Friday, June 14, 2024

Metto Supermarket: Odisha’s Home-Grown Grocery Chain

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Metto supermarket was started as a 2,500 sq.ft. store initially with an investment of Rs. 25 lakh .The size of the store was later extended to 4,500 sq.ft. after six months of the launch, and it is today spread across 6,400 sq.ft. Metto  has a portfolio of 5 supermarkets — 4 in Cuttack and 1 in Bhubaneswar, as of 2022. Of the three stores that are operational — all in Cuttack — the first store at 6, 400 sq.ft. is the largest, followed by a 2,800 sq.ft. store, and the smallest at 850 sq.ft.

It was in 2012 that a certain 27-year-old Azim Mohammad returned to his hometown Cuttack after doing a three-year tour of duty, learning the tricks of the trade while interning with reputed and established grocers across the country. Like a devotee who cuts himself loose from worldly moorings and sets out in the search of true knowledge and enlightenment, Azim had decided to break out of his cocoon, leaving behind his job and other obligations.

Like the proverbial pilgrim’s progress, Azim’s quest to deep dive and plumb the depths of the retail trade saw him intern with some of the well-known meisters and acknowledged mavens of grocery trade in India — Pariwar Supermarket in Jalna, Maharashtra; Dhirajsons Supermarket in Surat, Gujarat;and Sarvodaya Store in Mumbai. Three years after embarking on a self-learning exercise, he came back to launch his own store — Metto Supermarket in Cuttack.

Feeding a passion born early

After completing his MBA, Azim got placed as an Assistant Manager, Commercials, in Reliance Communications. Almost two years into his first job, he got a call from his uncle who was into the real estate and hotel business, a traditional family preserve and stronghold. Members in Azim’s family have been among the oldest operators in this line of business in Odisha.

The uncle was looking to diversify his business and he asked Azim if he had any plans to suggest. At the time this incident took place, I was reading a book called It Happened in India: The Story of Pantaloons, Big Bazaar, Central and the Great Indian Consumer, written by Kishore Biyani.

It’s the only book to have been penned by India’s greatest retail maverick — one to have achieved the heights of retail success.  The book talks about how Biyani as a businessman refused to fit into the traditional confines of his family business and ended up creating India’s most successful retail chain. It also introduced Azim to some fresh insights and perspectives on India’s retail market and its untapped potential.

“What left a deep imprint on reading this book was how India, upon entering the second decade of the second millennium, with a population of 100 crore plus people had only a tiny, wispy sliver of modern trade at just 3-4% compared with the US where a population of 30 crore had about 60% of its trade in the organized sector.”

”The book struck a chord, stirred up my subconscious, and raised some unbidden thoughts and ambitions, which coalesced with a sharp focus when my uncle asked for my opinion on a new business to diversify.” However, Azim’s opinion did meet his uncle’s confidence; but the nephew had already been sold on the idea of embracing the retail business ever since his MBA days in the college. “The initial inspiration had come when I was on the verge of completing my MBA. A guest faculty member from the US was visiting the institute who happened to be a senior executive at one of America’s most popular department store chain — Target. In his talk to the students, he narrated the evolution and powerful growth of the organized retail industry in the US and how, in comparison, India remained an untapped, virgin market for organized retail trade but one with an unlimited runway to grow and expand in the future.”

“It was a talk that channeled my inner entrepreneurial spirit and certainly got me hooked to the retail industry. Also, whenever I used to visit my home town during the breaks, I would chance upon many new stores like Reliance Fresh that were springing up in various parts of the city. All of it crystallized my interest in the retail industry,” he says.

While he took up a corporate job with Reliance after completing his MBA, Azim’s heart beat to the cadence and rhythms of the retail industry, which he wanted to be his true calling in life. Soon enough, Azim left his first job at Reliance and took up another — this time as a store manager — at a Reliance Fresh store in Krishna Nagar, New Delhi. “After spending about a year in my second job, I was caught up by the urge to start my own venture. My earlier interaction with my uncle had finally helped me to resolve my own feelings about what I wanted to do in life,” says Azim.

