Metro Cash and Carry to open small-format stores

The local arm of German wholesale retailer Metro Cash and Carry last week said it will open more small-format stores, largely focused on traders, as kirana shops emerged as key providers of essential items to Indian consumers during the country’s protracted lockdown.

The wholesale retailer that operates 28 stores in the country recently opened its smallest India store in Karnataka’s Tumkur. The retailer that competes with Reliance Market, Walmart’s Best Price stores (now owned by Flipkart), and Lots Wholesale said it will open such stores in the country’s smaller cities, as cheaper real estate and the lack of organized retail in such markets open up new growth prospects.

The company has planned to open five-six stores between October 2020 and September 2021. Of these, only one will be on the lines of its typical large-format stores. The rest will be a combination of small stores in big and mid-sized cities.

“We are looking at a mixture of stores. The small store in Tumkur is our first entry into a small town with a population of three-and-a-half lakhs. We are looking at stores which are under construction in places like Mysuru, we’re getting into Hubli. But we are also entering Vizag, which is a bigger city. There, we are coming up with a big-box store. In Hyderabad, in the middle of the city, we are launching a smaller store focused more on the trader community,” said Arvind Mediratta, managing director and CEO, Metro Cash and Carry India, in an interview.

Metro runs similar small-format stores in Turkey.

Cheaper real estate in smaller markets is a big draw, Mediratta said. “Secondly, you are able to get prime locations in the heart of the city; so, it drives a lot of footfalls to the store from both trader customers as well as the hospitality sector,” he said. Walk-in customers are always more profitable than delivery customers, he said. Big stores, on the other hand, require large land parcels which are hard to come by.

Meanwhile, it helps that India’s kirana stores performed well in the aftermath of the lockdown, while several stores closed down owing to restrictions, most others thrived. For Metro, servicing kiranas, a large number of which survived the worst of the coronavirus lockdown, is a key part of business.

In its June quarter FMCG snapshot, researcher Nielsen said that traditional trade or kirana stores, that account for 87% of FMCG sales, grew 5% year-on-year in June, after declining by 31% in April and May.

Online grocery purchases surged during the pandemic thanks to more first-time shoppers, but its share in overall FMCG sales is still in single digits—a trend that Mediratta says has reinforced the retailer’s thrust on the local grocer that it serves.

Unlike large hypermarkets, Metro sells to businesses, small shopkeepers and hotels, essentially replacing wholesale markets and FMCG distributors in those areas.