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Walmart pulls out of Germany with huge losses

by Upstate NY Fri Jul 28th, 2006 at 10:56:34 AM EST

Today, Walmart could not make a go of it in Germany after 10 years and big losses, and so it sold all its land and stores and warehouses to German company Metro at a loss. I read a very short blurb on it this morning, and so I found an earlier article that explained some of WalMarts troubles:

http://www.businessweek.com/magazine/content/05_15/b3928086_mz054.htm


One of the things that struck me about Walmart and the drones from Arkansas is that they believed they could export Middle America values to Europe. Walmart in Germany asked employees to greet customers at the door, to smile at them heartily and cheerily, to make shopping a family experience. This was a big turnoff for Germans obviously, and it should have been a lesson well learned by the twits from Arkansas already. After all, this is the same phony flakiness that us uppity Northeasterners experience when entering a Walmart in the USA.  Now, for Germans and the Coasters in the US, the happy attitude may seem phony, but I grant that it is not phony for down-home Arkansans and their neighbors. A few years ago, I was on a visit to Ok. State University in Stillwater, OK, and I was constantly greeted by cheery students and staff. Briefly, I considered that maybe they had heard I had arrived on campus (j/k) but then the happiness quickly began to wear. I had to get out of my brain and thoughts constantly just to acknowledge the salutes. The parking attendant took an extra 30 seconds of my life at her parking attendant's booth. Blonde boys and girls (lots of Oklahoma blondes) greeted me with high-pitched squealing "Hi's!" and growly "heys" everywhere I went, even as I slouched to an early 8 AM meeting with coffee in hand trying to awake.

How absurd that Walmart could imagine this Middle American quirk could be exported when in fact it's site specific to a peculiar section of America! Absurd.

Display:
Now you've got me conflicted. On the one hand, I can see how that constant bonhomie would make me want to blow my brains out; or if I am more clear-thinking - blow everyone else's brains out (with apologies to Douglas Adams). On the other hand, shouldn't we all be nice to each other?

It's probably because it is Friday and I am feeling mellow. I'm sure that on Monday I will agree with you whole-heartedly.

by det on Fri Jul 28th, 2006 at 11:35:07 AM EST
Trust me: I've spent half my life in Iowa and the other half in Manhattan. I can tell you that all this "bonhomie" is just their way of saying, "See, I was nice, wasn't I? Now go fuck yourself." Ultimately, the South and Middle America are among the coldest, most apathetic, most uncaring places in the world. If I'm ever in trouble, I hope it's in a place like New York City, where people may be brusque and unsmiling but actually care about their fellow human beings.
by Matt in NYC on Fri Jul 28th, 2006 at 03:26:27 PM EST
[ Parent ]
Actually the "greeters" are mostly there to prevent theft. There is very little help available once you are in the aisles. "Help" appears fairly quickly if you appear to be doing something suspicious on their closed circuit monitoring system, however.

Another example is the lack of (or minimal number) of cameras outside the store. Once you have left the store the "stuff" is yours and Walmart doesn't care what happens to you (or it). Parking lot crime is a serious issue at Walmart and it has to be handled by local police. Another instance of the firm's costs being shifted to the general population.

Most large shopping malls have private security firms patrolling the parking lots, not Walmart.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Jul 28th, 2006 at 05:11:52 PM EST
[ Parent ]
Here's another "Middle American quirk":

Council defies Daley, OKs 'living wage'

Defying Mayor Daley and challenging Wal-Mart and Target to follow through on their threats, a bitterly divided City Council voted Wednesday to require Chicago's big-box retailers to pay employees a "living wage" of at least $10 an hour and $3 in benefits by 2010.

The 35-14, veto-proof vote is an overwhelming victory for organized labor and the latest in a string of legislative defeats for a corruption-weakened Daley.

Another way of looking at Middle American values...  :)


Those who can make you believe absurdities can make you commit atrocities. -Voltaire

by p------- on Fri Jul 28th, 2006 at 11:37:21 AM EST
This is amazing.  Has anyone diaried this yet?

