Wal-Mart's learning curve in the German market.

Bradley, Don B., III. ; Urban, Bettina

ABSTRACT

Entering the German market would present Wal-Mart with many obstacles to overcome. When Wal-Mart decided to do business in Germany the company had to adhere to the many rules and regulations surrounding German businesses. According to German law, selling merchandise below cost is illegal. The sixth amendment of the Act against Restrictions of Competition (ARC) is a ban on undertakings with superior market power offering goods or services below their cost price without justification. This action limited the effectiveness of Wal-Mart's low cost leader strategy. Another German restriction requires stores to limit their amount of operational hours. German shopping hours are strictly regulated under Paragraph 3 of the BGBI (B9-74/00, Seite 875). No German stores are allowed to be open 24 hours a day, nor are they allowed to be open on Sundays and must close by 4 P.M. on Saturdays. In response, Wal-Mart began to open its stores earlier to avoid violating any regulations. The response from consumers was positive resulting in increased business. Another barrier to Wal-Mart was the limitation placed on the number of sales it could have in a single year. According to German law, sales are only permitted during a uniform two-week period twice a year. Wal-Mart is looking forward to changing the laws in the German lower house to allow them to offer the two for one deal popular in the United States. The final barrier to Wal-Mart is the law concerning the German workforce. Article 2 of Convention 87 states that German workers have the right to organize. About 25 percent of Wal-Mart's 18,000 workers in Germany are organized in the union called the Uni Commerce affiliate ver.di (Vereinte Dienstleistungsgesellschaft). Wal-Mart traditionally rejects trade unions so they could keep wages and labor costs down. If however the company signs the collective agreement, stating that Wal-Mart workers can unionized, it will show the company cares about the improvement of the relationship with their workforce, equal opportunity, and non-discrimination.

Retailing is, by its nature, a dynamic industry. There have been an almost overwhelming number of changes during the past 50 years. Today's consumer will demand more for less from the shopping experience: more quality, choice, consistency, convenience, and service, for less money, time, effort, and risk. Another major factor in the changing consumer atmosphere is the changing German demographic. Due to the shrinking younger population, older consumers dominate the market. This will drastically affect Wal-Mart's marketing approach to the German people. Today the German people are looking for more convenience and comfort. As life styles are becoming busier, the time devoted to household shopping and meal preparation is shrinking. Wal-Mart will have to adapt to these changes and offer a variety of healthy, prepared meals evidenced by the organic market increase 20 % from 2000 to 2001. Most importantly, however, consumers in the German market want to indulge themselves with small pleasures and personal rewards. Wal-Mart will have to continue to find new ways to keep the German consumer excited and interested in Wal-Mart's products.

WAL-MART STRATEGIC GOALS

To complete the advancement and domination of Wal-Mart in domestic and foreign markets, the company has outlined a four-point plan of marketing and logistical strategies. The first of these strategies is simply to dominate the retail market by positioning itself as a low cost leader in retail merchandising. Using its vast volume-buying resources Wal-Mart is in an enviable position to drive competition revenues down by offering its customers an immense variety of quality merchandise. Another important strategic objective of the Wal-Mart Company is to grow through US and International expansion. Wal-Mart has been a success in the US market and has now focused its resources on the expansion and growth of its stores in international markets. The international retailer currently operates in eight countries around the world. International success is derived from first buying out the industry leader in a particular company, thus eliminating its closest competition and gaining an easy entrance into the market through an established chain. After the takeover, Wal-Mart converts the stores, as well as the consumers, to Wal-Mart with quality products and dedication to customer satisfaction. An aggressive marketing campaign is then launched to expose the public to the Wal-Mart brand through television and other advertising mediums. Finally, Wal-Mart's focus is to offer the consumer more than retail merchandise. The company now offers its consumers a variety of services and goods ranging from pharmaceutical supplies to fully stocked grocery areas and countless other services to ensure that the consumer can fully participate in the one-stop-shop atmosphere that was the founding principle of Wal-Mart. (Staying on Top of the Fortune 500)

