While I wouldn't completely discount cultural and business-environment differences, this is probably the most relevant part,
> Another fatal flaw was that Germany's retail market is already saturated with discounters such as Aldi and Lidl, meaning that any new arrival inevitably finds itself in the midst of a cutthroat price war.
Walmart's model is to do high volume at low margins with a highly optimized supply chain. But that is already exactly the model of Lidl and Aldi, and there's not a lot of room to beat them at that game.
"Not a lot of room" in this case is basically zero.
FYI to those unfamiliar with Aldi: their (grocery) stores are fairly small, run in a seriously minimalistic manner. Products are usually presented either on their shipping palettes, and/or still in volume cases - customer does some of the unpacking. Most products are "made for Aldi" or otherwise sourced from bottom-price manufacturers. Variety is nearly nonexistent. Typically (at least in every store I've seen in USA) there are only two employees at any time - one acting clerk, other stocking/cleaning. Credit cards are not accepted; before debit cards, it was cash only. Aldi seemed the last store to use barcode scanners, clerks having literally memorized the codes for every product in the store and could process checkout nearly as fast (sometimes faster) than barcode scanning. Stores are very clean & simple.
You'd be hard-pressed to beat that cost-cutting business model.
Q: "Why is my local Aldi store not listed in the phonebook?"
A: Because phones cost money for subscriptions, and store personnel that picks up the phone doesn't bring in money.
No, that's not what their FAQ says, but generally believed to be true. Shops also don't have toilets for customers, and I remember a story about a shop that didn't have one for its personnel, either, but that may have been an urban legend.
Which keep the stores and parking lots remarkably clean. That simple deposit keeps all the carts up front and organized. Lack of free bags inspires people to take the packing boxes with them.
WIthin a short drive from me there's a Wal Mart, with a grocery section, and an Aldi, right next to each other. I tried the Aldi out of curiosity. I don't know if Aldi screwed up their format for America, but it was baffling to shop there. Heavy on the canned food. Confusing layout. Etc. Trader Joe's gets the "limited selection" thing much much better. Wal Mart caters to ethnic shoppers better. I don't think it works in America.
Possibly, but it would seem like there would be ample opportunity to compete on a number of other dimensions that would resonate with most humans. What you describe sounds a little like Trader Joes (some relation to Aldi) except that there are tons of happy employees around.
As a german, don't even know enough about Walmart to tell if they are in the same game or not. There are two mutually exclusive ways of doing cheap: you either take pride in being cheap our you try to hide it in everything but the price tag, aping pricier retailers in all other aspects (something Aldi or Lidl would never do, minimalistic presentation is the core of their brand identity).
The pretend-premium version of cheap simply would not work in Germany, because kills trust in the value of the actual products sold. Over decades, the (maybe at most semi-true) idea that products bought at Aldi or Lidl will provide high value despite their low price because all the saving comes only from cheap presentation has taken deep roots in the public consciousness. And this is where cultural differences really put Walmart in a pinch: even if they are firmly in the proud-cheap camp (which neither I not the general public would know), transplanting American service ideas like excessive greeting or the whole bag-packing thing (even just getting a bag for free is considered borderline wasteful) would give the exact opposite impression. Premium presentation, that combines with cheaply sourced goods into a very toxic "faux-quality" image.
"Over decades, the (maybe at most semi-true) idea that products bought at Aldi or Lidl will provide high value despite their low price"
I hate to be defending Aldi's rep (or the allegedly faux idea), but as a regular shopper in Germany'S four major chains (Edeka, Rewe,Lidl, Aldi), I must insist: Aldi/Lidl ARE providing a good price-to-value ratio for customers :-)
Of course, with the organic & premium chains popping up the last decade(s) you can get better quality. But those high-quality shops are making up just a small share of the market [1].
Their competitors (REWE/EDEKA) will offer you a wide range of [lets say Beans], ALDI/LIDL will offer you just one. But while that one usually has the quality of the competitor's most expensive version it comes with the price-tag of the competitor's cheapest.
The "semi-true" was aimed as much at the explanation (cheap presentation, which can't be the sole reason, otherwise it would be too easy to successfully imitate) as at the quality of goods (which is often high, but not always).
