Wal-Mart scales back expansion plans in Germany
Associated Press
FRANKFURT, Germany — Wal-Mart, the world's largest retailer, has scuttled plans to launch 50 new super stores in Germany by 2003, the latest sign that shoppers in Europe's biggest market are still cool on its all-American approach.
Bloomberg News Service
With little fanfare, the humbled store operator said yesterday it plans to open doors at only two locations this year, leaving it far off the goal set last July by Wal-Mart's then-top European executive Allan Leighton, who has since resigned.
Wal-Mart reopened a Supercenter at Karl-Marx Strasse in Berlin in August 2000.
"We will concentrate on our existing operations, but we are also interested in continuing our expansion," said Wal-Mart spokeswoman Andrea Hahn, who called last year's plans "optimistic."
Hahn declined to forecast how many stores would be opened by 2003 but said it would be fewer than the 50 once touted by Leighton.
When Bentonville, Ark.-based Wal-Mart broke into the European market by buying 21 German stores in 1998, it was hailed as a healthy injection of American consumerism. Bulk buying, deep discounts and service with a smile seemed just the antidote for the country's downtrodden shoppers.
But three years later, Wal-Mart is still trying to find its feet.
"I think Wal-Mart was expecting one or two years of start-up losses. But it's taking more time and money than expected," said Thilo Kleibauer, a retail analyst with M.M. Warburg in Hamburg.
Wal-Mart does not release earnings figures for its German operations, but various estimates say they chalked up losses $184 million to $230 million last year, according to Kleibauer.
Part of the problem is that Wal-Mart is still a small player in Germany, with only 94 stores compared to the 200 outlets of No. 1 rival Real, a division of Metro AG, the continent's second largest retailer. Wal-Mart's fledgling empire was diminished further when its Cologne store burned down in a suspected arson.
Wal-Mart is also being stung by the fact that it's tried-and-true recipe of friendly service and unbeatable discounts works well in the United States, but not in Germany.
"For example, Wal-Mart tries to focus on price, but German households tend to place more emphasis on trusted brands," Kleibauer said.