WAL-MART'S ATTRACTION TO INTERNATIONAL TRADE

International activities started in Mexico. Sam's Clubs were only the beginning. Soon to follow, Wal-Mart formed a joint venture with CIFRA, Mexico's largest retailer. After this successful introduction of the stores in a foreign market, Wal-Mart International decided to venture into Canada. The entry into the Canadian market was achieved by purchasing Woolco and its 122 stores. Subsequently, expansion continued into Latin America, particularly in the largest and most developed markets of Brazil and Argentina. (DSN Retailing Today: The Division that Defines the Future, 2003)

As of November 30, 1998, the International Division operated a total of 630 units in Argentina (13), Brazil (13), Canada (152), Germany (21), Mexico (410), and Puerto Rico (14). The Division also had joint venture agreements in China (3), and Korea (4). However, the Division has continued to grow extensively in 1999 with the purchase of 74 Interspar hypermarket stores, owned by the German Spar Handels AG, for $ 1.7 billion demonstrating their determination and commitment to international growth in the German market. This gave Wal-Mart a total of 95 stores in Germany. (walmartstores.com) The company went on to acquire 229 stores of the British Asda group, a supermarket chain (DSN Retailing Today: The Division that Defines the Future, 2003)

WAL-MART'S ENTRY INTO THE GERMAN MARKET

As in most of the countries around the world, the once popular mom-and-pop stores were rapidly losing ground to big retailers. Germany was no exception. Germans, who were once anxious to preserve the Old World traditions of small family-owned shops, could now be seen crowding into the stores of major supermarket chains. A major reason for the gain in popularity of supermarkets over village shopkeepers is, because of size, they can offer lower prices to the consumers. Wal-Mart recognized the change in German shopping behavior represented future opportunities for the company. Thus, they began searching for a way to enter the German market (Schmid, 2003a).

Acquisition of Wertkauf

When Wal-Mart Stores, Inc. announced in the beginning of 1998 its acquisition of 21 stores in the Wertkauf hypermarket chain from the Mann family of Germany; the impact was immediately felt on both sides of the Atlantic. (International Contact) For Wal-Mart, the deal allowed them to gain their foothold in the European market. For the Manns, it was evidence that their hard work had paid off. Through the years, the company had focused on establishing a strong reputation for providing quality service to its customers.

Although both parties agreed not to make the financial terms of the acquisition public, it is known that Wertkauf's annual sales are approximately DM 2.5 billion. (International Contact) According to Bob Martin, the company had been seeking the right opportunity to establish itself in Europe, and particularly in Germany, which is the single largest base for retailing on the continent followed by the United Kingdom and France. The one-stop shopping Wertkauf hypermarket stores sell what is described by Wal-Mart as a "broad assortment of high-quality general merchandise and food," and are similar in format to Wal-Mart Supercenters in the U.S. "Wertkauf matched the criteria necessary for the successful introduction of the Wal-Mart concept into the German market," offered Martin. "The 4,900 Wertkauf associates have provided quality service to German customers for many years and have built a strong reputation. They are the foundation of the business, and Wal-Mart will count on them to help us earn the respect and confidence of the German people". (Die Zeit)

Acquisition of Interspar

Not even a year had passed when Wal-Mart announced a second acquisition in Germany. This time they had purchased 74 Interspar hypermarkets from Spar Handels AG. The deal was made public on December 9th 1998, and the purchase price was DM 1.1 billion. While the Wertkauf stores that were purchase the previous year are located primarily in southern Germany around Frankfurt, the Interspar stores could be found in metropolitan areas such as Hannover, Hamburg, Cologne, and Munich. The annual sales for the 74 stores are estimated to be DM 2.6 billion. (International Contact) As a result of the purchase of the Interspar chain, Wal-Mart's market share increased to 2.4% of the German retail market. Before the Interspar acquisition their market share was a mere 1.1 percent. This is small compared to three of Wal-Mart's German competitors, Rewe, Edeka and Aldi, who control more than half of market for food in Germany. (Status Quo)

