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Germany’s Metro has shortlisted eight companies for its China business, a deal valued at between US$1.5bn and US$2bn as previously reported.

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German wholesaler Metro has called for bidders for its operations, kicking off the official sale process.

A deal valued between US$1.5bn and US$2bn

Metro, owns 95 stores in China as well as real estate assets in several major cities such as Beijing and Shanghai, is seeking a deal that would value the business from US$1.5bn to US$2bn.

It is reported that the decision to exit China is a part of Metro’s global plan to focus on its worldwide wholesaler activities and in response to disruptions from online players in China. We previously reported that its convenience stores were shut down in China in 2017. 

Potential bidders

There are several potential bidders, including local supermarket operators Wumart and Yonghui, as well as electronics retailer Sunning.

Alibaba has previously been in talks with Metro about taking a stake in Metro’s China business. Its interest is partially driven by its desire to bring online capabilities to offline. Partnering with Metro could bring synergy to Alibaba’s offline business Hema (now called Freshippo). Alibaba’s rival Tencent formed a strategic partnership with Carrefour in 2018.

Metro restructuring its business

Metro has been restructuring in recent years to focus on its core business. It is selling Kaufhof department stores and splitting from consumer electronics group Ceconomy.

Meanwhile, it opened a new warehouse in Yangon last week in Myanmar to focus on online sales for corporate customers and building a fresh food supply chain.

 

 

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German wholesaler Metro Group will be focusing on online sales for corporate customers and building a fresh food supply chain in Myanmar.

First new market entry since 2010

The wholesaler has partnered with Yoma Strategic Holdings Ltd, a Singapore-listed company to launch the service. Myanmar is the 36th country in the group’s network. 75% of the products will be locally sourced through partnership with farmers and food suppliers. The group employs about 150 people and will help to train and improve the skills of suppliers.

Warehouse with cold facility

The group has built a 5,800 sq m warehouse in Thilawa Special Economic Zone outside Yangon. It distributes more than 2,000 food and non-food products, with plans to increase this to 2,400 by June. About 300 customers had already accessed the website and placed orders before its official launch last Friday.  

Philippe Palazzi, COO of Metro, said, “the food wholesale industry in Myanmar offers big potentials for Metro and we believe our engagement in the trade sector will contribute to the local economic growth including the agriculture, tourism and hospitality sectors, and help upgrade the food wholesale infrastructure sustainably for the local community”.

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Metro Cash and Carry India is turning to smaller better stores, one of the five key trends we outlined earlier this year in IGD's Asia Outlook.

More compact stores...

Metro Cash and Carry is due to open its 27th store in India. It will operate approx. 3,716 sq m / 40,000 sq ft retail space, around half the size of most of Metro's existing stores in the country. The new compact store in Ghaziabad will be a similar size to the one in Nasik. As the wholesaler continues to accelerate network expansion, it is scaling-down the size of its stores with an eye on profitability.

Arvind Mediratta, CEO and MD of Metro Cash and Carry India, said, "We are doing away with bigger stores in the range of 75,000 - 100,000 sq ft [...] a lot of people think more space means more sales. Customers don’t come to you more often because you have a bigger store.”

Balanced expansion plans

Metro Cash and Carry India targets 50 stores by 2020, and with its plans to open smaller stores, the availability and price of development sites could make this number more achievable. As it continues to scale up the business across the country, it will need to be carefully map out suitable and relevant locations for its stores.

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Metro Cash and Carry supporting efforts to digitise traditional kiranas.

Launch of Kirana Success Centre

Metro Cash and Carry is launching several initiatives that target the neighbourhood mom and pop channel. Arvind Mediratta, CEO of Metro Cash and Carry India, said that it intends to be “champion of all small independent business and be a one-stop solution for them and help them in their business growth

The retailer opened its first Kirana Success Centre within its flagship store in Bengaluru last month. With the aim to provide kiranas with technical assistance and solutions, the centre will improve in-store visibility and install modern display solutions for these stores.

In addition, the centre will also provide modern point-of-sales counters and educate shopkeepers about inventory management techniques. GST-compliant receipts and invoices can be easily generated to help stores monitor sales revenues.

Improved sales and business growth

The initial program was rolled out six months ago to 100 traditional stores and these stores have already reported a 40 per cent increase in sales.

Metro Cash and Carry has also partnered with several suppliers to provide exclusive products tailored for the traditional channel. These exclusive products are offered to the stores at preferred prices, improving margins for storekeepers. The retailer intends to expand these exclusive “kirana-only” products to other suppliers over the coming months.

Online platform for added convenience

Another initiative announced recently is the year-end launch of its online platform. Kirana stores will have the option to integrate its supply chain with Metro Cash and Carry. This frees up the storekeeper’s time as Metro will remotely manage the kirana’s inventory and replenish stock when it is running low.

The retailer has also introduced a membership program specifically for the kiranas. For an annual fee of Rs$999 (US$13.50), members would have access to additional discounts and other benefits.

For Metro Cash and Carry, this focus on the kiranas has been rewarding too. They have “been able to garner a 70 per cent market share in the B2B segment and are growing by 15 per cent year on year.”

More about Metro Cash and Carry

Metro Cash and Carry is the Indian unit of the Metro Group, a German-based wholesale business. It currently operates 27 wholesale centres across India and has disclosed its intention to open more wholesale centres in areas where there is a higher concentration of kirana stores.

Find out more about the Metro Group here.

 

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