were also handled poorly. A Business Week piece details some cultural gaffs in Wal-mart's employee ethics manual. Cautions against supervisor-employee relationships were read as "a puritanical ban on interoffice romance, while a call to report improper behavior was taken as an invitation to rat on co-workers." More generally, Wal-mart had contentious relations with its employees' union, and it was repeatedly accused of violating German co-determination rules.
Other consumer gaffs: even bagging customers' groceries and instructing employees to smile at customers backfired! "It turned out that Germans didn't want strangers handling their groceries. And when clerks followed orders to smile at shoppers, male customers took it as a come-on."
The full story is here:
http://www.businessweek.com/magazine/content/05_15/b3928086_mz054.htm
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