Wal-Mart fails in Germany due to poor service mindset of its German employees

I admit, the headline is a little bold, but let me explain my hypothesis, which starts with poor service mindset in Germany, leads to poor service levels typically offered by German employees, and ends with foreign companies losing their service advantage in Germany. 

As discussed in this post, the poor service mindset among the German population impacts not only German companies, but also foreign companies operating in Germany and relying on German employees. Wal-Mart was mentioned there as an example of an US company that initially paid attention to good customer service, when it established presence in Germany. Over time, though, it lost that focus and let its German employees provide the poor customer service typical for Germany. 

Now that Wal-Mart is leaving Germany without making any profit after eight years, one may wonder how much of that failure is driven by the poor customer service provided by its German employees. When Wal-Mart entered Germany and took over stores from its German competitors in 1997 and 1998, it proclaimed that it will steal market share from established players through good service, friendly employees, and low prices.  

Initially this strategy was apparently well executed since customers were pleased with attractive prices and exceptional customer service. That service was even better than service offered by Wal-Mart in the US where Wal-Mart is notorious for the poorest customer service in comparison with other US retailers. Later though, Wal-Mart must have lost attention to execution of its strategy, since the service levels declined and customers were treated with the typical German inattentive customer service. 

Another potential explanation for Wal-Mart’s failure would be if German customers didn’t care about good customer service when it comes to grocery and department stores. If German customers wouldn’t pay much value to good service, then Wal-Mart’s strategy would have been simply the wrong one for the German market. This sounds doubtful though since there are more pricy grocery and department stores, which are successful, so it’s not only price that matters to German customers. 

Whether it was poor strategy execution or simply the wrong strategy, Wal-Mart ended up competing only on price. Here though it run into other discounters like Aldi, Lidl, or Plus, which have already a very strong position in the German market. And, competing only on price is difficult and usually not sustainable in almost every industry. Wal-Mart couldn’t benefit here especially from its usually efficient supply chain, since it didn’t have the buyer power in Germany as it has in the US.  

Finally, German shopping habits are different than what Wal-Mart is used to from the US. German customers are accustomed to shop in their neighborhood and without any additional benefits are not inclined to drive shopping at city outskirts where Wal-Mart stores were located. The German discounters, on the other hand, usually operate smaller stores located throughout many neighborhoods.

Wal-Mart’s failure in Germany should be a lesson for foreign companies operating in Germany and depending on customer service as their competitive advantage. That service is offered in Germany typically through German employees. Hence, companies need to understand the service mindset prevalent in Germany and proactively train and manage their employees if they want to deliver satisfactory customer service.


5 comments so far

  1. Anonymous on

    how much did this article benefit the author,german products are appreciated globally

    • Anonymous on

      The hypothesis of the writer is nonsense. I live in Germany and shopped at Walmart. They failed for three reasons.

      1. It is forbidden by German law to sell under cost. That is Walmart’s winning strategy. They move into a market, undercut the competitors to drive them out of business and then when they have a corner on the market, they can sell at regular prices. The sheer size of Walmart allows them to do that. But not being allowed to have rediculously low prices compared to the other stores meant that people didn’t flock to Walmart. Their winning strategy didn’t work here.

      2. The labour laws in Germany are much tougher than in the US. The employees here are union members. That’s unthinkable at American Walmarts. The outrageous acts of the company vis-a-vis their employees were not tolerated here. The employees fought back — and won. Example. Walmart USA forbids employees from having romantic relationships with one another outside of the workplace. That was challenged here in court and the company lost.

      3. Low quality at low prices is not a winning sales strategy in Germany.

      The writer of the article seeks to pin the blame for Walmart’s failure on the employees’ attitude. It makes me wonder if the author isn’t a Walmart employee at the headquarters in Bentonville who is just trying to make one more jab at the unionized German employees who fought back and won.

      Walmart failed in Germany because their 19th Century Capitalism doesn’t work here.

  2. Jack Lampka on

    To the Anonymous from October 7, 2012:
    This article is about customer service, not products. German product are usually of high quality, so to simplify it:
    German customer service: bad,
    German products: good.

    To the Anonymous from October 13, 2012 :
    If you believe that your hypothesis is a better explanation of Walmart’s failure in Germany, good for you.

    • Tristan Schäfer on

      OK I’m a German, and when I go shopping, this is what I do:

      When shopping for food, I go for best value, meaning price/quality. WTF do you need customer service for when you’re shopping food? You eat it, it’s not some sort of major Investment you want serviced. If I sense that the company is wasting time&money to make the employees smile, if they’re beautifully packaging everything, if they spend a lot on advertisement, if there is large variety of the same foodstuffs (high logistics costs) I know I’m not paying for the product, but for the frills.

      When shopping for non-food, I look for lowest life-cycle cost. If I can service it myself, it’s gonna be far faster than any customer service anyway. In Clothes I shop for functionality.

      Is this a German mindset? It just seems like common sense to me.

      In Germany, we don’t have Wal-Mart-Chants. The Unions and Works councils are your best ally in motivating the employees. And they are not commies :D They just try to make everyone happy and productive while taking care not to strangle the company with outlandish claims.

      • Jack Lampka on

        Tristan, it looks like you have misunderstood the topic of this blog and this article. This is not about servicing the product after it breaks. It’s about the customer service you get when you shop for a product. This customer service can simply mean that there is a person in the store who can tell me where I can find an item. This customer service is poor in Germany whether you shop in a grocery store, a toy store, or a department store. My experience has been that sales people seem to be more interested in chatting with their colleagues or inventorying items than helping customers find what they are looking for.

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