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Boby Kurian
Vinay Kamath

Bangalore/Chennai , Oct. 7

THREE years after receiving the Centre's nod, Metro India Pvt Ltd, part of the 50-billion euro Metro AG, is a fortnight away from commencing its cash-and-carry wholesale operations.

As its first two outlets, dubbed as distribution centres, open on the outskirts of Bangalore, this global giant's local strides are promising to modernise Indian trading in an unprecedented way. Domestic businesses are watching, and there is reason why they should. Even though it is early days to firm up projections, Metro's Indian arm expects the annual revenues from its distribution centres to be roughly Rs 450 crore annually. Its first two centres will shortly be coming up in Yeshwantpur and Kanakpura, each with over 1,10,000 sq ft area.

Metro's Asian focus is spread across Japan, China, Vietnam and now India. So what is Metro cash-and-carry? It is wholesale trading, as stated by the company, with an entirely new distribution approach. "Our model is business-to-business. But it should not be misinterpreted with the traditional understanding of wholesale trading. We cater to our business customers and their unique business requirements on a continuous basis," Mr Harsh Bahadur, Managing Director, Metro India Pvt Ltd, said. The product assortment that Metro offers in its stores includes agricultural produce, FMCG, pharmaceutical products, jewellery, fashion clothing, consumer durables and music and audio-visual cassettes and CDs.

Metro's entry, however, is being viewed with suspicion by some of the established retail chains in the country, which charge that Metro's `intention' is to engage in "retailing activity rather than wholesale trading as specified by their licence". The approval from the Government three years ago is subject to the condition that the company would ensure that products stocked by it would be sold to retailers and not to consumers. Currently, foreign direct investment is prohibited in retail trading. "Metro has approval to cater solely to all small retailers and semi-wholesalers hitherto dependent on the wholesale market for their purchases," domestic retailers point out. "However, they are targeting not only small retailers or semi-wholesalers but also all manner of small offices, restaurants, caterers, hotels, institutions and other small businesses." Besides, they alleged, the Metro officials were handing over "membership" cards to all employees of client organisations, which they can use to shop for their personal needs, which is a violation of the FIPB clearance to deal only with retail trade.

Another charge brought against Metro is with regard to its proposed trade in agricultural commodities. The APMC Act for the various States, including, Karnataka, notifies the commodities, which must be traded, as far as wholesale is concerned, only in the areas, which are specified as market yards. Since Metro's licence restricts it to only wholesale trading, its detractors argue that when it deals in the notified commodities, it must also operate only from the notified market yard areas. The two locations identified are outside the notified market yard.

Mr Bahadur, while rejecting talks about his company's retail ambitions, said it would fall flat in trying to play ball with a retail buyer because of its business model. "Our base is mainly registered business customers and we offer them the benefits of a new modern distribution. For instance, we cannot force a Udupi restaurant to buy 50 kg tomatoes if his requirement is only three kg. Similarly, we will service a luxury hotel if it requires 30 red wine glasses as replacement. Logically, it may look like retailing but it is not (if they understand our business model)," he explains.

Mr Bahadur also refuted the allegation of Metro doling out hundreds of membership cards. "We issue cards only to two or three employees from each business organisation. These photographed cards are given only to those employees who are nominated by their respective organisations to effect purchases on their behalf, and not for domestic consumption," he said. The Metro official also claimed that the allegation about the outlets being located outside market yard areas was purely technical. "We set up our centres in areas which are backed up by infrastructure facilities. Metro has invested Rs 175 crore in equity for the two outlets and its back-up facilities. For instance, we have developed a cool chain for sourcing fresh fruits which reduces the normal 25 per cent wastage between sourcing and warehousing and delivers better value to the supplier as well as the bulk buyer," he said. Metro has received the necessary clearances for setting up centres in the present locations and "all laws have been adhered to" in this regard, insists Mr Bahadur.

As Metro, the world's fifth largest trading business, takes wings, Mr Bahadur estimates the market potential in India to be as big as that in China, where it has 18 stores in just over six years. But it depends on how fast the cities expand to the suburbs with concomitant infrastructure, he added.

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