It’s official – from the summer of this year, there will be no more Wal-Mart Germany. Seventy of the retail giant’s 85 stores in the country will be completely rebranded and integrated into Metro Group’s Real super/hypermarket chain portfolio, while the remaining 15 stores are expected to be closed down.
The process began at the end of November last year with the integration of five stores and will continue through the first half of 2007, culminating in the closure of Wal-Mart Germany’s headquarters in Q3.
Realistically, the writing has been on the wall ever since Metro Group bought the Wal-Mart stores from its US parent last July. Many would say a lot longer, in fact. Despite plenty of financial backing, Wal-Mart Germany simply wasn’t the success that its mighty parent so longed for – it failed to find favour with the country’s discerning consumers who can be described as somewhat change-shy.
And after eight years in the country, most of them marred by economic doom and gloom, the world’s largest retailer admitted defeat and sold up. It is said that Wal-Mart Germany never made a profit.
There are still plenty of unanswered questions, however: What will happen to the 1,200 staff that worked in the 15 stores that will be closed, or indeed the 600 employees that work at Wal-Mart’s German HQ in Wuppertal? What about Roland Neuwald, Wal-Mart Germany’s CEO who was only appointed a few weeks after Metro bought the stores? And will the remaining 9,000-plus Wal-Mart people be taken over into Real? Questions that even the new owner can’t answer comprehensively.
Metro Group spokesperson Markus Jablonski said: "First of all it’s important to point out that we’re integrating the biggest part of the Wal-Mart network, about 80 percent.
"The remainder of the stores simply don’t fit in with the Real portfolio in terms of sales, geographic coverage or for other strategic reasons, and they will be closed. Here we’re looking for other opportunities, for example new tenants.
"As far as the stores that will be integrated into the Real chain are concerned, we will find out over the next few months how the employee structure of Wal-Mart fits in with that of Real. The Wal-Mart headquarterrs in Wuppertal will be closed and the Wal-Mart Germany board has agreed to a reconciliation of interests and a social compensation plan."
There’s no doubt that there will be redundancies – the question is simply how many. On a positive note at least, the German economy has been picking up at a rate not seen since 2000 and unemployment figures are finally going down – slowly but consistently. And any staff-related efforts made by Metro Group are likely to be complemented by strict German employment laws and the strength of the country’s unions.
From the outset, the integration of Wal-Mart Germany into the Real super/hypermarket chain makes perfect strategic sense. Store size and product offering – branded versus private label products and food/non-food ratio, for example – are very compatible.
And pooling together certainly gives Real an instant boost in terms of its market share and geographical coverage – by mid-2007, the chain is estimated to have an impressive 350 stores in the country. Furthermore, added Jablonski, "there’ll be great synergy effects in terms of marketing, logistics and purchasing".
But while size is important, a happy-ever-after is by no means a foregone conclusion. The Real chain itself hasn’t been doing well over the past few years, financially and in terms of reputation. Tying two ailing ships together could very easily make for a sinking fleet.
Read the full article in February’s issue of OPI