France, Britain, America, and Italy didn't adapt to the post-WW1/interbellum era. They were still basing everything on either WW1 paradigms (the French), believing that mechanized units would be secondary to... horse cavalry and infantry (yes, I have no idea why some thought this), or they simply didn't invest all that much into R+D (the Americans especially, and the Italians).Not true. The armaments industry was in the far west - like in Paris. In WWI France was the "Arsenal of Democracy", as evidenced by the American Army being equipped with French made weapons.
Also, in WWI there was no razing of industries. I admit that in the occupied territories Germans did dismantle factories and kept them crated, letting the the now unemployed workers baely scrap by.
The reasons why Germany had so many successes early on were because they invested time and resources, developed new doctrines like blitzkrieg and true combined arms with training and (for the time) superior tanks to the already obsolete Entete vehicles), and subsequently developed counters to the WW1 paradigms the other powers were operating on.
The Spanish Civil War also gave them valuable combat and performance data for their training, tactics, equipment, and the like, which were used to refine everything.
Even the Soviets had a heads up that times were changing and were quietly adapting to the times, such as when they exchanged advisers/training with Germany when there were veneers of peace. They simply just didn't adapt fast enough before war broke out a few years later.