Cash n Carry: looking up

The new FDI policy favours it.
Retail-Operations

A cash n carry is a B2B format that refers to the purchasing of merchandise by customers which consists of retailers, professional users, caterers, institutional buyers, etc. As the name suggests, the payment is made in cash on the spot and the merchandise is carried away by the customers themselves. No such service as ‘Delivery’ exists in this retail format. These outlets do not make sales to individual buyers. A huge amount of categories of merchandise are sold to the business buyers. This model is based on the grounds of buying through an efficient procurement chain and selling in cash. This enables them to charge very low mark-ups making it a suitable format.

 

This format suits the Indian set up appropriately, as the major pie lays with the kiryana store owners. Cash and carry has the ability to kick off an essential change to the trade and distribution structures in the country.

 

Players in the business 

Metro Cash and Carry India, a 100 per cent subsidiary of Metro Cash and Carry International GmbH, Germany, were the first to foray onto the Indian shores more than seven years ago with their first store in Bengaluru.  Besides this, another important player is UK’s largest retailer Tesco. They have also set up cash & carry outlets in the country. The latest on the scene is Bharti Walmart Pvt. Ltd, the joint venture between Bharti Enterprises and Walmart Stores Inc who has just opened their second cash and carry outlet, ‘Best Price Modern Wholesale cash-and-carry store’ in Punjab.  Rajan Bharti Mittal, Chairman, Bharti Walmart said, “Best Price Modern Wholesale brings immense benefits to kirana stores and local businesses by offering great quality of products at the best prices. Moreover, through our unique initiatives such as the “Mera Kirana” programme, we are helping small retailers in managing their inventory and capital better and learn from some of our best practices, thus creating a win-win partnership. During 2010, we plan to extend the Best Price Modern Wholesale footprint to seven stores across India with sizes up to 100,000 sq. ft. We believe that besides benefiting the kirana stores and local businesses, this roll out will also create employment opportunities.” The store is spread over an area of 50,000 sq. ft and offers best fixed and fair prices with unmatched convenience, choice, quality and hygiene. Your browser may not support display of this image.  

 

Advantages

Retail business format brings along a lot of benefits. The merchandise is available on the shelves for the year round, so a small retailer can make purchases as and when required, reducing his expenditure on maintaining inventory levels. In addition, it helps the small retailers to buy in an organised manner making them a part of the organised channel. It also gives access to all the latest and up dated range of products to the retailers in smaller cities and towns. The buyers can also get a better price as the cash and carry operator is a big buyer and get better deals from the manufacturers. It further reduces the numerous layers that exist in the wholesale business.

 

Government regulations

In India, for wholesale cash and carry model, 100 per cent FDI is permitted. The Indian Government opened FDI for cash n carry because it could foresee the benefits it will bring to the country’s economy.

Recently, new rules have been issued by the Indian ministry which states that the sales to ‘Group companies’ should not exceed 25 per cent of a cash and carry company’s turnover and should only be for ‘Internal use’. Further, the cash and carry companies need to keep up elaborate records of the daily sales made. Such steps make sure that front-end retail will not come within the garb of the wholesale business.

As a result of these norms, cash and carry retailers already have their thinking caps on as to comprehend what the guidelines actually mean. As a result, we can find players to be reassessing their expansion strategies. It sends out a warning sign to the new players wanting to make a foray into India. This would result in the lowering of the money being invested in India. French company Carrefour which is set to come to India by teaming up with the Future Group is also rethinking its plans. Your browser may not support display of this image.

 

Future prospects

The future for cash and carry in India looks promising. With little co operation from the Government, the sector will see a rise in the entry of many more International players. Proper sourcing and supply chain management will be the other key factors which will give the sector the needed impetus.  

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