COVID-19 pandemic has been a major disruptor for economies across the globe, Arvind Mediratta MD & CEO, Metro Cash & Carry
NEW DELHI: German wholesaler, Metro Cash & Carry has been at the forefront of the battle since the lockdown to keep its supply chain up and running and kiranas stocked. The company’s MD & CEO, Arvind Mediratta talks to TOI about the fight that lies ahead for kiranas, as well, as modern retailers. Excerpts:
How do you see the supply chain landscape changing post lockdown? What were the key learnings and observations?
The lockdown imposed to curb the COVID-19 pandemic has been a major disruptor for economies across the globe. The virus outbreak has adversely impacted production, sales, income for businesses as well as consumer behaviour and preferences. Supply chain has been hit the most with companies across the globe still scrambling to streamline the supply chain to normalize operations.
During the lockdown phase, a vital lesson that we learnt was to devise a pre-emptive and proactive approach to grapple with the crisis at hand. Our foremost priority has been to ensure enough stock for our customers, especially the kiranas.
During the early phases of lockdown, the supply chain was disrupted and there was a shortage of truck drivers to transport goods from FMCG companies to the markets; hence, we deployed our own delivery trucks to procure goods from the go-downs of the FMCG companies and warehouses to ease the supply chain burden.
In few cases, we moved goods to longer distances in order to meet demands of regional customers, which eventually increased our logistic costs. We mitigated the impact of higher costs with supplier backing of long haul movements, both for leading brands as well as own brand suppliers. Throughout this phase, we have been reinventing and restructuring our strategies real-time to adapt to our customer needs.
Several players (Reliance, Flipkart, Amazon) are now eyeing the big kirana pie for last-mile delivery. Your views on the growing importance.
In India, there are close to 12 million kiranas and 90% of India’s $700 billion annual food and grocery market is controlled by kiranas. After agriculture, it is the second largest source of employment generation and livelihood for millions of local entrepreneurs.
The lockdown has brought the limelight back on these traditional stores. Neither e-tailers nor modern trade could match the competency of kiranas to do the last-mile delivery to customers during the lockdown. People are now buying their daily essentials from them as they are unwilling to travel long distances to hypermarkets. Kiranas are also looking at widening their range and assortment. Also, margins in food and groceries are much lower than food items. It is also difficult to beat kiranas on unit economics.
We have always been vocal about empowering kiranas with technological solutions and we will continue to champion the cause of their mainstreaming. We have strengthened our ‘Smart Kirana’ programme and have engaged with thousands of kiranas with modernisation and digitalisation solutions.
Going forward, the Government should support and empower these neighbourhood stores and look at incentivizing the modernized and digitized kiranas. There needs to be an increased thrust on their transformation and digitization to enable more footfalls and profitability for them. India’s future lies in entrepreneurship; all efforts should be made to boost entrepreneurship to help create more employment opportunities and encourage India to move on the path of being atmanirbhar (self-reliant).
A lot has been spoken about the digitisation of kiranas. Metro has done a lot of work in this space. How do you see the acceleration and adoption of technology?
Technology will play a vital role in transforming the retail experience, and as kiranas control the food and grocery market, they cannot be left unaccounted for. They understand the pulse and pain of their consumers and are well versed in the trade of food and commodities. If you have to make your products available to end customers, whether in urban or rural markets, you have to reach out to the kiranas. Technology needs to embrace the unorganised sector. If you arm them with technology and basic data analytics, they can function more efficiently.
Benefit of digitisation is ubiquitous for retail business. The government and industry needs to collaborate for modernisation and digitisation of these neighbourhood stores, as well as look at incentivizing their efforts. Adapting to technology is the need of the hour and the future of retail.
Food and grocery segments grew significantly for retailers in the last four months. What steps did Metro take to keep the momentum going?
At Metro Cash & Carry, our strength is food & grocery. Our pre-Covid food and non-food sales ratio was 85:15, which has changed to 90:10 now. In early March when the European markets were grappling with the virus outbreak, we were agile enough to absorb all the learning from them. We adopted a 30 step safety measure which encompassed stringent social distancing norms and other requisite hygiene precautions. Having worked so closely with kiranas and understanding their proficiency, we ensured that there is no shortage of supplies of essentials for them so that they can serve their end customers seamlessly.