THE GERMAN FOOD RETAIL SECTOR

Germany has experienced low economic growth and this has led to relatively low growth rates in food prices in nominal terms and falling prices in real terms. On average, food prices increased by less than 1%. Despite a strong increase in employment and noticeable decline in unemployment, private consumption was disappointing, partly owing to high oil prices. Against this backdrop and, in part, reflecting it in the growth of discounters, price competition in food retailing has been very intense. The German food retailing market is not only highly advanced in terms of logistics, marketing, pricing and merchandising but is also one of the most concentrated in Europe. Germany's ten largest grocers dominate 84 % of the market with combined sales of EUR 170 billion. (Status Quo)

The top 30 players achieved combined sales of EUR 198 billion, thus capturing 98% of the national market. This means that the remaining 90 grocers account for only 2% of the national market or EUR 4 billion. (mm-eurodata.com) The German market has made considerable movement towards the "one-stop shopping" concept with several large multiple retail chains dominating to the detriment of the independent retailer. (Status Quo) German retail sales climbed a nominal 1.6 percent in 2002 (ananova.com), advancing from EUR 134 billion to EUR 201 billion. Adjusted for inflation, this represents an increase of 3.7 percent. (mm-eurodata.com) Having led a shift from the high street to out-of-town stores, the large retailers are now tackling the less profitable parts of the retail chain in order to increase their market dominance. This includes the opening of both convenience stores, in an effort to get a bigger slice of the local shopping basket sales, and a return to mid-size supermarkets in town centers. (Status Quo)

PROBLEMS AND SOLUTIONS

Wal-Mart has come across many differences in terms of business practices and cultures. These have presented barriers of varying degrees of difficulty and may be seen as being potential hurdles to be overcome, but they are not the same in the different countries that the company has entered. For example in the United Kingdom there has been a much simpler integration as the social culture and economic structure of the country is more similar to that of the United States. This was not the case when Wal-Mart decided to enter the German market. There were different ways in which the county's laws and culture impacted the company in terms of regulations, labor difference, and the German customer base.

German Regulations

There were many new laws and regulations concerning business that Wal-Mart had to conform to before successfully entering the market. These "barriers to entry" included transforming one of the founding Wal-Mart's principles of selling below cost, store operation regulations, and how business was conducted in terms of sales offered to the public. Adherence to German business regulations proved to be pivotal to the success of the company. (businessweek.com)

Selling below Cost

The German Federal Cartel Office ordered Wal-Mart to increase its price to meet German regulations. The sixth amendment of the Act against Restrictions of Competition (ARC), known as Gesetz gegen Wettbewerbsbeschraenkung or GWB, in Section 20 (4) 2 (bundeskartellamt.de), is a ban on undertakings with superior market power offering goods or services below their cost price unless there is an objective justification for this. The Cartel Office has carried out several preliminary investigations on the basis of this provision and has prohibited undertakings from selling below cost price in prohibition proceedings. The Cartel Office has also established principles for interpreting this provision in order to make its practice in this area transparent and to provide additional legal security for the undertakings concerned. In its decision of September 1, 2000, (Kartellverwaltungssache), the Cartel Office prohibited the Wal-Mart company from selling certain basic foods such as milk, butter, sugar, flour, rice and vegetable fat below their respective cost prices. The Cartel Office established that owing to their size, market share and resources, Wal-Mart has superior market power over the independent grocers that are the small and medium-sized competitors. Wal-Mart had been selling between five and ten items below cost price since the end of June 2000. The manufacturers' selling prices, as confirmed by the suppliers, including all the price reductions, discounts and other price-related terms relating to the items in question, were decisive factors in determining the cost prices. In this case, Wal-Mart was also not selling below cost price as their prices were meant from the very start to run over long periods and lasted for more than two months. Selling these products below cost cannot be objectively justified either. They were not perishable goods, and Wal-Mart cannot claim that it had matched their rivals' prices. Wal-Mart has not put forward any other reasons that could objectively justify their action. Wal-Mart took the lead by cutting prices in mid-June, not only legally undercutting the sales prices of its competitors but also illegally undercutting its own cost prices. (freshfields.com)

