Metro C&c Case Study

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- not as successful as Russia or China (planned to open 8-10 stores each year, it opened only 2 since it entered in the country’s high-tech hub, Bangalore in 2003)

- 98% of the market served by traditional formats such as wet market

- pluses: strong growth, urban migration, rising living standards, some Westernization of urban practices and habits, 34% increase in consumer spending from 2001 to 2005, highway planned to connect Delhi, Mumbai, Kolkata and Chennai → FDI on rise (foreign direct investment), however still low compared internationally

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ODPOWIEDZI STĄD:

1. • World leading C&C wholesaler (544 Stores) • Very efficient supply chain • Hub and Spoke geostrategic approach • Adjustments to local market without changing the stores format • Tree store formats and open 16 hours a day • Wide range of international products • Targeting professional customers

- China • Joint Venture with Jingjiang Group • Local government & retail companies tried to slow down the expansion • Bring harmony to the local market • Governmental control & authorisations

Russia • Invitation from Moscow’s mayor • Government saw a opportunity to built a distribution chain with METRO C&C

India • Complex political situation • Licence • Strong governmental control • Product sales restrictions • Restrictions with local farmers • The government protect the local market • Public relations

- Strategic expansion • Smaller stores in big cities • Look for cities with a good infrastructure • Search for better intermediaries • Resorts to corruption

Public relations • Advert in the local language • Work with the local-language press • Reassure the local traders • Resorts to corruption

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Metro Group:

- Dr. Hans-Joachim Korber – chairman of the board of management and chief executive officer

- a conglomerate headquartered in Dusseldorf that operated divisions in 30 countries (Europe + Asia)

- Germany’s largest trade and retail group & major international player

- 2005: sales €55.7 bln

- Continued plans for substantial international expansion

- Metro AG listed in 1996 (the holding company of Metro Group) → instantly 1 of 20 largest companies on Germany’s stock exchange

- 2006: 250 000 employeers, half worked outside Germany

- Organized into 4 business units:

- Real/Extra – everyday retail hipermarket and supermarket

- Kaufhof – up-market department store chain

- Media Market/ Saturn – Europe’s leading electronics retail chain

- Metro C&C – 2006: world’s leading C&C wholesalers; 100 000 employees, 544 stores under the Metro and Makro brand names (430 in 2003), 2005: sales of €28 bln {which accounts for 50.4% of Metro Group’s consolidated sales, up from 46.5% in 2003}

Metro C&C

- Thomas Hubner – CEO since 2002

- C&C – chain of wholesale stores catering solely to commercial customers

- Pioneered by Dr. Otto Beisheim

- First store in Germany 1964

- Global merchendiser built via organic growth, international expansion and mergers

- German precursors of C&C wholesale were wholesalers that in 1950s extended beyond dry goods to sell fresh foods and few nonfood items

- 1960s stock expanded and they emphasized assortment rather than just price (i.e. Metro) + commercial equipment and other goods needed for maintaining small business added

- 1970s fresh meat and fish added + computer-aided merchandise management systems and emphasized customer service

- 1980s expanded beyond food retail: new customer groups: caterers, convenience stores, other service operators (this required new assortments of goods along with the machinery and equipment)

- 1990s commercial customers supplied across a wide range of niches

- German retailers protested Metro C&C’s establishment as a one-stop wholesaler arguing that Metro presented a form of unfair competition to them. German court system consistently ruled that:

- Metro C&C is a legitimate form of wholesale trade

- Occasional purchase by business customers of Metro C&C merchandise for personal consumption wouldn’t make M C&C a retail business (unless such usage made up over 10% of M C&C sales) → it was investigated to be 2.4%

- Model:

- Traditionally wholesale (origin: U.S.) = highly specialized assortment of merchandise often delivered to customers who paid on credit

- In contrast: self-service wholesalers (i.e. Metro C&C): wide range of food and nonfood for immediate cash sale from large warehouses, clients transport on their own

- High quality goods targeted at business customers and institutions (small and medium-sized enterprises SMEs i.e. hotels, restaurants, bars, cafes, caterers cafeterias, general or specialized food and nonfood retailers, government and non-profit institutions). Good for those, who are less able to predict long term demand + lacking physical facilities to hold large inventories/ financial resources to guarantee the credit required for large bulk purchases + prefer to buy more often in smaller quantities (restaurant owners need fresh food twice a week and therefore saves on inventory costs)

- Open 16 hours a day

- Membership only for businesses with valid business registration (1-2 per SME)

- Catchment area around a M C&C center (1 hour drive): new customers (50.000 – 80.000 of them) were identified within the area and surveyed for potential new needs

- Direct mailings, no other advertisement

- Stores and Procurement

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