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
by marco on Fri Jul 28th, 2006 at 09:32:48 PM EST
[ Parent ]
It wasn't the hellos, I'll wager...it was probably the fact that they had to pay Union (living) wages...rather than the slave wages they are used to making billions off of in the States. In the end, US slaves...er, employees... are easier, it would seem (sorry, my US friends, but...you know this to be too true...)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Fri Jul 28th, 2006 at 11:54:22 AM EST
I don't think the extra $3 an hour per employee would take a bite out of the bottom line. Employee pay is one of the most marginal expenses that Walmart pays (which makes their pay rates all the more indefensble). True, it does ct into their net quarterly profits, but it certainly doesn't standing the way of making a good profit. Remember, Walmart lost money in Germany, and there have to  reasosn why the other department stores can MAKE money there while Walmart can't.
by Upstate NY on Fri Jul 28th, 2006 at 12:10:40 PM EST
[ Parent ]
Social benefits...which they don't have to pay in the US?

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Fri Jul 28th, 2006 at 12:14:30 PM EST
[ Parent ]
I guess I'm ignorant of this. What social benefits do they have to pay? Not health insurance. Higher taxes yes, but then higher taxes support a health care system that takes a load off employers.

I live on the border with Canada. A big multinational was kicking around Western NY recently looking for a home to a new manufacturing plant. WNY was competing with lower Ontario (across the river, essentially) and Alabama.

WNY had high taxes, a highly educated citizenry, and no state provided health care benefits for citizenry.

Alabama had very low taxes, a relatively uneducated citizenry, and no state health care benefits.

Ontario had very high taxes, a highly educated citizenry, and state provided health care benefits.

Ontario won. Many big companies are realizing that you can make more profit if you don't have to expend so much money training your workforce and providing health coverage. In other words, higher taxes are an excellent investment.

That's exactly why I don't understand why the left is pressuring Walmart so much on social benefits. If you expect a crappy company like Walmart to be the shepherd that looks after the health and welfare of its employees, then you are in a very crappy situation indeed. A social safety net is the responsibility of the state, not Walmart.

by Upstate NY on Fri Jul 28th, 2006 at 12:45:02 PM EST
[ Parent ]
The state? Whassat?

Nothing is 'mere'. — Richard P. Feynman
by Migeru (migeru at eurotrib dot com) on Fri Jul 28th, 2006 at 12:46:41 PM EST
[ Parent ]
State? Um, how long do you want the definition to be? Ah, it could be supranational, international, federal, even local. Heck, some say that it's a State of Mind.
by Upstate NY on Fri Jul 28th, 2006 at 01:13:09 PM EST
[ Parent ]
I thought it was the kind of thing you drawn in a bathtub.

Nothing is 'mere'. — Richard P. Feynman
by Migeru (migeru at eurotrib dot com) on Fri Jul 28th, 2006 at 01:14:06 PM EST
[ Parent ]
That's also why France is successful in receiving foreign investment. Once you do real accounting (and not the academic economist crap), it's obvious.
by Laurent GUERBY on Sat Jul 29th, 2006 at 08:08:23 AM EST
[ Parent ]
I agree with your last sentence a 100%, but I think this country is going to have to experience a much worse crisis than today to understand how important a social safety net is. I think the idea of Wal-Mart taking care of its employees is a short-term solution to a much bigger long-term problem, which nobody is really addressing.

Maybe the idea is to pressure these big companies enough to where they begin lobbying for a universal healthcare themselves? Hell, look at the state of GM and Ford, look at every company that talks about "legacy costs." None of this would have been an issue today had we had a financial stable pension system and a healthcare plan.

Mikhail from SF

by Tsarrio (dj_tsar@yahoo.com) on Sat Jul 29th, 2006 at 12:17:26 PM EST
[ Parent ]
Very good point. Maybe WalMart will eventually pressure the gov't into doing something, finally.
by Upstate NY on Thu Aug 3rd, 2006 at 09:58:11 AM EST
[ Parent ]
Don't be so sure.  

They are totally freaking out about the living wage law passed in Chicago and saying they will not open stores here and will have to close any they have because of the living wage.  Of course they can afford to pay it.  But can they pay it and still afford to open a new store on every block?  What happens when town after town starts demanding living wages and benefits?  Could be a domino effect that marks the beginning of the end of their empire.

Those who can make you believe absurdities can make you commit atrocities. -Voltaire

by p------- on Fri Jul 28th, 2006 at 12:20:44 PM EST
[ Parent ]
well, living in Bavaria, I have gone to Walmart a few times, mostly because it is convenient.  The shops in Bavaria are closed on Sunday.

The quality of the merchandise in Walmart in Germany was quite poor and the prices were higher than other places I have shopped. Germans are used to getting good quality for their dollar and I didn't find that at Walmart.

