Metro Group, Germany’s largest trade and retail group, is a major international player with sales of over €55.7 billion by 2005 and continued plans for substantial international expansion. Metro group is organized into four business units:
•Real/Extra: Everyday retail hypermarket
•Kaufhof: Upmarket department store chain
•Media Market/Saturn: Leading Electronics Retail Chain
•Metro Cash and Carry
‘Metro Cash & Carry’ stands for one of the great success stories in modern commerce. In 2005, Metro Cash and Carry has sales worth of €28 billion, with 100,000 employees and 544 stores worldwide. They contribute around 50.4% of group’s revenues. The wholesale business-to-business model of Metro C&C is focuses towards business and professional customers such as hotels, restaurant, caterers and small and mid-sized retailers. Metro C&C offers this target group a greater efficiency by offering a one-stop solution for their purchases, helping them improve their assortment, providing high quality products at reasonable and transparent prices and offering a consistent supply source.
This case study discusses about the expansion of Metro Cash and Carry, which has options of expanding in the new untapped markets or existing markets. Beyond the benefits Cash & Carry offers its own customers, it also brings “positive externalities” to countries where it operates by a modern distribution chain with improved quality and the safety of a supply chain. When they got their market saturated in Germany, they expanded their operations into other countries in Europe. Later, they moved to Russia, China and India.
Support from local markets in Russia and China, made the penetration for Metro C&C easier in comparison to the complex political structure in the Indian market, which posed a great challenge for them.
Metro C&C – Business Model and Growth in Germany:
•Metro C&C uses its B2B model to sell wide range of high quality food and non-food items for immediate cash only. They have huge warehouses. It caters to the small and medium scale industries’ needs. •Businesses with valid business registration could enroll as members to make purchases. The customers were provided with magnet/paper card as identity. For any sale to happen, the customer had to swipe this card. •They conduct customer surveys to gauge the potential needs of the customers in order to make continuous improvements in their supply chain. They send direct mails updating their customers on special offers & promotions. Metro did not otherwise advertise. •They have three formats of stores based on size (sq m), Classic (10000 to 16000), Junior (7000 to 9000) and ECO (2500 to 4000). They tailor their store’s assortment to the local market and aim to source 90% of the stock locally. This helped in generating business for local manufacturers and farmers which helped to modernize the major processes especially in the emerging markets. •Metro Group Buying, a subsidiary of Metro Group, took care of negotiations, payments, sampling and sourcing merchandise, supplier relationship and article management.
Exporting the Cash and Carry Concept:
•Metro C&C was often the first foreign C&C to enter in international markets. •Took over Makro, a similar firm trading in other markets. A cross shareholding agreement was signed so as to avoid conflict within the same markets viz. South America, Asia, Europe etc., which benefitted Metro C&C because of Makro’s international expertise and experience. •Metro was fast to adapt and quick to learn local cultures. •Metro C&C expanded to nearly 26 countries in almost 12 years. Metro management reflected its international presence with 178 managers from 25 countries. •It adopted different strategies for regional markets backed up by detailed feasibility analysis at macro and micro levels with specific investment plans for instance, spiral for Russia, Cluster for China and Outpost...