Metro unfazed by entry

German retail giant Metro AG appears unperturbed over the entry of the world's largest retailer, Wal-Mart, into India's wholesale cash & carry business through a joint venture with Bharti Enterprises. The company feels that it has the first mover advantage and is now gearing up to face the competition by consolidating its presence through rapid expansion.

The company, which entered the Indian market five years ago with its wholly owned subsidiary, Metro Cash & Carry India, thinks that its model has worked well in India and there is no need for a change in its business model.

Said Martin Dlouhy, managing director, Metro Cash & Carry India, "Our business in India has clearly shown that our business model of offering a one- stop location for businesses especially hotels, restaurants, caterers and small retailers is working well. We have spent almost four years since opening to understand Indian business customers and also work on the supply chain to offer better value, both to our customers and suppliers. Going forward, we are poised for rapid expansion across the country."

Metro is at present busy setting up its fourth and fifth distribution centres in Kolkata and Mumbai. Its Mumbai centre is being set up at Neptune's Magnet Mall by the end of 2007. At present, Metro operates two distribution centres in Bangalore and one in Hyderabad. It will open its fourth wholesale store in Kolkata this year.

"In several countries, local players have emulated Metro's successful model of connecting producers and manufacturers with trade and business. In all such countries, Metro Cash & Carry continues to have a strong position in the cash & carry wholesale business. So, we do not fear competition at all," Dlouhy told Business Standard.

Metro's distribution centre in Mumbai will be spread over 100,000 sq ft and create more than 400 jobs. Its Kolkata centre launch has been delayed due to a legal dispute over land acquisition. Further, it aims to open distribution centres in all major cities having over 1 million population.

Metro, till now, invested over Rs 250 crore (Rs 2.5 billion) to set up three distribution centres in Bangalore and Hyderabad. Its Mumbai and Kolkata centres will see a combined investment of over Rs 150 crore (Rs 1.5 billion). "We are also looking to open at least three centres in Kolkata and enter as many cities as possible. We are presently looking for real estate in many other cities," a senior Metro official said.

In India, Metro serves three types of customers - retailers, hotels and caterers and other businesses including IT companies, offices. Metro sells around 8,000 type of food products and 10,000 non-food products. About 90 per cent of the goods offered originate from local producers and suppliers. In the last four years of its presence in India (till March), Metro has acquired 3.13 lakh members. Its products are sold only to its registered members.

Metro plans to invest EURO 300 million (about Rs 1,800 crore or Rs 18 billion) to expand its operations in India over the next three to five years. Metro Group is also looking at greater export opportunities from India. The Metro Group already has a company, Metro Group Buying, established in Delhi, which exported goods worth around $50 million in 2006.

Organised retailing in India is expected to be worth $21.5 billion by 2010 from the current $7.5 billion, according to consultancy firm Technopak Advisors. The retail trade business as a whole is expected to touch around $300 billion.