Not All Ways Wal-Mart as Chain Takes On Germany

By CAROL J. WILLIAMS

Aug. 15, 1999 12 AM PT

TIMES STAFF WRITER

DREIEICH, Germany — There is no greeter at the door or bagger at the checkout, and the “Wertkauf” sign towering over the parking lot offers no clue that the giant store in this Frankfurt suburb is among the newest members of the worldwide family of Wal-Mart.

As the world’s No. 1 retailer takes on Europe’s No. 1 market, the merchandising missionaries of Wal-Mart have discovered they are best advised to go slowly in confronting German consumers with their ardent friendliness and their price-is-paramount credo.

Germany and its 82 million bargain-starved residents may be an alluring target for the Arkansas-based empire as it finally makes its way to Europe. But German shoppers are arguably a trickier lot than their counterparts in Asia and Latin America--foreign fields that Wal-Mart International has already invaded.

Wal-Mart Germany was created last year with the acquisition of 21 huge “hyper-markets” from the Wertkauf retailing group, and its presence was bolstered early this year with the purchase of 74 of the Spar food group’s biggest grocery outlets.

The company has also begun a move into Britain. In June it announced an agreement to buy the 229 stores of Britain’s third-largest supermarket chain, Asda Group, for a reported $10.8 billion in a bid to undercut that country’s food prices--among Europe’s highest.

Germany, known for customer service that ranges from indifferent to surly, poses a retailing challenge all its own.

Major retailers are bound by the same restrictive labor laws that prevail throughout the country, making it impossible or prohibitively expensive to fire any employee. In grocery stores, where customers must bring or buy their own bags and pack up their purchases themselves, cashiers glare at those who bag too slowly, and have been known to angrily sweep unpacked wares back into the cart.

Short shopping hours, narrow aisles and high prices fixed by competition-stifling industry agreements are other elements of the status quo that conflict with the Wal-Mart outlook, but they too are being tackled with caution.

The frenzied shopping culture that results from early closing hours means those plowing through the doors after work are seldom in a mood to chat with a stranger.

“As a German, I find the idea of being greeted at the door uncomfortable. I would feel astonished if someone I didn’t know started talking to me,” said Martina Menz, managing supervisor of the Fleishman-Hilliard public relations firm that handles Wal-Mart publicity in Germany, explaining why the German outlets have yet to install the company’s trademark greeters.

“We can’t go 100% here like we do in the States. We have to work up to it gradually and do the things first that will work here,” said Heinz Miller, the son of a U.S. serviceman and a German woman who left his Wal-Mart job in Dallas last year to impart company philosophy to his new associates in the country of his birth. “German customers are in more of a hurry than Americans. They want to get in and get out.”

Although customers may be rushed by rigid retail laws that mandate closure by 8 p.m. weekdays, 4 p.m. Saturdays and no shopping at all on Sundays, the German stores are already accounting for some of the highest sales volumes in the Wal-Mart empire. The store in Karlsruhe, which was Wertkauf’s headquarters, is the busiest Wal-Mart on the planet, despite being open for business each day for fewer than half the 24 hours of many Wal-Marts in other countries.

Wal-Mart declines to disclose whether sales have risen since the company took over from Wertkauf, whose product names and logos have been phased out in favor of Wal-Mart brands, in-store advertising and “Thanks-for-Shopping-Wal-Mart” grocery bags.

One loosening of the shopping strictures Wal-Mart proudly claims as its first major achievement is the decision to open its doors two hours earlier across Germany--breaking ranks with retailers who routinely began the business day at 9 a.m., even though the infamous Ladenschlussgesetz, or shop-closure law, allows commerce to start at 7.

“It’s nicer to come in when it’s not so crowded,” said Cornelia Adler, a regular shopper who has three young children she ferries to school and activities later in the day. “The prices are lower and the clerks are friendlier than in other stores. If you ask for something, they don’t just send you off to look for it yourself with vague directions.”

Prices in the German stores still operating under the names Wertkauf and Interspar have already been lowered by about 5% through mass-purchasing and administrative economies, and the goal is to bring them down 10% on average throughout the stores, said Manfred Lange, manager of the Dreieich Wal-Mart.

Wal-Mart’s standing offer to match any selling price a customer brings in from a competitor’s ad has already riled other German retailers. In January, the industry-backed Center for the Fight Against Unfair Competition in Bad Homburg filed a claim against Wal-Mart, contending that the U.S. retailer was violating German law by selectively lowering prices.

