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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.

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Metro Cash and Carry is planning to support the development of 500,000 kirana stores in India as part of its omnichannel strategy. The German wholesaler has said it will look to help kirana owners digitalise their stores over the next three to five years.

Modern fixtures, marketing tools and point-of-sale devices

Metro will continue its focus on the business-to-business space by helping to modernise the kirana stores. The company will supply the stores with modern fixtures and marketing tools to increase customer retention. Metro has also partnered with EasyPay to supply point-of-sale devices. The devices will allow the kirana stores to track customer information, inventory, purchases and sales.

Order processing, payment, collection and delivery (OPD)

In 2017, Metro launched its own omnichannel strategy known as OPD. The proposed digitalisation plans are part of the OPD strategy.

“The focus is on the omnichannel strategy and digitization of kirana stores. The stores need to look much better and inviting, and we want to transform them into self-service stores”, said Arvind Mediratta, managing director and CEO of Metro Cash and Carry. The total investment cost and expected returns of the digitalisation process remain undisclosed.

Continued expansion

Metro also intends to continue expanding its presence in India. It will open its 27th store in Ghaziabad by the end of September 2018 and is aiming to open an additional 50 by 2020.

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Germany-based, Metro AG, has announced its intention to sell its Real hypermarkets business. Neither a buyer nor a price have been confirmed for the chain.

Total sales and operating profit have fallen

Real generated a loss in the 2016/17 financial year, with total sales and operating profit falling by 3.1% and 25% to €7.2bn and €80m respectively. The chain’s operating profit margin also fell from 1.4% to 1.1%. As it has evolved its strategy Real has attempted to build up ecommerce to improve sales, roll out a new store design, under the market hall concept and to drive profitability.

Real has already been on the market

Real was first put up for sale in 2012 and attracted the attention of KKR, Apollo and Towerbrook. However, Metro declined the offers and chose to restructure the chain instead.

Real sale part of on-going restructuring programme

Metro has undertaken a restructuring programme in recent years to create a more focused business that can better meet the needs of its clients and shoppers through more targeted investment. It sold its Kaufhof department stores in 2015 and separated from electronic retailer Ceconomy in 2017.

However, the challenge will be to find a buyer for the stores. Metro’s Real stores across Central and Eastern Europe were sold to France-based Auchan, but only after a considerable amount of time. The stores provided Auchan will the opportunity to scale up strongly in these countries, where it had few other opportunities to do so.

Finding a buyer for hypermarkets in Germany, though, could be even harder. The format is under considerable pressure and the expansion of other formats continues apace, providing shoppers with even greater choice than they have had traditionally. Added to this, grocery ecommerce is emerging, although only slowly, which will add to the competitive pressures. Against this backdrop, finding a buyer at a price that is agreeable to Metro could prove difficult.

Metro’s new focus

Metro has decided to focus on its core cash-and-carry business and finally sell its Real hypermarkets. Speaking about the decision, Metro’s CEO, Olaf Koch, said, “Metro is thus focusing entirely on wholesale. We will further intensify and expand our focus on professional customers in order to tap the enormous potential.”

For subscribers wanting to see in-store at Real’s new concept hypermarket, see our store visit to its Markthalle concept in Krefeld.

Spain-based discounter DIA has announced it has joined the Horizon International Services alliance. DIA is the fourth member of the alliance alongside Auchan, Casino and Metro.

Membership aimed at improving competitiveness

Announcing its membership of Horizon International Services, DIA said it was aimed at ‘improving competitiveness with the major manufacturers’ brand suppliers and providing consumers with a better offer in terms of stock and price’. DIA said the alliance would be focused on branded manufacturers and would ‘not affect own-brand or fresh products’.

Horizon to help DIA compete more forcefully in its home market

What its membership of Horizons means for its existing alliance with Casino, ICDC Services, will remain to be seen. Either way, DIA’s membership of Horizon will help it buy more efficiently and cheaper than it does now, which should help it as it looks to invest in prices in the short to medium term.

The retailer’s H1 2018 results, where it said like-for-likes rose only 0.3% in Spain, underlined the challenges that it faces in its home market, especially as Mercadona and Lidl continue to win further shopper spend. Investing in prices, while maintaining a workable margin, will be key as it simultaneously looks to update stores. Being a member of Horizon International Services will help with this.

For subscribers wanting to see how DIA is updating its stores in Spain, see our Retail execution presentation.


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