As the APMC markets shutdown, a lot of retailers and distributors were unable to source fresh fruits and vegetables. To ensure seamless supply, we sent in our delivery vehicles directly to farmers and farm collection centres in Chikkaballapur and Hosekotte to procure fresh produce. Similarly, we sent our delivery trucks to procure goods from the warehouses of the FMCG companies to ease the supply chain burden. We also scaled up our private label brands as big FMCG companies were unable to fulfill demands due to labour shortage.
Currently in the unlock phase, we are seeing demand going up in essentials and food business almost at the pre-Covid level. Though non-food is still a bit flat, we are seeing recovery every month.
How has the pandemic changed/altered the consumers’ preferences and what trends do you foresee going forward?
The COVID crisis has led to dramatic shifts in consumer behaviour and preferences. Since the lockdown, from buying staples, food and hygiene products, to purchasing ready- to- cook, frozen food, beverages; almost all our categories have witnessed its own journey. The pandemic has brought the focus back one’s health and wellness, and safety and hygiene has now been engrained in the consumer’s mind. The demand for sanitization products such as disinfectants, hygiene soaps, sanitisers, fruits and vegetable washes, masks, wipes, gloves etc will continue till we find a definite cure for the virus. While obsessiveness of sanitizers might go in the long run, good hygiene practices such as washing hands will remain.
As we are slowly unlocking the economy, things are steadily getting back to normal. While people are spending on regular essential commodities, and sanitization products, there is a surge in demand for immunity-boosting products like green tea, honey, Chyvanprash and neem and tulsi drinks. Going forward, consumers will start investing in basic apparels, footwear and fashion. However, premium and luxury products will still take some time to rebound.
A new trend of biodegradable anti-bacterial bed sheets, bed covers has garnered immense popularity, and we see this trend continuing. In terms of packaging, eco-friendly packaging is garnering a lot of steam. However, there is not much discretionary spending, and this may continue for another 9-12 months.
Has the current pandemic impacted Metro’s expansion/future plans?
India is one of the key expansion markets for Metro; we are committed to our long-term sustainable business operations in India and making every effort to steadily improve our performance including profitability in India. Going forward, you will see a lot of innovation from us, in terms of format, in terms of what we are going to do with our customers and also in terms of the bigger play of digital and e-commerce.
We are looking at exploring smaller stores as they are more efficient, have smaller capital expenditure and have relevant commercial viability. Currently, we are exploring opening five stores in India; three in Karnataka, two in Andhra Pradesh and one in Telangana.
How do you see the retail sector evolving post the pandemic? What would be the new normal for the industry?
The COVID crisis has upended the retail industry; there are quite a few categories especially in non-food, general merchandising which might see recovery only around the first quarter of the next fiscal. There is a need to create extra liquidity to propagate the demand in the market. In the coming months, especially with the onset of the festive season, the government needs to work on some relief measures to boost discretionary spending in order to stimulate the subdued demand.
During the current crisis, a lot of offline players adapted to digital and omni-channel solutions to stay relevant. Going forward, most of the companies will have to adopt a more innovative omni-channel approach to create a distinctive customer experience, in order to rebound faster from the pandemic. Customers are looking at convenience of shopping online, which means warehousing and logistics technologies are becoming more significant. Digitisation will continue to play a vital role, and cashless and contactless shopping will be the new norm.
Technology will remain a game-changer and the retail sector will have to embrace an agile operating model coupled with newer tech tools to enhance the convenience and meet new customer expectations. Measures undertaken in these segments will create a conducive atmosphere for new investments to kick-start the economy of an Atmanirbhar Bharat. Upskilling the current workforce would also be required to meet the pivoted demand of a digitally driven marketplace.
Over the next one year, things will slowly crawl back to the pre-Covid level, but growth momentum shall be gradual as the world is yet to find a vaccine and a definitive cure.