Wal-Mart executives spent eight years trying and failing to lure the German consumer.

Just how unfamiliar a creature they were pursuing became clear shortly after they set up their 95 shops in 1998 and 1999, having bought the Wertkauf and Interspar food chains.

The US retail giant assigned staff to pack customers' bags at the checkouts. Commonplace in the US, such helping hands for shopping were unheard of in Germany. But rather than hailing this US import, shoppers balked at the idea. Bag-packers were reassigned.

"The German consumer does not like extra service, as he's worried that he'll have to pay for it," said Thorsten de Boer, a retail specialist at Roland Berger, a Munich-based consulting company. "People in this country only ever look out for one thing - price."

That trait should have been a boon for Wal-Mart, which styles itself as guardian of constantly low prices. But this national characteristic meant Germany already had a number of well-established discount names, chains confident enough to also want to export their ideas.

Privately-held Aldi and Lidl, and Metro, the country's largest listed retailer, had already discovered the efficiency of drab out-of-town store sites and economies of scale that made suppliers sweat.

German shopping may not be elegant, but it has long been cheap. According to GfK, the German consumer research firm, packaged groceries cost 2.5 per cent less last month than in 2001. The average shopping cart load did cost 0.5 per cent more than five years ago - but that was because of a recent spike in fresh produce prices.

"At the end of the day, price pressure was so intense that Wal-Mart's formula of clear price leadership didn't work," said Mr de Boer.

Rather than asserting itself, it joined its rivals in an established, margin-destroying race to cut another penny here or there.

But instead of abandoning the field and so handing the chance to raise prices to any rivals, all the chains dug in. As a result, Germany has about 120 million sq m of retail space, according to the HDE retail association.

The Berlin-based trade group reckons its members need to close about one-third of their capacity to fall into line with the rest of Europe. Not surprisingly, all the big players are used to dismal numbers.

Even Metro's Real chain lost money this year. Wal-Mart never managed to make a profit either.

Last year, its 85 remaining outlets and 11,000 employees sold about €2 billion of merchandise. But industry observers said the company was probably still writing a loss in the hundred of millions. It had tried German managers, American managers, and a combination of the two, but upheaval at the top was matched by problems on the front line.

Supply-chain problems and stores that were showing their age compounded the pressure from competitors.

"We knew Wal-Mart were losing money, but it's still a surprise they're pulling out," said Mr de Boer. The feeling among rivals was that the US firm would tough it out, too afraid to tarnish its image by pulling out of the world's third-largest economy.

What Wal-Mart will achieve by disposal, Metro hopes to achieve by acquisition: an end to losses.

The deal - called a "bargain" by people familiar with Metro - will extend Real's portfolio from 550 to 640 outlets, allowing for more economies of scale. The company is taking a punt on being a winner in the consolidation that Germany's retail industry must at some point face up to. It is betting that selling food to the Germans is not too bad a proposition, once the overcapacity problem is solved. Germans may prefer to buy cheap, but despite the image of a poor retail environment in Germany, they still like to buy.

According to the EU statistics office, Germans put 13 per cent of household expenditure into food and drink. That puts the penny pinchers exactly on a par with the EU average.

The global consumer survey Roper Report, compiled by UK-based GfK NOP, is further proof of the German love for groceries.

Seventy-nine per cent of Germans surveyed like to shop for food in their spare time, a full five points above Roper's European average.