It was also a time, when he was in touch with some of the leading lights in grocery retail, including practicing retailers and retail consultants to help him guide forward on his retail journey. “One of them was Chetan Sangoi, a retail consultant who also operates his family-run Sarvodaya Supermarket in Mumbai. When I told him that I had decided to launch my own store, he encouraged me to knuckle down for my new project by acquiring more first-hand experience of the trade. I took this advice to heart and that’s how I set off on the journey to learn, intern and work with some of the established grocery retailers across the country,” shares Azim.

A retail dream takes shape

After an exciting, retail-knowledge fuelled tryst, Azim returned home to Cuttack with plans to open his own store. But he realized that his glimmering dreams would have to wait until the time all the clearances and permits for the new store were in place.

For a newbie entrepreneur impatient to alchemize his dreams into reality, Azim felt like Ahab chasing the white whale of bureaucratic corridors in pursuit of the elusive licenses. Recalling the phase, he says that there was a maelstrom of to-do activities before he could get the store off the ground. It involved time-consuming runarounds to procure different licenses from different departments.

“It took me almost three months running and chasing officials from the different departments to get all the licenses — trade license, food license, shop & establishment license, license for weights and measurements, packing license etc, with the fire license proving to be the biggest ordeal. For any wannabe entrepreneur, getting all the compliance certificates to meet this regulatory burden can be unnerving and very time consuming.”

Offering his take on what’s still a big entrepreneurial hurdle, Azim says that that though most regulations have been framed with good intent to serve the public good, there is much scope for streamlining the system, making the process less cumbersome, easing the compliance burden, and promoting the ease-of-doing business.

“In my opinion, a single-window clearance system for acquiring all the licenses can be the biggest service to the cause of entrepreneurship. Some of these licenses can be subsumed into a single regulation while a few can be done away with. You even have to acquire a license for playing music inside the store. Imagine, it was only a few years ago I learnt that we need to get an insecticides license for selling the common mosquito and bugs’ repellants in the store.”

After some three months of hard-scrabble chase and hunt, the licenses were in the bag. The moment had come when the rubber would finally meet the road. Metto Supermarket was started as a 2,500 sq.ft. store initially with an investment of Rs. 25 lakh. The size of the store was later extended to 4,500 sq.ft. after six months of the launch, and it is today spread across 6,400 sq.ft.

Azim says that the initial investment would have been higher but for the good fortune he had in getting his hands on some brand new electronics at a marked down rate as they were lying unsold at one of the malls that had closed down operations.

The store opened to a good public response with its location proving to be a major winning point. “From the days of my internship with the top retailers, the one thing that struck me loud and clear is that getting the footfalls is the biggest challenge for any new store. That’s why I decided on a location that was on a high street and just about 300-400 metres apart from two up-and-running Reliance Fresh stores. Also, I made sure that the store enjoyed a wide 120-foot frontage, which endowed it with good visibility and easy access,” says Azim.

To those new to the world of retail, it might seem like a counter-intuitive move to open a new-born store next to the maws of sinewy and hungry competitors. But for Azim, it was a deliberate decision with hard-nosed business logic.

“People in the area were already accustomed to buying from Reliance Fresh and were exposed to the modern trade concept. So, I did not have to worry about creating a new market or changing customers’ habits and shopping behavior, which can prove to be a big challenge for any retailer. Also, I did not have to do a market survey or research to understand the market potential of the location because that, in any case, must have been done by Reliance before opening their stores.”

However, despite the upsides, certain challenges came along the way too. “Cuttack is an old and a very retail-dense city dominated by kirana shops every few meters and where people are used to buying from shops on a credit basis. Also, smaller packs are more popular with the shoppers than their bigger units,” says Azim.

It took a few months of intense in-store interaction with the shoppers just to convince them that buying at a modern supermarket is a more pocket-friendly proposition and shoppers can indeed save more on their grocery budget by shopping at Metto than at the scattered kirana shops.