The Cartel Office will continue to maintain effective competition for the benefit of consumers. A precondition for this is the existence of competitive structures, which are not determined by market power alone. Small and medium-sized undertakings also have to face the challenge of competition. However, they must not be squeezed out of the market through unfair pricing strategies by large enterprises with superior market power if they would be able to operate efficiently under fair competition. In introducing the new Section 20 (4) 2 into the ARC, the lawmaker assumed that certain legal terms such as "cost price" would be defined in more detail through administrative practice and decision-making. In spite of the small number of proceedings carried out so far and a lack of court rulings in this respect, the Cartel Office has decided to start defining such terms by establishing principles for interpreting this provision, thereby at the same time contributing to greater legal clarity and security. In addition, the Cartel Office assumes that the preliminary effect of the principles of interpretation will be to combat unfair price-setting practices intended to squeeze competitors out of the market, independently of individual proceedings carried out by the Cartel Office. The principles of interpretation are tailored to the trade sector in accordance with the meaning and purpose of Section 20 (4) 2 of the ARC. In the manufacturing and service sectors the general rules on the abusive setting of prices through sales below cost price deriving from court decisions will continue to apply. The principles of interpretation establish that the Cartel Office includes all the price-effective conditions that arise from supply contracts in the cost price, taking the manufacturer's invoice price as its starting point. These include annual discounts but also product-related additional agreements concluded during the year. The Cartel Office assumes that all the conditions agreed between the supplier and the buyer in principle serve to sell the product and are thus product-related. In addition to directly-assignable deductions, such as cash discounts and rebates, further conditions may be considered, such as annual bonuses, allowances for advertising costs and sales promotion cost, even if these are contracted only for a particular product, temporary sales operations or particular distribution channels. This is intended to prevent any inappropriate manipulation of the selling price. The publication states that beginning to charge lower competitive prices may be a justification for sales below cost price. This does not apply, however, if the illegality of such competitive prices is evident or has been established by an authority or a court. The Cartel Office accepts as justification neither undercutting competitive prices nor "overshooting the euro" in the price reaction through covering an excessive regional area or going beyond the product group in question. This limitation prevents a downward price spiral as a result of unfair practices. Sales below cost price may be justified when an undertaking enters a market for the first time. However, when a firm changes hands or when a merger is involved this is not considered to be a "new entry". (bundeskartellamt.de/13 and bundeskartellamt.de/25)

Store Hours Regulations

German shopping hours are strictly regulated under Paragraph 3 of the BGBI (Bundesgesetzblatt, Band 1, Seite 875). No store is allowed to be open 24 hours a day, nor are they allowed to be open on Sundays in accord with Germany's Sabbath laws. On Saturdays, stores must close by 4 P.M. (bundesrecht.juris.de) Nonetheless, Wal-Mart has begun to open its stores earlier and thus has managed to avoid violating any regulations restricting stores from remaining open beyond a certain time of the day. Soon after Wal-Mart acquired the Wertkauf stores, it began to open at 7 A.M. This received excellent customer response and resulted in increased business. Most large retail stores in Germany open at 9 A.M. and close at 8.30 P.M. during the week. (Schmid, John)

Limitation of Sales

Also the limitation of sales has to be considered in the German market. Any type of sale, such as clearance or end of the season, is illegal in Germany except during uniform two-week periods twice a year. (Schmid, John) There has been a light at the end of the tunnel with the recent lightening of the competition laws there have been fears of the outbreak of a "price war". For a discount store such as Wal-Mart this may be seen as the signaling of an ability to compete in its traditional way, returning the core competencies of the company. Here it can be seen that with the German lower house changing laws, which have been in place since the 1930's, there will be the overturning of laws that have prevented the two-for-one offers that are popular in the United States, as well as taking away the seasonal limits that are placed on the special offers. This may ease the situation from Wal-Mart, but they still face many challenges to establish themselves and gain the market position they desire in Germany. (vz.nrw.de)

