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Metro hit by slowdown as retailers cut purchases

Lack of credit facility turns firms away from German company

K Rajani Kanth  |  Hyderabad 

For Suryanarayana — a small-time retailer who runs a consumer electronic store Sindhu Electronics at Balanagar in Hyderabad — business hasn’t been good for the last couple of months. With the future looking uncertain, Suryanarayana, who registered himself with Metro Cash & Carry, has cut down his purchases from the business-to-business concept store.

"Till October, I used to buy at least 30 pieces of colour televisions and DVD players from Metro every month and sell them to customers by offering installments with six-month to eight-month durations. With my business shrinking in the last couple of months, I have cut down my purchases to 20 units per month," he said.

The example illustrates the impact wholesalers including multinational such as Metro Cash & Carry, the Indian arm of German wholesaler, Metro AG are facing.

Major hotels including the Le Meridien, Taj Residency, Royal Orchid and The Park in Bangalore source groceries, fish, milk products, canned items and other daily consumption products from Metro. Of these, Royal Orchid and Le Meridien have cut down their purchases as occupancy levels have dropped to as low as 50 per cent.

"We procure groceries, canned items and perishable items from Metro. While we have increased the variety of items we are sourcing from Metro, our volumes of purchase have reduced by more than 15 per cent than earlier," said a source at Royal Orchid. Similar sentiments were echoed at the Le Meridien hotel which buys chicken, cheese and other dairy products from Metro.

Metro India officials, however, say that the slowdown hasn’t affected business in India. "Our role is to provide support to our business customers to help them navigate through the current uncertain market environment. In every challenge lies also an opportunity," a company spokesperson said.

For Metro, the core target group comprises hotels, restaurants, caterers as well as Kirana stores and other small retailers. Metro entered the Indian market in 2003. It currently operates two centres in Bangalore, one each in Hyderabad, Mumbai and Kolkata. Hotel officials say that in some cases, Metro indicated a revision in prices coinciding with the busy season of tourist arrivals, but hotels haven’t agreed.

"The bigger hotels generally get into contracts for three months to a year with Metro. Based on that we devise our room tariffs, most hotels may not be in a position to change tariffs till March 2009," said an official with a five star hotel. Unlike the big hospitality players who source niche items such as tuna, lobsters and certain variety of fish, mid-size and smaller retail players come to Metro for perishable commodities.

Smaller retailers say that they haven't been affected much by the slowdown considering there hasn't been any cut-back on purchase of essential food commodities. However, supermarkets, which stock on a variety of items, say that there has been a dip in niche food products.

"We haven't seen any change in the demand for day-to-day groceries and milk products. However, gift items like dry fruits, which see good sales during the diwali and Christmas period have certainly dropped by 10 per cent. People prefer to buy gifts in the range of Rs 150-200 instead of the earlier trend of buying in the Rs 300-350 range," Sunil, an official at NN Supermarket in Bangalore's RT Nagar.

Additional reporting with Archana M Prasanna & Mahesh Kulkarni

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First Published: Tue, December 09 2008. 00:00 IST