“By and by, through their own experience, people began believing that the store offered the biggest bang for their buck and it was a place for making value purchases. And, of course, they enjoyed the touch and feel experience and the freedom to choose from a wide range and variety of products,” says Iffat Jahan, the better half of Azim, who partners her husband in running the affairs of the supermarket chain.

Store format, USP and performance

Metto  has a portfolio of 5 supermarkets — 4 in Cuttack, and 1 in Bhubaneswar, as of 2022. Of the three stores, the first store at 6, 400 sq.ft. is the largest followed by a 2,800 sq.ft. store,  with the smallest at 850 sq.ft. 

In terms of revenue performance, for the month of July 2022, sales came in at Rs. 65 lakh for the 6,400 sq.ft. store and Rs. 35 lakh for the 2,800 sq.ft. store. “Our sales per sq.ft. Are decent and the sales numbers when broken down show that they are close to Rs. 1500 per sq.ft, which is considered to be a healthy figure,” says Azim.

“Our stores are getting good acceptance from the customers and that gives me the room to play around with new categories and products and experiment with new concepts to increase the sales further,” he adds. At the same time, he is honest to admit that there is plenty of room for Metto’s sales numbers to improve and grow bigger. “My market intelligence says that the two Reliance Fresh stores nearby are scoring higher  numbers which can largely be attributed to their higher marketing budget”.

“Thanks to their bigger marketing budget and a wider range of Fresh products at their stores, they are able to reach out to more customers and penetrate a higher number of households. As the Fresh stores also stock wet grocery and fruits and veggies, they attract greater footfalls as well,” feels Azim.

Azim says that it’s his conscious decision to not stock fruits and veggies because even though they fetch higher footfalls, the ROI on the category is not great. “From my experience as a store manager at Reliance Fresh, I know that the ROI in Fresh is not something to jump about. Also, the category is difficult to maintain because of the perishable nature of the products. Then there are problems around wastage, shrinkage and timely replenishment.”

Metto’s product mix is spread across more than 30 categories ranging from food and grocery to non-food and FMCG, crockery and kitchen ware, plastics and steel, toys and bags, among others. About 70% of the floor space is devoted to the supermarket categories, which includes food and grocery, and FMCG.

With a 70% sales contribution, the focus is more on food and grocery including products like oil and ghee, and masalas, which is also the store’s most profitable category, giving out 30-35% in profit margins. The chain is known for stocking an impressive range and variety of food and grocery products. “You can find four different varieties of jeera at our store, different varieties under individual pulses like tur, chana, moong, masur, etc, and a wide range of staples, cereals, snacks and ready-to-eat/cook products,” says Azim.

As far the customer segments are concerned, Metto stores cater to the masses with the focus more towards the lower and middle income consumers. Metto stores have built their brand identity around offering attractive discounts with a wide range and variety of products to choose from. “I am very much inspired by the D-Mart success story and how they have established their brand identity as a ‘people’s store’. Like D-Mart, Metto’s market positioning is of a discount store,” says Azim.

In keeping with its discount store positioning, Metto is known for its super-size 20% discount on all weekends and a regular 5% discount on all weekdays. For instance, Metto offers a 20% discount on food and grocery items on the 4th weekend of every month. Similarly, on the third weekend of the month, a 20% discount is extended to the category of masalas

On some select items like ghee and milk, which offer very tight margins, not more than a 2% discount is available. “Even when Reliance Fresh was offering a 2% discount back in 2014-15, we were offering 5%. Now that it has become a staple marketing offer, we have a very distinctive 20% discount on all Saturdays and Sundays on select categories on a rotational basis,” he adds.

Iffat, who dons the mantle of Metto’s Executive Director, joined Azim in his venture in 2019 after completing her B.Tech studies from National Institute of Technology, Karnataka. Since then she has been actively engaged in driving Operations, Marketing & Management of Metto. Iffat holds the opinion that a 20% discount on all grocery products is a value bonanza for the households. “There’s a huge rush on those days, which is 5-6 times more than on the regular days, and the stores have to be opened from 6 in the morning to close to midnight. People come in large numbers and buy bigger packs and SKUs to maximize the value of their purchase. Also, as these discounts are on the selling price and not on MRP, there is an even bigger gain for the customer.”

