In an exclusive conversation with Arvind Mediratta MD and CEO, Metro Cash and Carry India sheds light on growing wholesale market in India.
METRO Cash and Carry is almost a decade old brand in India, how do you see this market has grown in over the years and also sum up the brand’s experience working in India market?
India’s pace of growth over the last decade has been its highest in its economic history. Growth potential has increased exponentially, not only in the big metros but also in Tier II & III cities thanks to the explosion of the middle class and the ‘rural-to-urban” migration trend. India presents a sound opportunity with 1.3 billion people and 10 million Kirana store owners. Out of the 450 million internet users in the country, over 300 million are smart-phone users.
In India, however, the market has not delineated as smoothly as the west. What we witness today is a fair mix and jumble of all three – 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 thrive in the omni-channel approach. 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, we are seeing a huge proliferation in the number of categories and sub-categories, with customers becoming more and more experimental. METRO has definitely evolved and have come a long way after its foray in Indian market way back in 2003. METRO has been closely following Consumer Trends in order to provide to retailers assortment which is in-line with the ever changing consumption trends. Some of the trends which METRO has consciously absorbed, in order to become more relevant to its customers are 1) Self Indulgence– Beauty Zone at our outlets, 2) Importance of Health and Fitness – Organics and Herbal Range, 3) Regionalization – Local Brands to meet local customer needs, 4) Convenience – Wide range of Ready-to-Eat and Ready-to-Cook packs to suit today’s fast paced lives.
What kind of demand scenario do you see as far as cash and carry wholesale market is concerned?
These current industry trends point to the fact that the Indian economy is brimming with big potential for growth. Policy makers are creating 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% 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 for 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.
Also, highlight current outlet numbers and how you plan to expand the same? Also highlight your turnover target for current financial year.
Metro Cash and Carry is all set for a rapid expansion in India. The growth in India is a result of a two-pronged effort.
- Strengthening our presence in markets where we have great presence
- Focus on entering new markets that have great potential
In last 12 months, we opened new stores in Lucknow, Ahmedabad and Surat while we strengthened our presence in Bangalore and Hyderabad by opening 2 and 1 store respectively.
We currently stand with 24 stores and are looking at maximizing growth in mid-population towns (5-40 lacs) which lie at the sweet-spot of large opportunity and low costs.
What are the major challenges in Indian cash and carry wholesale market and also how you compare this market to other international markets where the brand is present?
India is not one homogenous country but rather a continent in itself. It is this diversity that 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. This is primarily the reason why a one-size-fits-all approach does not work in this market. 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 store size, product mix and assortment.
Also, the concept of Organized Cash And Carry is not very popular. People are often not aware about the quality of products and the rigorous tests these products go through or the fact that we offer the best prices across product categories. Thus educating our trader partners is an important aspect of managing business in India.
Additionally, the concept of Credit Cards and Digital Paymentare still to catch speed amongst the trade community. In this regard, METRO is supporting the trade community through the introduction of the OPD Model (Order, Pay, and Deliver) and educating its customers on the convenience and ease of digitization.
Do you see new GST regime changing the game for Indian wholesale market?
The wholesale market is likely to face a few challenges since the unorganised markets will get affected. The unorganised sector constitutes a significant part of the Indian wholesale market and it will face some trade related issues during the initial phase of GST implementation.
- Demonetization has not been able to break the chain of cash based operation. Although cash is back in operation, the process is not completely eased. The income- tax authorities have been pushing to widen the tax net and encouraging digital transaction, especially for large scale transaction. This will bring the entire unorganised sector under strict scrutiny
- We also have to keep in mind the possibility of a large part of the unorganised market operating below the tax radar. Tax scrutiny and greater transparency may make many of this small business unviable. Many of the smaller player in the ecosystem is not fully ready for the transition
- However, very small traders will not get affected, since they are exempted from GST
Having said that organised sector is all set to benefit from this transition and also help their trader and supplier reap the benefits of a more robust and transparent tax regime. Players like METRO thrive on the premise of providing greater transparency and championing independent businesses. We will be able step in and fill the gap and help the entire ecosystem become fully compliant.
At last, mention your growth plans?
We will continue our steady expansion in India in the upcoming 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 focus countries for METRO GROUP Wholesale & Food Specialist Company. Recently, we revamped our India operations and split it into North-East & 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.