Even as India was still witnessing the first ever grocery retail boom through organised chain stores such as Nilgiris, Foodworld, etc. in the early 2000s, German Retailer and the world’s second largest retail chain Metro AG entered India with it’s first large format outlet in the outskirts of the then sleepy, tony Bangalore. Spread over 40,000 sft., the store was a retail wonder, a marvel and a museum at best those days. Normal coinsumers couldn’t buy anything as the format was only for B2B – t ubusiness to business. In other words, it was open only for resellers. The outlet sold everything from day to-day grocery to soft furnishing, hard goods like television and refrigerator to footwear and general merchandise.
Cut to 2022, the company opened its 31st outlet at Hubli and had pledged to grow the network over the coming years. Witnessing a very dynamic business climate over the past decade as well as intermittent lockdowns in the past 2 years which has hampered growth with regard to revenues, the retail chain has been plagued with various challenges.
First, the format is governed by multibrand FDI guidelines, which means the sale (at outlets) can happen only to registered buyers – earlier with a VAT certification, now with a GST. Second, the format has seen stiff competition with Big Bazaar, at one point in time equalling or offering even lower on prices across categories. Lastly, there has been stiff competition from digital retail formats like Udaan who reach retail shopkeepers directly with similar or even better buying prices. E-commerce was the latest and the biggest headache for Metro.
As of now, it is not just resellers (read: shopkeepers) who buy across Metro outlets but also small and medium sized offices, especially those run by professionals – CAs, Lawyers, Hospitals & Clinics, Consultants, and SMBs. They also end up buying for their personal consumption but legally, that can never be established or found. For FY 2021, Metro AG had a turnover of Rs. 6,700 Crores. Reliance Retail’s “Mart” format and D’Mart have given stiff competition to Metro, especially since they have a clear mandate to address end users / consumers as well.

As per recent news reports, Metro India’s parent has refused to pump in more money in to the entity, clearly leaving out 1 of the 3 options.
A strategic sale to a global Investment fund with adequate management control; a full sell-out to a large company – offline retail companies including Tatas, Birlas or Ambanis. Lastly, shut the India business and exit with limited accumulated losses. In the first option, there is very little to manage directly except for the international cross-learning that the group offers. In the second option, there is a possibility to sell the fledgling business to large conglomerates including arch-rival Walmart-run Flipkart, which incidentally gained control of the similar operating model “Best Price” (from Bharti Group) a few years ago. To exit fully, shutting all doors – is a possibility as well, which the company has earlier done in international markets like the United Kingdom, Vietnam, Japan, Turkey, Russia, Ukraine and many more.
FDI laws in India are complex and in most cases, incomprehensible at best. For Ex., while FDI in e-commerce was not allowed, Flipkart found a round about rule a decade back with its parent company and subsidiaries located in India, Singapore and Cayman Islands. When the company was bought by US based Walmart, the monies didn’t flow in to India. Amazon, on the other hand partnered with Infosys Founder NR Narayanamurthy’s Catamaran Holdings and formed a JV company which sold goods on the platform to customers. After a lot of recent noise on the topic, the JV has thus been dissolved. GoI has been tight lipped about the lapses by e-commerce companies & its Investors. The now beleaguered Future Group had similar challenges as well, with the inability to attract foreign funds due to draconian FDI laws.
However, this leaves a large opportunity for home grown companies, business houses and Industrialists. If at all Metro AG leaves the country, the blame will squarely be on the theory of the Modi-Government’s stance on protecting small and medium shopkeepers and a populist governance model. Seldom would anyone agree the shortfalls of Metro India as well, which failed to scale up at the best possible time – especially between 2009 – 2014 which is considered the golden period for India’s Retail growth story.