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Troubled WalMart-Germany Cuts Expansion Plans

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WUPPERTAL, Germany (2 January) – WalMart President Lee Scott stopped the expansion strategy for their German subsidiary and for the time being, WalMart will not make further acquisitions and will not build up 40 to 50 new outlets as had been earlier planned. WalMart-Germany will first concentrate on “the right way to do business”, Industry […]

WUPPERTAL, Germany (2 January) – WalMart President Lee Scott stopped the expansion strategy for their German subsidiary and for the time being, WalMart will not make further acquisitions and will not build up 40 to 50 new outlets as had been earlier planned. WalMart-Germany will first concentrate on “the right way to do business”, Industry observers recently were quoted in Süddeutsche Zeitung that from a management point of view (“as long as they are not able to make any profit here”) WalMart should give up its German business in 2001 if they cannot make a change for the better. WalMart, the world’s largest retailer entered Europe back in 1997. Eyeing the success stories of other aggressive US chains like McDonald’s, Burger King and Pizza Hut., the very optimistic US mass merchant claimed it would conquer the rich German market within seconds. WalMart set up its German headquarters in Wuppertal and acquired the Wertkauf chain’s 21 outlets. One year later, 74 Interspar cash&carry outlets followed. Today these outlets do sales of approximately DEM 5 billion (US$2.4bn;EUR2.6bn). It had the making of another success story. But it wasn’t to be. WalMart-Germany’s 1997 forecasts were not reached. The American company had to face the fact that German consumers are different. Not only were early bargain sales campaigns not as effective as first thought. German consumers didn’t react to the price-killing WalMart offers as expected but the service at the German outlets wasn’t as good as in the US. The German staff were not as automatically friendly as those in the US. Industry observers joked about the address of WalMart: “Welcome to the ‘service-desert’ of Germany.” Furthermore, German authorities intervened in some bargain sales because the products offered were sold under production price. A practice forbidden in Germany. WalMart-Germany is still not giving out any financial details. In an article in the German newspaper Süddeutsche Zeitung industry observers doubt whether WalMart-Germany is making any profits at all right now. The company’s globalization strategy isn’t plagued everywhere with similar problems as those in Germany. All in all the world’s largest retailer is expecting another two-digit growth. In 1999 the retail giant reached total sales of US$ 160 billion. (JB)

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