German Workforce

Additionally, Wal-Mart must face another major operating complexity with Germany's unionized workforce. About 25 percent of Wal-Mart's 18,000 workers in Germany are organized in Uni Commerce affiliate ver.di (Vereinte Dienstleistungsgesellschaft). (Wal-Mart in Deutschland) The labor unions in Germany are extremely powerful and managed regionally. Every region has a local chairperson whose negotiating powers include determination of working conditions and work schedules. (Verdi.de) Because the world's largest retailer is anti- Union in the United States, Wal-Mart has failed with any type of Union. Wal-Mart believed the Union will caused them to loose profit. When Wal-Mart came to Germany the Union hoped that Wal-Mart could adapt to the way they do business. Wal-Mart's approach was to reject trade unions so they could keep wages and labor costs down. By not being a member of the Union, Wal-Mart is not obligated to pay six weeks of vacation for employees who worked at least 15 hours a week, nor are they obligated to pay medical and social benefits. (union-network.org) For Wal-Mart to grow in Germany understanding collective bargaining and the regulations is a must. This is represented by the I.L.O (International Labor Organization). The I.L.O's declaration framework is based on these fundamental principles and rights in the workplace.

Fundamental Principles of the I.L.O

"Principle 1 support and respect the protection of international human rights within their sphere of influence; and

Principle 2: make sure their own corporations are not complicit in human rights abuses.

Labor

Principle 3: freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labor;

Principle 5: the effective abolition of child labor; and

Principle 6: the elimination of discrimination in respect to employment and occupation.

Environment

Principle 7: support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies." (union-network.org/ p. 2)

Rights in the Workplace

Article 2 of Convention 87 defines the basic right for any worker to organize:

"Workers and employers, without distinction whatsoever, shall have the right to establish and, subject only to the rules of the organization concerned, to join organizations of their own choosing without previous authorization."

In Article 11, the governments of member countries are given the obligation to ensure that the right to organize is respected: "Each Member of the International Labor Organization for which this Convention is in force undertakes to take all necessary and appropriate measures to ensure that workers and employers may exercise freely the right to organize."

Convention 98 gives further support for the right to organize by forbidding employers to interfere: Article 2 states:

1. Workers' and employers' organizations shall enjoy adequate protection against any acts of interference by each other or each other's agents or members in their establishment, functioning or administration.

2. In particular, acts which are designed to promote the establishment of workers' organizations under the domination of employers or employers' organizations, or to support workers' organizations by financial or other means, with the object of placing such organizations under the control of employers or employers' organizations, shall be deemed to constitute acts of interference within the meaning of this Article." (union-network.org/ p. 5)

This framework will give everyone an opportunity to grow. If Wal-Mart signs the collective agreement for commerce it will show that the company cares about the improvement of the relationship with their workforce and the respect of equal opportunity, and non-discrimination, health and the environment. This will enhance Wal-Mart's relationship with the community and society in Germany, as well as in other countries. (union-network.org)

Understanding the Consumer Trends

Retailing is, by its nature, a dynamic industry. We have seen an almost overwhelming number of changes during the past 50 years, from the satisfaction of the basic needs to a "multi-optional" consumer. Every decade in the last 50 years was concerned with a different attitude and, therefore, faced with a different consumer pattern. In the 50's the only concern of the consumers were the satisfaction of the basic needs. Because of the Second World War there was a tremendous backlog on supply and demand. Therefore, the 60's and 70's became a time for economic growth and high consumption. The so-called "affluent society" was born. The consumer of the 80's and 90's looked for the pursuit of pleasure and the principle of everything that is good in life. This new consumer type is also called "hybrid customer". Consumers' expectations are getting higher. Today's consumer will demand more for less from the shopping experience: more quality, choice, consistency, convenience, and service, for less money, time, effort, and risk. If anything, the forces of change are picking up speed. Doing business in the future will be markedly different from doing business in the past. The next ten years will undoubtedly hold even more changes than the last decade. Therefore, Wal-Mart has to understand the trend of the German consumers and meet their prospective to survive and prosper in the future. (Status Quo p. 23 ff)

