July 28, 2006
Beating Wal-Mart at Its Own Game
Posted by Gordon Smith

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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