German wholesale giant evaluating smaller cities for expansion

German wholesale giant’s two-year venture so far off the radar.


Farooq Baloch June 26, 2015
Though it captured a significant share in the B2B segment, the company’s operations remain limited to urban centres. PHOTO: FILE

KARACHI:


In a development that remained off media’s radar for nearly two years, Metro-Habib Cash and Carry has been evaluating market potential of smaller cities through what it calls satellite stores - the move is part of its strategy to expand further in the country’s $42-billion-a-year market.


The Pakistani subsidiary of German wholesale giant Metro Cash and Carry (MCC) had opened its satellite stores in smaller cities and towns, such as Gujranwala, Multan, Hafizabad and Vehari two years ago, sources familiar with the matter told The Express Tribune.

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Through its satellite stores, market sources say the MCC wanted to expand its footprint to smaller cities of Punjab, which are located far from its main stores in Lahore, Faisalabad and Islamabad.

An official said these stores would take orders from local customers in Multan, Gujranwala and Vehari and also manage the storage and delivery of stocks dispatched to them by one of the main stores in Lahore and Faisalabad. After two years of experiment, the company closed these stores last month because the returns were lower than expectations, he added.

The MCC chose not to comment on the subject but an official close to the development said it was only a pilot project whose main purpose was to study whether these cities make a business case for a full-fledged MCC store.

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“Instead of moving the whole ship to these cities, it’s better to test the waters through small boats,” said the official, explaining why the company entered these places through satellite stores instead of its full scale MCC superstores.

They [satellite stores] were extensions of existing locations because sales were recorded at mother stores in Lahore and Faisalabad, the official said. The company wanted to collect data and study the potential of these markets to decide if it was feasible to open a full-scale MCC superstore.

“The company has been watching Multan for quite some time now. The one you see today is developed and much different from the one it was seven years ago,” the official said, adding that Multan certainly makes a business case for their next store.

The foundations

The European wholesale giant entered Pakistan in 2007 and soon expanded its operations to a nationwide network of nine wholesale centres in Karachi, Lahore, Islamabad and Faisalabad. It runs on a business-to-business (B2B) concept targeted at professional customers: hoteliers, restaurants, caterers, canteens, small and medium size retailers as well as service companies and businesses.

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Though it captured a significant share in the B2B segment, the company’s operations remain limited to urban centres, which account for only 35% of the country’s strong 190 million population base, the sixth largest in the world.

The company had less than 3% share in the country’s overall market as of 2012, an indication that MCC’s expansion to smaller cities was inevitable.

MCC’s criterion is to be in every city with a population of at least one million, said an official, adding that a lot of cities in Pakistan meet that condition.

Besides Multan, the official said Gujranwala, Abbottabad and Hyderabad are also very lucrative markets. Moreover, the company would love to open stores in Peshawar and Quetta if security situation in these cities improve.

Published in The Express Tribune, June 26th, 2015.

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