Edeka and Rewe are already out of the cheap range. Mainstream with cheap options very chose to the discounters and very far from the prices in the tiny organic/luxury segment, but still clearly distinguishable from the strictly cheap places.
In addition, an important part of Aldi's recent success in Germany is that they do not compromise on quality. Often their products (say olive oil, toilet paper,...) win/score at the top of consumer reports. They have a great brand image (much better than Lidl).
That depends on which part of Germany you're in. There are two Aldi chains in Germany, run by brothers. South Aldis are great. North Aldis are understocked, dirty and generally don't provide a great experience.
When Aldi came to Dallas a few years ago (I'd like to say 2010-2011ish), they started a price war over milk that resulted in milk prices in Dallas plummeting to 1960 levels.
"If recent events in the UK are any guide, they get really unhappy over low prices."
Dairy farmers in the UK were complaining that some supermarkets were paying them less for a litre of milk than what it cost them to produce the milk. After protests from farmers, those supermarkets - which included Aldi, Lidl, Asda (owned by Walmart), and Morrisons - agreed to pay more for the milk price.
The cost of milk is pretty cheap in the UK. Four pints (2.27 litres) of fresh (not UHT) semi-skimmed milk is usually 90p to £1 in most UK supermarkets (that'a approx €1.37 or $1.50)
"Dairy farmers are like any other business in that many can stand to be more efficient."
I don't know if farming practices are inefficient in the UK, but it's worth asking: what does efficiency mean when it comes to farming and animal welfare? I don't want to see dairy farmers go out of business or for milk to be imported. And I don't want to see more "zero grazing" farms where intensive indoor grazing is the norm and cows have little or no outdoor access. Intensive farming methods like this are already used in the UK and continental Europe and look set to grow. Perhaps it's really for us as consumers to ask: what price are we prepared to pay for milk?
When "outdoor grazing" means dedicating land for animal use instead of planting crops that could feed several hundred people, just so that a couple of them can get to drink milk... I'd rather see the "zero grazing" variant.
It is never as easy as that. Law of supply and demand is not a linear function and externalities count too. Also, most of the markets are somehow captive.
I doubt that people will drink much more milk because it is cheaper. What happens is that supermarkets don't care if they loose money with one product because what counts is the average of the basket. So what happens is that milk producers will pay the price of a marketing operation.
I like the Aldi I used to go to in Kansas while working there. Cheap, clean and no one bothers you. It actually was a better experience than Walmart, even for this American. They had cool, better carts too!
Trader Joe's rocks. Evidently things have turned around for Aldi since I remember hearing about them having problems with stores in the southern part of the US. Honestly, that's been 8-9 years ago now, so it would appear I was wrong about their current successes!
AFAIK Aldi is expanding in the US. Also, Trader Joe's which is hugely popular with the younger crowd (at least here in Chicago) is owned by the same company.
> The company also scrapped the staff warm-up sessions scheduled at the start of every day, on the grounds that German employees found them ridiculous.
Ah, Germans. Gotta love the directness of the culture. Keeps things real.
Germans I've asked about this say "why do you need to perform a cheer to begin your work?" It's not just the directness, it's the attitude that you show up on time and work. No screwing around, no hand-holding needed.
Just wondering.. i never heard of this (I'm german) but i have seen a documentary about Japan, where employees (in this case salesmen) gathered in the morning, did some kind of sports and some motivational speech and things like that. Is that also something i'd find in the US? I must admit, i smiled at it and found it ridiculous. I'd think all the time "stop wasting time with this shit and get some work done"...
As an american I find this kind of thing "ridiculous" as well. I think a lot of folks share that sentiment. The question is why are we still doing it.
I also have to ask what they entail at walmart? Ya for no heath insurance, Ya for working but having to be on food stamps, Ya for not enough hours to support my family?
When Walmart came to Germany I've actually kinda hoped, they would succeed with that warm-up thing. But as most (if not all) stores were just bought up from other German chains - their employees were bought with those stores and remained as unmotivated, bored and sometimes aggressive as they were before :-)
When you write about "the directness of the culture" I find it telling, that Wal-Mart sees its methods as "people-centered" while the competitor's German CEO sees them as "all about budgets, not customers"
"The company gave the job of masterminding Wal-Mart Germany to an American who didn't speak a word of German. This should surely have been indispensable to finding out what the German salespersons would need to know about local shopping habits."
