Rajeev bakshi recently took over as the managing director of METRO Cash and Carry India, gearing up for a countrywide footprint after a rather slow expansion over eight years. Bakshi, who earlier held senior positions with Pepsico India, Cadbury India and ICICI Venture, discusses plans with Raghavendra Kamath. Edited excerpts:
Don't you think you are slow, given that you entered in 2003 and other cash-and-carry players such as Walmart and Carrefour, which came later, have scaled up rapidly?
Not really. You can measure the performance by how many stores you opened during five-six years. That is one matrix. The second, more important, is what is the retail evolution in India like? From eight to nine years ago, after we entered and opened the first store in cash and carry (wholesale business), we have learnt the business and grew with it. If we had opened 20-25 centres, much ahead of the curve, and customer habits weren't changed to adapt to this format, it would have been chaos. You cannot be ahead of the curve when it comes to change in consumer habits. It is nothing to do with the setting up of a number of stores. Then, it would lead to opening hundreds of stores and then shutting half of these.
But it could have given you early break-even and the scale.
Check how B2B (business to business) works. In the hotels business, purchases happen through a network of purchase managers, who have long-term relationship with, let's say, 200 suppliers. It is very unorganised. It is a challenge to convert that habit to a unified buying structure in large hotels.
After chasing these guys for several years, now we have signed a contract with the Taj and Oberoi for supplying them on a national basis. This means those guys now have to change the entire system of purchasing and orient themselves to one particular supplier. It took some time for us to convince them that we can deliver. We are now setting up dedicated supply chains for them. The second is the office channel, with hundreds of suppliers and purchases happening in an opaque way. We have convinced them to get into rate contracts for six months. When people say six years is a long time, I completely disagree.
After Walmart opened three stores in Punjab, now you are saying you would open stores there. Don’t you think you missed the bus and could have had first-mover advantage there?
Valid point, but two points to counter that. In centres like these, you need to invest at least Rs 100 crore. When you get into a particular place, you need to get your business right. A hundred crore is not a small amount to waste on a single centre. Second, one Walmart or one Metro does not make for entire customer habits. One store is a minuscule part of a city's wholesale trade. We want to get the model right in terms of offering, the environment in which customers' habits will change and so on.
In newer stores, we have modified the concept very substantially. We have made our stores smaller than what they were earlier. We have introduced newer concepts such as modern mandis, as we felt a grocer does not want to go inside the stores and feel intimidated. He can pick up grains and commodities from there and go out.
You also faced some regulatory problems in some states. Does that bother you now?
Whatever regulations are there, they are there. Our main concern is to get the model right. Our main challenge is to get the concept in sync with customer habits.
What is your revenue target this year? Have your stores broken even?
We do not disclose the country-specific numbers and profitability.
Expansion plans?
We have five stores in the country and we will open the sixth in Hyderabad this month. Out first target is to operate in six states which are issuing Agricultural Produce Marketing Committee (APMC) licences. We are already in four and the fifth will be in Punjab. Beyond that, we see potential in 43 cities where the population is greater than a million and 63 with a population of more than half a million. How many stores and where we set these up depends on how the business pans out.
What changes have you have initiated?
We are sharpening our focus. We are understanding from customers what they want. Therefore, we will not stock everything, unless there is critical mass in terms of demand. Assortment is tightened in sync with customer needs. The whole concept has become service-oriented. From (being a) passive player, we are becoming active.
Walmart is providing back-end support to Bharti stores and Tesco to Tata’s Star Bazaar stores. Why haven’t you looked at that route?
That's not our business. Our business is 100 per cent foreign direct investment-compliant and we are doing it.
Will you enter Indian retail if FDI opens up?
No interest. We want to remain a wholesale cash and carry player. We do not want to get into other formats.