A Changing Population

One of the factors Wal-Mart must study is the demographics. The changing of the population is one of the major factors in understanding the consumer. Germany is faced with the oldest changes by a society in peacetime. Due to the fact that the younger population is shrinking and the older population is increasing. This shift in age composition is dramatic, unprecedented, and caused by a sharp decline in births some years ago, and it has dramatic implications for Wal-Mart. (Status Quo p. 8)

There has been a dramatic decline for items such as toys, games, and some segments of the apparel and footwear market. Therefore Wal-Mart can reconfigure the usage of space in their stores and also concentrate on less youth-oriented, less style-oriented, and more practical marketing campaigns. The middle age population will have a need for such products as cosmetics, skin care, hair coloring, and other youth-inducing products. Also the sales of leisure and entertainment products will rise. The older population will put emphasis on improving the quality of homes in which they plan to retire. Furthermore, the number of households in Germany will rise considerably, even with a shrinking growth of population. That is because the number of people living alone will increase substantially, as people marry later. (Status Quo p. 8)

A Changing Consumer Lifestyle

Another major change Wal-Mart has to consider in order to meet customer needs is the changing consumer lifestyle, which in turn is affecting the consumer behavior. In a time-constrained world, consumers are looking for more convenience and comfort. Lifestyles are busy and getting busier. The time devoted to household shopping and meal preparation is shrinking. For example, the preparation for a warm meal had declined from 30 minutes in 1974 to just 5 minutes in 2000. The German population is changing their eating habits, from cooking in the house to more service-oriented meals. In the last years the money being spent away from home has risen dramatically and will continue to climb, as is evident from the following chart. (Status Quo p. 25)

Consumers will become increasingly reliant on immediate consumption options. Many households will no longer shop only once a week. Their planning horizon will be a meal at a time. They will replace the regular, weekly, shopping trip with shorter, more frequent, fill-in shopping forays. They will eat out, take out, and buy prepared food more often. Therefore, convenience to the consumer is best described as easy-to-buy, easy-to-select, easy-to-decide, easy-to-prepare, and easy-to-locate. Additionally, wellness is another key word of the new consumer trend. Healthy eating is a growing trait, as is the popularity of organic and functional food. Sales of health and beauty aids are growing in double digits. Also nutrient and organic products are increasing in demand. With the recent academic "mad cow disease" (MKS), the demand of organic food has further increased. The current organic market is worth 3.83 billion Euros and reached a growth rate of 20% in only one year, being between the years of 2000 to 2001. Also, functional products are increasing in popularity. Functional food has an added ingredient that supports one or more of your body's function. Forecasters have seen the world-market change from 30.68 billion Euros in 1998 to 51.13 billion Euro in 2004, which indicates a market growth of 62 percent. (Status Quo p. 26)

The new consumer also likes to indulge themselves with small pleasures and personal rewards. They are looking for something that makes them feels good and appreciated. All of the above attitudinal trends will influence shoppers as they enter the store. Therefore, for Wal-Mart to be successful in Germany they need to stay focused on the customer, as indicated earlier, with the realization of new consumer trends. Wal-Mart continually has to change in order to meet customer needs. This shows that the consumer wants more comfort, convenience, wellness and indulgences. First of all Wal-Mart has to rethink the way their merchandise is offered to the customer. They need to be more innovative with each and every store and the consumer buying behavior within a given store. Making the store more personal, with every item within the store more relevant to the consumer. This will have an exponential impact on the merchandise assortment in the store. Due to the increasing demand of convenience, Wal-Mart must focus on adding value to the food shopping experience by offering busy consumers meal solutions that will sell the meal not the ingredients. (Status Quo p. 25) This will shift space allocation away from commodity packaged goods aisles toward a larger section of fresh, fresh prepared, takeout, and eat-in options. Therefore the consumer will be able to shop for their needs and not have to wander through the store on a "discovery mission" to find items they want to buy.