Well. Culture beats strategy
I love when people think they can learn about a new market from their comfy office an ocean away
This reminds me of Tesco trying to crack the US. No language barrier, and spent ages studying US shopping habits but gave up in the end. Supermarkets are hard.
That was such a failure. They baited people in with the promise of a good selection of products at a low price when they had actually a pitiful selection and jacked up prices.
Half of the shelves were actually empty.
Clothes were of extremely low quality.
While I fully agree with the empty shelf point (it WAS pretty pathetic), I don't accept the jacked-up price argument. Yeah, Target Canada did not have the prices one sees in Target US, but then Walmart Canada doesn't have the prices, either. Maybe in spots, but for the stuff I buy there's still a noticeable price reduction down south. Even factoring in the currency difference...
I think it's because Wal-Mart's been in Canada and people have grown used to the stores being there. Target was new, and it's way harder to overcome a screw up when new. Once the competition disappeared, things got more pricy in Wal-Mart so the Canadian consumer lost in various ways during this process.
I'm not sure they could have screwed up Target more if they tried. Perhaps this was all a tax write-off?
The Wal-Mart in Munich, Germany introduced me to the concept of "hot dog relish" (must have been ~10 years ago) which I had never heard of before. So if not for other reasons, for getting ingredients for sandwiches and stuff I mourn their parting :)
Locally walmart means absolute junk quality for poor people who wait in long lines. The description of Germany is a good fit for retail in general, but not walmart. This truth can't be stated in a commercial publication, walmart spends too much money on advertising, but I think it fairly obvious.
Now Target could have possibly made it. Or maybe walmart could have made it in far southern or eastern Europe in very poor areas.
In Germany, Lidl and Aldi do attract higher income brackets as well. It's not considered a freak accident to see a Mercedes/BMW/Maserati/Audi/Tesla parked in front of them. Also small-family diner owners buying there as well, as Aldi/Lidl often beat wholesale prices (Metro Group).
Of course, if you visit one in the red light district it's going to be a different experience.
Lidl seems to have a terrible reputation in the UK and Italy (and possibly elsewhere), but in Germany they're just another discounter.
We do have some more upscale supermarkets, but there's generally little variance in quality among the discounters. Although Lidl does have by far the best store brand (J.D. Gross) chocolate.
The food in Lidl isn't junk quality, most of it is fine. They have some junk quality non-food stuff quite often but there's nothing wrong with the food in my experience.
There were a lot cultural misses in Walmart. For instance, nobody bags your groceries in Germany. When you're not expecting it, it's fucking weird to have some employee come up and grab your food.
Also, Germany has places like Kaufland and Rewe (in addition to Aldi) that have certain items much cheaper than Walmart. I found that milk, rice, bread and cheese were all cheaper there than in the US... and better quality for some reason too.
As some have mentioned, yes. But in general: Why must someone push his brand and store concept into another country, instead of buying/creating a local chain?
How often will grocery-buying customers from one country be shopping groceries while on vacation? And would a recognizable brand really leave the customer with an advantage? E.g.: If I were an American in Germany, yearning for Twinkies, which are nowhere to be found in regular stores in Germany, would I or Walmart be really better off, by also-not-finding-them in the German Walmart too?
But that's hardly something unique to Germany then. Off the top of my head, the Netherlands, France, Belgium, Spain, UK, Germany, Denmark, and Finland all have their own set of national grocery store chains, with only very little cross-border movement (Aldi and Lidl are the big exceptions).
Poland seems exceptional in this regard - there are local chains here, but they are heavily outmassed by foreign brands, ranging from German LIDL, through Portuguese Jeronimo Martins to French and British franchises. That's probably because of a skewed tax policy favouring foreign companies over locals, which I have a hard time understanding.
> Another fatal flaw was that Germany's retail market is already saturated with discounters such as Aldi and Lidl, meaning that any new arrival inevitably finds itself in the midst of a cutthroat price war.
Walmart's model is to do high volume at low margins with a highly optimized supply chain. But that is already exactly the model of Lidl and Aldi, and there's not a lot of room to beat them at that game.