BackMetro to open 50 stores by 2020 in India
MD Rajiv Bakshi talks about Metro's growth plans and why Wal-Mart's expansion won't affect Metro
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Bengaluru: The local arm of Germany’s Metro Cash and Carry is set to open 50 wholesale stores in India by 2020 in line with the investments planned by the retailer two years ago, said Rajiv Bakshi, managing director, on the sidelines of the company announcing its 18th store in India and its fourth in Bengaluru on Wednesday.
The store was acquired from French retailer Carrefour that exited the country last year. Metro acquired three Carrefour stores, before the latter’s exit. The other two—in Delhi and Meerut—will open shortly. Metro typically spends ₹ 70 crore per outlet on an average.
Metro will add 32 stores over the next four years, a pace that is much faster than when it launched in India in 2003. The company sells goods of daily use to small traders through its big box retail outlets. India only allows 100% direct foreign direct investment in the wholesale multi-brand retail business.
In an interview, Bakshi, the former head of beverage maker PepsiCo. India, talks about Metro’s growth plans and why Wal-Mart’s expansion won’t affect Metro. Edited excerpts from an interview:
Wal-Mart recently announced that it would open 500 cash and carry stores in India over the next decade. How does that alter your expansion plans in the country ?
No, we don’t react to that. We’ve been sure and steady on what we want to do in India and we’ve done it along with a certain pace. Some have argued why the pace has been so slow or why it hasn’t and the reason is that it has to do with the evolution of the consumer. The consumer has to be ready for it. If consumers and our customers are not ready for it then it doesn’t make any sense to open more stores. We were ahead of the curve. We opened our first store in Bengaluru (in 2003) and it took us a few years to settle down and therefore we had to sedate pace of work and the pace is now picking up because I think the consumer is ready.
But what has changed (on the consumption side)?
As I see it, it is the proliferation of needs leading to proliferation of categories. What you consumed 10 years ago and what you consumer now is 3x and once those needs go up, traditional distribution systems start falling by the way side. While needs are going up by so much and categories are coming in—as a consequence traditional channels can’t cope with that—so new channels need to come in. If you see large FMCG companies, the mantra 10 years ago was that the growth driver will be penetration, today growth driver is not penetration, but wider range of products and multi-layered segments.
You then start gravitating towards larger formats of retail...that’s where modern trade starts evolving. This trend has escalated very sharply in the last five years and if you look at the retail industry—first set of retailers in the last few years—all big retailers have shut their small format stores. It’s because smaller shops just tend to replicate traditional kirana experience.
So what growth areas will Metro focus on, considering that you will now be competing with Wal-Mart ?
The basic focus is on market creation, it is not market competitiveness. Our expansion model is very different from say that of Wal-Mart. As far as we are concerned, we are proliferating in larger cities. At Wal-Mart they are not looking at larger cities, most stores are in a million or less population towns. So we are going top-down, but they are looking at middle-lower markets and then down below, they are not gravitating upwards. We believe the growth is in larger cities with a certain population.
Where will your next set of stores come up?
Cities with million plus population and we’ve identified 43 such cities.
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