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Tuesday, March 08, 2016

Supermarket of Supermarkets: Metro cash n carry-Bangalore

Metro Cash and Carry is super market of super markets. Recently I got to visit their outlet in Bengaluru with a friend and this post shares my experience and observations.

Metro is a German origin company and they set shop in Bengaluru when I was studying engineering- sometime in 2003. There were huge protests that time against the idea of mega stores and their deep discounts. Main concern of the protesters was that cash rich metro can afford to run in loss for years giving out deep discounts and driving entire competition out of business and then they will establish monopoly, increase price and loot India. Obviously no such thing has happened. 13 years later, Metro is still selling goods pretty cheap and most of the small outlets are very much in business (may be they have not grown much or not making more profit)- watch the movie "Bharath Stores (Kannada)" if you have time.

Goods are pretty cheap at Metro Cash and Carry. Duracell AAA batteries that retail at Rs 35 a piece are sold in metro for Rs 24- that is cool 33% profit. Similarly every other product is sold much cheaper than its MRP, so that traders can reap in decent profits. Metro achieves this low rate by buying in super bulk quantities and saving on transport/distribution costs. (Customers need to arrange their own transportation)
So why can't everyone go buy from Metro?

Metro is different from other supermarkets- Metro is licensed to sell only to traders, not to end consumers. So in order to buy something at Metro you should be a businessman. But unfortunately, law enforcement ends there. It doesn't matter if you are running a services company, a consultancy or a hotel or a supermarket- as long as you have documents to prove that you are businessman, you can register at Metro and buy goods. Once inside, there is no restriction that you need to buy goods relevant to your business- a grocery shop owner can buy electronic goods for his home/ neighbor /friend and an electronic goods shop owner can buy grocery for his home. So essentially, traders/businessmen are eating into each other's business by buying all their stuff-business and personal from Metro.

There is no verification of the Access card holder- once you get a membership, you can go or send your friend/staff or anyone else. You can also take one additional person. So this is subject to abuse.

There is a condition that minimum billing amount should be Rs 1000. I saw that most people were buying regular household needs only. Didn't see anyone buying truck loads of goods for their shops (I spent only an hour or so- my observation need not conclusive.)

Has the regular supply chain/distribution network collapsed because of Metro? I think No. The goods manufacturers are still having their logistics arm, country level re-sellers, regional distributors, sub distributors etc to send the goods to retail shops. I guess if you are running a shop, buying from Metro might be eventually costing almost same (after factoring transportation cost etc) compared to buying from traditional supply chain. Otherwise everyone would have made a mad rush for Metro.

I think online stores like flipkart and amazon are causing more worry to brick and mortar shops than Metro.

What Metro cash and carry means for end consumers like you and me?
We are not businessmen so we can't register and buy goods cheap from Metro. But of course, if you have a friend who is one, you are free to tag along and buy something for yourself. In principle it is illegal- you should only buy such items that you intend to resell. But this isn't enforced in anyway and is exploited to the max. It is not practical to go to Metro for every small item- there are only 4 metro shops in all of Bangalore- you should factor travel time, transportation cost etc. But if you are buying expensive goods like say AC, buying from Metro can save you a few thousand rupees, which is significant. Even otherwise, a visit to Metro will educate you on the approximate profit your local shopkeeper might be earning on various everyday goods you are buying.
In Summary, Metro has not managed to establish complete monopoly, but has cornered a good market share for itself and doing brisk business in India. Please share your thoughts.

3 comments :

Arun Prasadh said...

Have been here and yes they give good discount but now there is competition for this too. Dmart is giving even more discount and its open for all.

Dhananjay Murthy said...

You have good observation and covered almost everything within in hour. But even prices of so many goods are also cheap in Bigbazar considering they keep giving offers. As i will be purchasing in Metro more than 8 years &bigbzaar regularly. You will come to know which is more cheap if keep visiting both often.

Shrinidhi Hande said...

Thanks Arun Prasadh- will check D mart when possible

@Dhananjaya- thanks. Yes, supermarkets also give discounts but not at par with Metro is what I felt