The Dreieich store, like all of the German acquisitions, has yet to be affixed with Wal-Mart signs, but Wal-Mart Germany President Ron Tiarks has announced that all 95 stores are to be renamed by the end of this year. “When it’s Wal-Mart inside, we’ll make it Wal-Mart outside,” said Lange, noting that the stores still have much internal restructuring to do.

Also acquired with the stores were their former owners’ obligations to Germany’s powerful labor unions, which represent all retail employees. Part of the deal negotiated by Wal-Mart is that no jobs would be cut and that union wages, benefits and protections would be respected.

Wal-Mart’s German employees earn between $1,420 and $1,840 a month for a 37-hour workweek, or $8.85 to $11.47 per hour. They also enjoy more paid holidays and health insurance benefits than their non-unionized U.S. counterparts, whose wages the company refuses to discuss.

In fact, to improve customer service and back the motto “Our people make the difference,” Wal-Mart Germany has hired more than 1,000 new employees, or “associates” as everyone in the company is known, to bring total employment to 15,000.

But whether Wal-Mart can significantly lower prices while facing higher labor costs remains to be seen. Executives have set no deadline for bringing German operations in line with those in the U.S.

Wal-Mart’s late founder, Sam Walton, based his management strategy on the belief that everyone in the store has ideas to contribute and should be encouraged to share them. Store meetings for brainstorming and the morning cheer are daily fixtures at U.S. Wal-Marts, but those practices are being incorporated gradually in Germany, with each store management team deciding when and how often the staff needs such bonding.

Nebahat Aleoglu, who has worked at the Dreieich store for five years, struggles to find an example of what is different in her daily routine since the store became a Wal-Mart.

“Nothing much noticeable, but it is nice to be encouraged to talk to the customers,” said the cashier in her early 20s. “I like it that they want us to smile more. It makes the customers happy too.”

Not all has gone smoothly in the transition. The influential daily Sueddeutsche Zeitung of Munich wrote a scathing review of the store in the Bavarian capital at the end of its first year under Wal-Mart management. It claimed nothing had changed in sales personnel’s haughty attitudes toward shoppers, citing an associate behind the cosmetics counter who refused even to look up from her needlepoint.

But some Germans who shop at Wal-Mart do seem won over by the friendly service, even if it is slow in coming. “I’m very happy to see this little piece of American society here,” said Helga Wagner, a retired drugstore worker. “The grocery bags are free here--you have to pay for them elsewhere.”

Having traveled to the United States and seen Wal-Marts in their native element, Wagner wonders why the German stores don’t bag groceries for customers and foster a cheery atmosphere.

Wal-Mart managers say all of the U.S. practices, from greeting to bagging to daily cheers, will be tested to gauge German reaction, and that those customs that meet with approval will be adopted.

Although Wal-Mart’s arrival in Germany did little to change the retailing landscape--hyper-markets such as Huma, Metro and Aldi have long been in business here--its imminent entry into the British market is another matter.

It has provoked a debate about urban planning and the competition the U.S. company might present to mom-and-pop businesses that already set a high standard for customer service.

“In the short term, we will see lower prices over the next year . . . and competitors will either have to fall in or give their customers a good reason why they don’t,” said Richard Hyman, chairman of the Verdict retail consulting firm in London.

Unlike in Germany and the United States, where the automobile is king, Britain has retained its city-center high streets and rejected huge suburban shopping centers where mass retailers like Wal-Mart must locate to provide customer parking.

Industry sources say Wal-Mart has been pressing the government of Prime Minister Tony Blair to relax land-use codes so bigger stores can be built to offer shoppers the full line of low-cost products.

Competitors feign indifference to Wal-Mart’s arrival. The Boots drugstore chain argues that the lowest prices are not the only issue for British consumers.

Maybe not the only issue, responds market researcher ACNielsen, but a prime one. Its Homescan survey of 10,500 consumers showed that 72% look for discount offers, up from 64% three years ago.

Spokesman Greg Dawson of Sainsbury, Britain’s second-largest grocery chain, insists that Wal-Mart’s arrival will not force the chain to make major changes in pricing or policy.

“We welcome the addition to the English market. We have a very clear idea in terms of pricing about what our customers want. We understand our customers, and we don’t intend to change our strategy,” Dawson said.

Then again, after Wal-Mart’s Wertkauf acquisition, Germany’s major grocery chains issued similar assurances that their operations were invulnerable to the U.S. invasion.

But Aldi and other chains have quietly begun adopting policies such as matching all local sales prices and opening as early as the law allows.

Says Wal-Mart’s Lange: “We know we’re doing something right when the others start copying us.”

Times staff writer Marjorie Miller and bureau assistant Janet Stobart in London contributed to this report.

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