Metro AG restrategises with smaller stores, to focus on kiranas

The move comes even as Metro Cash & Carry is seeking to cut operating expenses in India and shifting focus to the kirana segment from the hospitality sector where hotels, restaurants and catering services were among its largest customers. The shif...

BENGALURU: Metro AG’s wholesale unit in India will now open only small stores in the country, which goes contrary to its global strategy of having big-box formats that are nearly two times the size of a football field.

The move comes even as Metro Cash & Carry is seeking to cut operating expenses in India and shifting focus to the kirana segment from the hospitality sector where hotels, restaurants and catering services were among its largest customers. The demand from the hospitality sector remains weak with fewer people opting to dine out amid the pandemic, the company said.

“We are going smaller in store format in both top metros and towns. This strategy helps optimise capex and operating expenses,” Metro Cash & Carry India managing director Arvind Mediratta said.


“The hospitality sector, especially smaller family restaurants, has received a severe blow due to the pandemic and will take six-nine months to reach pre-Covid levels. At our stores, the division requires large spaces for refrigeration, big cold rooms and increased headcount in processing,” he told ET. “So, we don’t want to make big investments, and (want to) focus on kiranas which require competitive pricing. Low-cost structure will help succeed in B2B business.”

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The smallest of its stores so far, at 24,000 square feet, will open in Karnataka’s Tumakuru on Saturday. The property has been taken on a 30-year lease and this will mark the company’s entry into a town where the store assortment will focus on small packs and local brands for kiranas. In metros and big cities, the demand is higher for large packs across packaged food and groceries for both kiranas and hospitality companies.

Like several retailers across fast moving consumer goods, fashion and electronics, Metro also wants to take the omnichannel route for its wholesale and B2B business. A large number of consumers shifted to online shopping amid the nationwide lockdown earlier this year. Now members of the kirana ecosystem also want to embrace ecommerce. There are an estimated 10 million kiranas in the country.
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“While physical stores continue to be key for kirana members, we are now investing to upgrade our ecommerce platform because we clocked 5X growth since April. In the kirana business, about 10% of our sales come from ecommerce,” said Mediratta.

Metro launched an ecommerce app in April to help kiranas sustain competition through digitisation during the first phase of the lockdown.

In India, Metro competes with Flipkart-owned Walmart’s Best Price and Thailand’s Lots Wholesale.

Germany-based Metro AG, the world’s fourth-largest retailer, entered India nearly two decades ago but doesn’t sell products directly to consumers. It is an organised wholesaler that sells products through a membership model to kiranas, local stores and hospitality companies with valid licences.
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Earlier, the wholesaler targeted metros like Bengaluru, Mumbai, Hyderabad, Delhi and Kolkata with most stores sized about 100,000 square feet each. Two years ago, it opened smaller stores, sized about 40,000 square feet, in places such as Ghaziabad, Surat, Meerut and Jaipur with a population of 2.5-3.0 million.

The Tumakuru store is the company’s first in a town with a population of 350,000. It plans to open similar small format stores in Mysuru and Hubballi in Karnataka, Hyderabad and Guntur and Visakhapatnam in Andhra Pradesh by early next year. It is also looking for real estate in markets such as West Bengal and Delhi-NCR, the company said.
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