In addition to being more convenient to the consumer, Wal-Mart has to do a better job in grouping products together. The most important element of affinity merchandising is grouping together products that solve a customer's need, regardless of who owns that category. Understanding and merchandising to this exploding consumer need will be a very profitable strategy for Wal-Mart in the future.

Wellness is one of the other growing assortment trends. As seen earlier, wellness comes in many categories. One of the wellness categories is focused on "getting well" and "staying well" is yet another. Wal-Mart will have to increase the space they dedicate to products that will make sick consumers feel better, and healthy consumers feel great. Also, selling health and body maintenance will reset Wal-Mart in the traditional health and beauty, vitamins and nutritional categories.

In addition, consumer indulgence is one of the dominant traits that Wal-Mart must address in the future, because of the increasing population of "boomers". This consumer class believes it deserves the "niceties life has to offer." They're not looking for toilet paper and dishwashing soap. To meet the consumer needs this also means that Wal-Mart must provide a broader section of unique products such as special perfumes, relaxation equipment, cosmetics, plus thousands of other items that meet the fancy of impulsive consumers.

CONCLUSION

Wal-Mart is the largest retail store in the United States with 4,414 retail facilities globally. The company's relationship with its customers, as well as its employees, is highly stressed. The company maintains Sam Walton's philosophy that the customer is always right. Upon entering the German market, Wal-Mart has been faced with great difficulty. The primary problems that the company has had to attempt to overcome are heavy legislation and limited space. While dealing with these obstacles however, Wal-Mart has continued to maintain its consistency in terms of its strategy of its fundamental retail concept, and its goal to get worldwide customers to recognize Wal-Mart in association with these concepts. Always the low prices and satisfaction are guaranteed.

Wal-Mart stands for low prices, and the price still drives the majority of consumer buying decisions. However, with the time pressures and the continued complexity of life decisions, price-based value equations are beginning to be questioned in the eyes and mind of the consumer. Consumers are beginning to look for convenience as the new value equation and are willing to pay for it. The reality is that consumers always did and always will want a bargain, but the good price at Wal-Mart will have to be accompanied, as indicated earlier, with convenience and simplicity. These concepts are solutions that are all significantly new in driving consumers reasons for shopping one retailer over another.

The problems of Wal-Mart in Germany can be seen as wide-ranging. Some solutions to consider include the need for the company to implement their strategy in the best possible way, especially in regards to public relations. Many Germans see Wal-Mart as a bully and a tyrant. Therefore, Wal-Mart has to adopt a friendlier corporate attitude among the German public. If Wal-Mart changes its image, it will not only remain the largest retail chain in the world, it could become one of the most popular stores in history.

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Don B. Bradley III, University of Central Arkansas

Bettina Urban, University of Central Arkansas Total Turnover 2002 in German Retail Market (Euro Millions) REMAINING EUR 31,000 Millions COMPANIES 16% Top 10 EUR 170,000 Millions Companies 84% Note: Table made from pie chart. Top 10 German Retailers by Total Turnover 2002 (Euro Millions) SCHLECKER 5300 SPAR 7539 Lekkerland tobaccoland 8170 TENGELMANN 12463 KARSTADT 16050 ALDI 25000 EDEKA/AVA 25177 REWE 28622 METRO 32022 Note: Table made from bar graph. in Billions of EUR Eating Out Food-Services 2005 122.71 76.69 1999 114.53 66.47 1997 115.04 63.4 1995 114.02 62.89 1991 108.91 54.2 Note: Table made from bar graph. Market Volume for Food-Services and Eating-Out Consumer Fruits & Vegetables 31% Organic Food 6% Medicine 25% Diet 4% Hygiene 32% Functional Food 2%