Wal-Mart, the world's largest retailer, is to sell off its 85-store German operation at a $1 billion (€784 million) loss after eight tough years. The retailer, notorious in the US for its aggressive retailing strategies and anti-union practices, acknowledged yesterday it was beaten at its own game by its German competitors.
The US retailer had to bail out its near-bankrupt operation in recent months before yesterday's decision to sell out to German retail giant Metro.
"It has become increasingly clear that in Germany's business environment it would be difficult for us to obtain the scale and results we desire," said Wal-Mart vice-chairman Michael Duke.
Last month, Wal-Mart's German head David Wild rejected speculation of a pull-out.
Yesterday, Wal-Mart executives admitted the company had misjudged the German market and the expectations of its consumers. The company made an aggressive push into Germany in 1997, when it bought 85 stores belonging to two German retailers. It rebranded the stores and introduced alien concepts like "customer greeters" and motivational meetings for employees.
The German stores were small and dirty with a poor range of products compared to their US equivalent, and attracted mostly lower-income customers.
Wal-Mart made the mistake of being a late entrant into a retail market where homegrown discounters like Aldi and Lidl already have a 40 per cent market share giving customers low prices in a low-rent environment.
The Wal-Mart stores fell short of initial expectations and the American managers were replaced with locals who gave the chain a German makeover and abandoned the meet-and-greet concept. But the managers and retail concept changed every year and by 2004 it was running a three-figure million loss on a turnover of €3 billion.
The German pull-out comes two months after Wal-Mart closed its South Korean operation, but a spokesperson denied yesterday it had plans to sell its 320 Asda stores in Britain. Wal-Mart has 6,500 stores in 15 countries worldwide generating a profit last year of €8.8 billion on a turnover of €245 billion.
The deal sees German retailer Metro swallow a serious competitor for a bargain-basement price.
"Wal-Mart were really keen to get rid of the business and they sold it to us for much less than it's worth," said a spokesman.
