Doing Business in India11 August 2020
In India, you are as successful as the partners you work with
In India, METRO has established 27 branches in 17 years and initiated a special programme that modernises local neighbourhood stores, so-called kiranas. This is done with the aim to help them withstand the growing competition by large chains and e-commerce platforms. In an interview with Maier+Vidorno, an expert consultancy for the indian market, Mark Alexander Friedrich, Head of International Affairs, talks about the difficulties during the beginning phase and the success of recent years.
METRO began its India adventure optimistically when the company became the first foreign wholesaler to enter the market in 2003. "We saw enormous potential for our concept in India. Specifically, because the middle class in the country is growing so fast. Hence, we thought of taking the plunge. But we had not considered many factors. Like, large regional differences in the country, the obstacles in the supply chains and the challenges in terms of infrastructure. In addition, the Indian government was concerned that we might pose a threat to the country's small supermarkets. As a result, we soon concluded that we had to prove our point. And, i.e. we were supporting rather than undermining the small independent shops by investing heavily in them. Only by helping our partners grow could we become successful in India ourselves.
Kiranas are the most important customers for METRO in India. Just as with our suppliers, we have been looking for ways to support them and make their working methods more efficient with the digitisation of accounting, stock management and payments.Mark Alexander Friedrich, Head of International Affairs, METRO AG
Building your own Indian supply chain
One of the first steps METRO took was to adapt the range of products on offer in the various stores. "In our first years, we focused on opening stores in several Indian state", says Friedrich. "This involved a carefully selected range of products because customer demand varies greatly from region to region and people like to buy local. We therefore had to expand our list of suppliers in a short space of time". Again, METRO was confronted with a different system than we know in Europe. "Farmers here have been selling their products to an intermediary, who then resold them to various shops and supermarkets. But this delay often does not benefit the quality and led to food waste. Our customers include hospitality industry and other large companies. Therefore, we want to be sure that we can offer the best of the best. And, this meant that we had to take matters into our own hands".
The company started special collection centres where farmers could sell their products to the wholesaler themselves. Friedrich explains, "We now have 5 of these centers in 4 different states. It makes a significant difference in the quality and freshness of the fruits and vegetables that are in our stores". "It's also a better deal for the farmers. They earn more from their products. Reason being, there is no need for an intermediary and they receive our payment within one day". However, in the beginning the farmers took time to get familiar with the methods of METRO. "It took a while before the influx got going. The farmers were accustomed to working with specific intermediaries and did not want to let go of that immediately to join forces with us. But as soon as one or two farmers joined us and the rest of the community saw the benefits of working with their own eyes, they were gone. Indians adapt very quickly."
Strong Indian partners are the key to success
At the same time, METRO had to convince the Indian government that they did not want to dominate the Indian market by sidelining local convenience stores, the kiranas. "Kiranas are the most important customers for METRO in India," says Friedrich. "We therefore have absolutely no advantage in pricing them out of the market. Just as with our suppliers, we have been looking for ways to support them and make their working methods more efficient". In the meantime, the company has modernised around 2,000 kiranas in various ways through the "Smart Kirana" program. "We are rebuilding the stores so that they have a more modern look and feel and consumers can see the products better, but we are also helping with the digitisation of accounting, stock management and payments. In this way, these neighbourhood supermarkets are better able to respond to the rapid digitalisation of Indian life".
According to Friedrich, with these initiatives METRO has been able to prove to the Indian government that they are doing what they promise. "Through these initiatives, we have been able to build a good relationship with the Indian government over the years. Society and especially politics in India is very hierarchical, so you don't just sit at everyone's table all of a sudden. The local politicians are very involved in their constituencies and know what is going on, they heard about our initiatives and how they positively influence the communities. Of course, they wanted to be part of that as politicians and that opened the door for us".
Without an e-commerce branch you don't participate in India
The company is now an established name in India with over a million customers and focuses on the changing needs of Indian consumers. "In India, you can't make a long-term plan for the next ten years. Developments in this country are moving so fast and we as a company have learned to adapt to them," says Friedrich. "Our customers are busy entrepreneurs. They want tasks such as purchasing products for their business to take less time. To meet this desire, we have built an e-commerce platform. This platform has been in use successfully for almost a year now".
Setting up METRO's e-commerce platform in India went very smoothly. "We don't have strict legislation because we don't sell directly to the end customer," explains Friedrich. Currently there is restriction in India for selling b2c online as a foreign company. Nevertheless, Friedrich advises every sales company in India to be present online. "We see that the omni-channel approach is very successful in India. So, you give your Indian customers the option to browse through the products online. And, then make the real purchase in the physical store. Hence, we have come out with our new "METRO Wholesale" app, which allows our customers to order anytime, anywhere. They then pick up their groceries at one of our locations. It shows that if you can't be found online in India, you don't participate anymore".