Metro’s business traditionally catered to B2B customers. ET on Tuesday reported that since the company is now an Indian entity, following Reliance Retail Ventures’ Rs 2,850 crore deal with Metro AG, it need not comply with the foreign direct investment (FDI) norms.
RRVL in December 2022 acquired a 100% stake in Metro Cash & Carry, a wholesale distributor that launched operations in India in 2003. RIL only recently got a regulatory nod and is currently integrating the business with its own.
Synergies and maximisation
Reliance got access to Metro’s 31 wholesale distribution centres across the country. Alongside its consumer push, RRVL will continue doing wholesale business from its Metro outlets for B2B customers to fulfil its ‘new commerce’ ambition of wholesale supplies of products to smaller stores in grocery, electronics and apparel.
Reliance Retail operates 52 B2B outlets under the ‘Reliance Market’ brand of stores, catering to Kiranas and other institutional customers.
Industry executives told ET that the company will have a ladder pricing strategy for Metro stores whereby more discounts will be offered for higher quantity sold, bulk packs apart from selling wholesale packs.
RIL’s acquisition of Metro AG’s India business was welcomed by analysts as they believe it gives RRVL access to Metro’s warehousing assets in tier 1 & 2 cities and to its strong supplier network, Bernstein said in a report.
Using B2B to push grocery biz
Reliance, like its peer Rakesh Damani-led Avenue Supermarkets, has smelled an opportunity in India’s retail market, which is majorly controlled by unorganised players. And within this, lies the food & grocery market. Reliance is looking to tap into Metro’s capabilities to further enhance its footprint in this particular segment.
Metro sells products such as fruits and vegetables, general groceries, electronics, household goods and apparel to clients like hotels, and restaurants as well as offices and companies, small retailers and Kirana stores. Brokerage firm ICICIdirect in a note said that it expects Reliance’s Metro acquisition to further strengthen Reliance Retail’s backend supply chain and accelerate growth in JioMart Kirana orders by on-boarding new clients in hotels, restaurants, and cafe categories.
“Metro will focus on grocery new commerce business and also expand B2B supplies to kiranas, merchants, small stores and others in categories like electronics and apparel,” an industry executive told ET.
Analysts say that Reliance is using traditional and eB2B models in an aggressive manner to capture Kirana stores, to tap into the opportunity in India’s unorganised retail segment. “Over 2/3rds of its network stores are in tier-2/3 cities. 75 per cent of store launches were in tier-2 and below towns. Reliance is looking to generate stickiness in these geographies,” Bernstein said.
Reliance aimed to gain significantly through its acquisition of Kishore Biyani-led Future Enterprises, but that fizzled out and the National Company Law Tribunal (NCLT) admitted the company for corporate insolvency. However, in March 2022, Reliance took possession of the premises housing some 900 Future Retail stores citing non-payment of rent. Reliance went on to rebrand these stores as Reliance outlets. This transaction would’ve enabled Reliance to sell its products across 1,500 of Future’s outlets in the country.
It aims to do the same now through its Metro deal. Reliance’s retail business has a strong portfolio and these outlets can help the company market a host of products, exclusively.
Reliance Retail today is the largest organised retailer in the nation and is showing no signs of slowing down.
Reliance’s consumer business growth
Analysts expected the B2B of Metro to support Reliance Retail’s new commerce strategy and expand its presence in urban cities with large format multi-category stores. “With $1 billion in bolt-on acquisitions in retail and the recent launch of its own brand, we expect RIL to remain aggressive in its retail strategy,” Morgan Stanley had said in December.
Even though Metro launched operations nearly two decades ago, it couldn’t expand its footprint significantly over the last 5-7 years. Analysts opined that RIL has the requisite tools, i.e., supply chain networks, technology platforms and sourcing capabilities to turn it into a profitable segment.
