Metro Cash & Carry revamps India operations, sharpens regional focus

Managing Director & Chief Executive Officer of Metro Cash & Carry India, Arvind Mediratta, speaks to Sanjay Kumar of Progressive Grocer about the company’s recent initiatives across various functions, which have not only helped Metro dig its feet firmly in India but also marked it out as a trend setter and benchmarking partner for all cogs in the wheel of the wholesale industry.
“We have kicked off many recent initiatives to sync with our global aim of being the ‘Champion for Independent Business’,” says Mediratta.
The company has carried out top-deck leadership changes in recent months, and is focusing to enlarge its footprint in the northern and southern markets of India – its traditional strongholds. It has also split its operations into north-east and south-west for better business focus and leadership across specific regions.
“We will continue with our focus on these markets while also keeping an eye on emerging markets in Tier II and III cities,” points out Mediratta, adding that India is among the countries where Metro Group is set for sure-footed expansion as a Wholesale and Food Specialist company.
After 14 years of operating experience, how does Metro weigh the opportunities and challenges of doing business in India?
Metro has definitely evolved and come a long way after its foray in Indian market way back in 2003. The Indian market is extensive and diverse. This provides us with both opportunities and challenges. In India, what works in the north will not work in the south because of the penetration of regional and local brands. We are focusing on these brands, especially in food and groceries, because people want a particular brand of spice or oil. So, for instance, when we opened a store in Gujarat, we found people were using cottonseed oil, which is not common in other parts of the country. Likewise, there are brands in the south that are specific to that region. Likewise in apparel, in Punjab, we need to stock a lot more of the large sizes whereas in Bengaluru, the large sizes don’t sell. In Amritsar, we used to stock small thalis (plates) and small bowls, but we noticed nobody was buying those. So, these are the things that we have to localize according to the market. We keep evolving and growing with every city we enter into.
Where do you stand today on your earlier proclaimed target of expanding your network of distribution centres to about 50 by 2020?
We will continue our steady expansion in India in the coming years as the market offers great potential and opportunities. Since the organized wholesale market in India is growing at an even higher rate than modern retail, there is no dearth of opportunities in the country. India is among the countries where Metro Group is set for expansion as a Wholesale & Food Specialist company. Recently, we revamped our India operations and split it into North-East and South-West, to sharpen our regional focus. Metro India has a new leadership team in place to drive this goal. Several expansion projects are already on the agenda. To sum it up, we are pretty much on track.
North and south are basically the two regions where Metro has been very much focussed now. What are your plans and pace of consolidation in these two regions?
In our kind of business, a cluster approach to markets is the best way to grow the business. North and south markets have been our traditional strongholds and there is plenty of headroom for growth in these regions. We will continue with our focus on these markets, while also keeping an eye on emerging markets in Tier II and III cities.
For a heterogenous market that India is, how has Metro been customising its solutions and services to best serve the diverse needs of specific regions?
We have a simple strategy to suit diverse needs – we listen to our customers. Our exemplary customer satisfaction levels are majorly because we constantly analyse local requirements and bring products that the market demands. A large percentage of the goods are sourced locally and are tailor-made to meet the specific demands of the region. We are constantly engaged in customer interaction to ensure that we understand the pulse of the market and provide products and services accordingly. This gives us the knowledge and insights into what exactly works in each catchment.
How do you see the potential for growth of big box retailers like Metro in India?
Metro in India operates B2B wholesale. In the last ten years, India has been growing at the fastest pace in its economic history. The growth potential has increased manifold, not only in big metros but also in Tier II and III cities. India presents a sound opportunity with 1.2 billion people and 10 million kirana store owners. Out of the 450 million Internet users in the country, over 300 million are smartphone users.
These trends point to the fact that the Indian economy is brimming with big potential of growth. Policymakers are creating a conducive environment by relaxing norms so as to invite foreign funds and speed up the country’s infrastructure. The Government’s decision to allow 100 per cent FDI in food retail is one such welcome step in this direction.
Against this backdrop, the potential ahead for big retailers and wholesalers is immense and growing. The buying potential of customers is rising, infrastructure and supply chain is improving and Internet has demolished the aspiration lag between big and small cities. The Indian retail and wholesale market offers great potential and bright prospects for international and domestic players.
How do you look at the role of Metro in strengthening the retail eco-system and cash-and-carry trade in the country?
Metro Cash & Carry is not only one of India’s leading organized business-to-business wholesalers but also the country’s first HACCP-certified wholesale retailer. We ensure that all our 23 stores comply with the highest standards of cleanliness and hygiene. This not only covers in-store activities but also procedures involving sourcing, supply chain, stocking, and point of sale.
In critical areas of Fresh Food, i.e., meat, fish, fruits and vegetables, dairy, frozen and bakery, we impart the necessary training and skills to our employees and suppliers alike. Our five Farmer Collection Centres, in diff erent parts of India, supply fresh produce to Metro within eight hours of harvest. We train our farmers in the adoption of new crop management techniques, optimum utilization of resources and agronomic practices. Suppliers of meat and fish are also trained in international quality and safety standards and certification systems. All our suppliers are given systematic training on meeting customer requirements in terms of food quality, safety and traceability. We use standardized communication programmes and training tools to impart this knowledge.
Fair prices and guaranteed and transparent payments from Metro have proven to be a catalyst for change within agricultural communities. Metro was the first company to introduce immediate credit of payment on electronic cards for farmers, a pioneering practice that has now found broader industry acceptance. Under this initiative, all Metro farmer suppliers are issued a Pay Direct card through a national bank. This is a specially devised card for farmers, which functions as a debit card and requires minimum documentation. Only farmers who have a Pay Direct card can conduct business with Metro. After Metro makes a purchase from a farmer at an accepted quantity and price, payments are credited directly into a farmer’s account in less than a day.
