Want a retail life in a ‘Metro’?!

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Metro AG tread where others failed to... and shrewdly so!

Wal-Mart, Carrefour, Tesco and other kings in the retail kingdom are giving what it takes to make a mark in the lucrative Indian retail industry. Unfortunately, all that can be said with respect to the levels of success attained is – it could have been better! Much better! “And why?” you ask? Well, just when everything around them seemed hell-bent to support their cause, the bigwigs got stuck in the midst of all possible calamities – be it the policy-makers’ or local traders’ uproar or an inability to get along with an Indian partner; they have experienced it all. Whatever tactics they tried has in fact worked against them and these retail Alexanders who have almost spread their operations quite spectacularly across the globe are finding it hard to conquer the Indian terrain.

After every futile attempt they remain unshaken and can be seen devising a newer gameplan. Well, standing ovations for their steadfast spirit but for what reasons are these global giants dying to enter the market? The reason is (and no surprises here, please!) – their love for money! The giants want to be a part of story which currently stands at $300 billion and is expected to grow to a more-than-spectacular $427 billion by 2010 and literally an El Dorado worth $637 billion by 2015 (KSA Technopak report). Confirming the happy tale, Jigar Valia, Analyst, Parag Parikh told 4Ps B&M, “The sector is undergoing a phenomenal change and once the international biggies enter the market, it will undergo a significant change...”

But while there is the story of ‘sour grapes’ on one end, there is also the ‘seen that, done that’ reality show. And leaing the pack of successful invaders is the street-smart Metro AG (Germany’s leading retailer). Unlike others, it decided to work around the given environment and adjusted itself in the best possible manner. Sensing the rigid policy structure, Metro intelligently entered the wholesale cash & carry business (where 100% FDI is allowed). The company started its operations in 2003 with a cash-and-carry store in Bangalore, and is now looking to spread its arms across other metros. At present, the company runs three stores in Bangalore and Hyderabad. More importantly, the move has helped the company in setting up its strong base and has strengthened its back-end operations, which is a strategic necessities for success in this domain. Today, Metro has attained a significant lead as compared to the crowd of retail wannabes on the Indian soil. Moreover, if norms are relaxed by policy-makers, Metro will have a considerable advantage as compared to other global peers. Jigar Valia explains this as, “One cannot miss the India story and Metro has been prudent enough in entering the market via the wholesale business. Preently, almost everyone is considering this as an option…”

So, after Wal-Mart, the latest to copy Metro will be Carrefour. There is also the happy fact that despite a lot of copy-cats, Metro will not face any crunch since there’s enough space to accommodate all. The next phase of the war will therefore be decided by who transform itself into a retailer from a wholesale player in a seamless fashion. At present, Metro AG has quite a lead, but can one underestimate competition?! Surely, Metro doesn’t!

Siddharth Nahata

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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