Most of the time, the store was quite empty.  They just had a better variety of foodstuffs than other stores, and had a good biological fruit and vegetable section.  

I never saw any greeters there.

by manon (m@gmail.com) on Fri Jul 28th, 2006 at 12:47:29 PM EST
[ Parent ]
I'd guess that covers it. In the UK many people won't shop at ASDA/Walmart unless they have no other choice. For comparison, Tesco merchandise is low-middle in quality but often very cheap and very popular. And at the higher end Waitrose and M&S seem to have no problem with either customer interest or profitability.

There is market for (mostly) crap at bargain prices - qv Lidl et al -  but if you try to sell crap at inflated prices people will point and laugh instead of spending their money on what you have to offer.

So I think Walmart has just discovered what it's like not to be a monopoly. When you're not the only option you have to be at least a little competitive along whatever dimension you're trying to pitch a stall. If you're not - pfft. Gone.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jul 28th, 2006 at 01:00:06 PM EST
[ Parent ]
There has to be something else that's killing Walmart. It doesn't have a monopoly herre in the US. There are compeittors with better quality items at low cost. Target is just one of them. Also, given that Walmart is the world's largest distributor/contractor for goods made in countries with cheap labor, I tend to doubt that anybody can undercut it. It may be that they simply were not satisfied with their margins and raised the prices to make up for the European cut. It's literally impossible to beat Walmart for cheap crap here in the States.
by Upstate NY on Fri Jul 28th, 2006 at 01:17:03 PM EST
[ Parent ]
I don't have time to go through it, but the majority of Walmart's profit comes from areas where it got in first. Areas of the US where there is an established competitor, their returns per store are not so good.

The key in the US is that they were able to leverage their local monopoly in some areas to subsidise taking out competition in others and keep growing.

The problem in Europe generally for Walmart is that there are some big players here who are harder to take out that way.

Also, planning restrictions make it harder to break into various city areas for newcomers. Various wage structures can be an issue at times. Finally, Walmart's fabled efficiency comes out of large scale distribution antics. These are less effective in Europe because products are more regionalised. Mainly, of course, because there are countries rather than states.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Jul 28th, 2006 at 04:12:10 PM EST
[ Parent ]
Thanks, much of what you wrote should have been obvious to me. What's an Italan to do with "wife-beaters" made for Brits?

* wifebeater: http://en.wikipedia.org/wiki/Wifebeater_(shirt) and not derogatory in the least.

by Upstate NY on Fri Jul 28th, 2006 at 05:15:20 PM EST
[ Parent ]
There has to be something else that's killing Walmart

No desperately impoverished populace to buy their shit?

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Fri Jul 28th, 2006 at 04:37:04 PM EST
[ Parent ]
These policies are slam dunks for the public because they render walmart completely powerless. They can't move the store to China and still make money off a neighborhood in Chicago, and if they close the store, someone else will simply come in and find a way to make money off the local market conditions (not that market conditions are greatly changed by this modest pay increase). Ahhhh it makes me smile.

you are the media you consume.

by MillMan (millguy at gmail) on Fri Jul 28th, 2006 at 04:23:00 PM EST
[ Parent ]
I've generally found German supermarkets to be quite poor - bad selection, bad quality, middling price. They reminded me of the lower end Polish ones except for the price.  For produce the smaller Turkish groceries tend to be quite good and reasonably priced, and the outdoor markets excellent, for meat, cold cuts, and cheeses the specialty shops or the larger outdoor markets are good.  Whenever in Germany I mainly used supermarkets for non-food items and drinks or when I had no choice.
by MarekNYC on Fri Jul 28th, 2006 at 01:36:03 PM EST
There are many issues involved with Walmart. I'm part of a small group of regular bloggers who write on this topic. If you want to know more or want to comment please visit The Writing on the Wal.

We would especially like to hear from any people in Europe who can report on conditions in Walmart owned stories in their area. I think those in Germany would be surprised at how poorly US Walmart employees are treated, many common practices are illegal in the EU.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Jul 28th, 2006 at 02:19:26 PM EST
That's how capitalism works, folks.
by messy on Fri Jul 28th, 2006 at 02:57:18 PM EST
??? (What...you don't think there's capitalism in Europe? Hello?)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Fri Jul 28th, 2006 at 04:00:00 PM EST
[ Parent ]


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