Coming to the vast universe of small traders and kirana owners, Metro regularly conducts Trader Support and Partnership programmes. The motive of this programme is to help our kirana customers become more competitive and modern. Using our knowledge and expertise in the field of selling and stocking, we share best practices with kirana shops in planogramming, assortment planning, store layout and inventory planning to improve their profitability. As a result of this initiative, we’ve been able to turn around businesses for many of our customers.
These and many more initiatives kicked-off and sustained by Metro makes it a trend-setter and benchmarking partner for all cogs in the wheel of wholesale industry. All these initiatives sync clearly with our global purpose of being a ‘Champion for Independent Business’.
What are the features of your Private Label programme and how is it helping Metro strengthen its business?
Internationally, Metro has a wide range of products under its private labels. Our private labels such as Aro, Fine Life, Rioba, Horeca Select, Sigma, Tarrington House, etc, are well recognized and rated among professional customers. Our private labels have helped increase the loyalty of our customers, both in India and abroad. Categorization of product lines under each of these brands is aligned across all Metro countries. However, each country exercises its discretion to introduce products under these brands depending on customer and business needs.
Right from EPP products to premium brands, Metro private labels have something for everyone in its kitty. We benchmark our products against the lead brands to ensure that customers get the best quality at a competitive price that we can afford to pass on. Each launch undergoes stringent quality checks enforced by our in-house quality team. Being in the business of serving professional customers gives us unique insights into their needs.
We accordingly tailor our solutions such as those in Housekeeping, Pantry and Office, to meet their expectations. Adherence to food safety practices is a necessary pre-condition for suppliers of private labels. Several micro and cottage industries that work with us on private labels are required to comply with international standards of working and processes, which also stands to benefit them in the long run.
Private labels help us develop and grow our business in several ways. We are able to plug several assortment and price gaps with our own brands. For instance, we recently launched a body wash at Rs 49 for customers who wanted to upgrade from soap to body wash, but found price a deterrent. The product was a huge hit among our customers. We use our own brands to introduce innovative products, such as ceramic coated cookware, which we have done recently.
What is the next big change that you see coming in retail?
Let’s analyze the past before we predict the future. If we look at the United States of America, where I was earlier, one could see a clear distinction between the evolutionary phases in the retail industry. From 1960s to 1990 was the Age of Manufacturer. After that, till 2010, was the Age of Retailer. After the turn of the century, emerged the Age of the Customer.
In India, however, the market has not segued this smoothly. What we witness today is a fair mix and jumble of all the three ages – Manufacturer, Retailer and Customer. This makes for an interesting mix of pull and push factors that drives today’s consumption. What is becoming increasingly obvious is the channel transformation that the industry is going through. Whether online or offline, buying and selling cannot afford to remain mono-channel any longer. Only those players can envision a long and rewarding future who are able to fold into the Omnichannel approach. The future will also see increased interaction with sophisticated technologies. Already, technological innovations like Augmented Reality and Advanced Robotics are changing the way people buy abroad.
In terms of categories, I foresee a huge proliferation in the number of categories and sub-categories with customers becoming more and more experimental. Coupled with the rise in self-and-social consciousness awakened by social media, one can safely presume that four categories will rule the roost in near future. This is linked directly to what the new-age customer desires from life:
a) Health & Wellness: Organic food, health supplements, fitness equipments, apparel and personal care products
b) Experience: Media, travel, entertainment, home, gaming, sports and luxury categories
c) Staying Connected: Highly integrated smart homes, smart kitchens, telecom, transportation and IT products
d) A Fair World: Socially, environmentally, and ethically fair products such as cage-free eggs and vegan products
What initiatives are you taking to beef up your e-commerce capability?
We are primarily an offline player. Our brick-and-mortar wholesale stores provide everything under one roof at the most competitive prices in town along with friendly service and a broad range of products in various pack sizes. Our customers like buying at Metro stores a uniquely happy experience owing to these factors.
However, we do recognize the importance of Omnichannel for reasons I explained earlier. We have recently introduced an ordering platform for our trader customers (OPD: Order Payment Delivery) where they can order online, and their order is delivered to them. We expect this programme to scale up significantly in the coming years.
What do you feel is the optimum size of store that Metro should be looking at?
In size, there is no one-size-fits-all approach that we can speak of. We decide the size of the store and the prominence given to any category depending on what our customers in our catchment want. Before entering any market or zone, we do a thorough research on market trends and customer preferences. Using these information and insights, we take a call on dimensions.
Compared to the more than 25 odd countries where Metro is present, what is different about running your operations in India vis-a-vis the rest of the world?
The Indian market is very different from the other countries where Metro operates in. Moreover, markets in European countries are much more mature and stable than in India. Being a growing economy, however, the potential for growth and expansion in India is a lot more than its European counterpart. To compete in a fiercely competitive market with a high real estate cost and MRP regime requires one to be very nimble and cost efficient. We learned our lessons in the Indian market very early and started adapting ourselves to suit the customer needs.
Will you consider changing your current path and direction if multi-brand retail is allowed?
Globally we are a B2B business, and we will continue to remain a B2B company. The ways in which we reach out to our customers will evolve and improve, but our vision and mission is clear. We strive to be a Champion for Independent Business and will continue to serve professional customers.