The mega discount offers on the weekends have helped Metto to burnish its image as a super-value store and strengthened its brand identity and visibility as a value retailer for the masses. “It’s now become a part of people’s general consciousness that one can get more value for the money by buying at Metto than at the nearby stores,” says Iffat.

Azim says that Metto is able to offer the super discounts because of its strong relationship with major suppliers. “Seeing the huge demand for their products due to the special offers, they are happy to let go of some of their own margin, which is anyway recompensed in a higher measure thanks to the huge bump in sales. At the same time, as a retailer, we also sacrifice our own profit margin for those special days and pass on the benefits to the consumer, who becomes our regular customer not just on the weekends but on the other days as well.”

Managing the business with lessons learnt from setbacks

Up until now, the growth journey of Metto supermarket has been completely organic. Could the pace of growth have been faster if it had looked beyond its own kitty for funding the expansion? “Rather than lean towards debt, I would take on board an equity partner or an investor who can join our journey of growth, and such a move is very much on the table,” says Azim.

He adds that Metto’s business expansion was pretty fast during the early days but a few things came unstuck that slowed down the momentum. “I had opened my second 4,500 sq.ft store in Bhubaneswar within two years of our first launch. However, the life of the second store was cut short and it folded just after a year of operations,” reveals Azim, noting that the failure set him back by some three years.

How could a gifted entrepreneur with the right credentials by way of educational background (MBA), business lineage (family members in business) and one who went all the way to cultivate and gather extra business moss and retailing nous by working with top retailers in the country go wrong only in his second gambit?

“Basically, I was blindsided by my ambition to move the flywheel too fast and too quickly and the wheels came off before reaching the top gear. Also, I could not handle the challenges of operating two different stores in different cities, and things soon spiraled out of my control to the extent that I had to shut down the store,” says Azim.

But what was the exact nature of those challenges? He confides that he paid a price for paying a rental that the sales could not support apart from not having a mature and seasoned team to trouble-shoot the erumpent problems. “To be honest, in my eagerness to grow and expand, and out of my fascination at the swift growth of the likes of Big Bazaar and Reliance Fresh, I got completely blindsided and tried to juggle my way around the basics that are at the core of retail science. My mentors had taught me that the rentals of any retail business should not exceed 2-3% of the sales generated; salaries should be within the 3-4% limit of the overall turnover; power consumption bills should not max out beyond 1-1.5% of the topline; keeping more than 5-10 suppliers for any category is not advisable.”

Azim admits that he broke the rules of the game and payed dearly for it. “To give an example, I had 40 manufacturers supplying for the biscuit category. It led to an inventory pile-up of unvendible products at the store. Apart from incurring a financial loss of about Rs. 30 lakh, the close down caused a lot of disappointment,” he says.

The setback pushed Azim to go back to the drawing board and review his actions with threadbare honesty. Some of the basic lessons that he had given a short shrift to came back to him with a burning force and incandescent clarity. “I resolved to assemble an efficient team comprising competent professionals and put proper systems and processes in place to oversee the different facets of the business. Also, I decided not to dabble in everything myself because that leads you to having too many irons in the fire and you can end up burning your fingers,” says Azim, adding that he was juggling various tasks from managing the purchasing orders to sales and marketing to presiding over all the meetings and taking various other decisions. “I had made myself indispensible to many parts of the business and it just didn’t work out.”

Today, the Metto chain is run by a smart and experienced team, which comprises Azim as Managing Director, Iffat as Executive Director, and other top managers from different departments as part of the company’s leadership management. There are seven departments, each with its own Head and key result areas (KRAs) to supervise and implement decisions to propel growth in line with the company’s policy and vision

“All departments — Managing Committee, HR, Accounts, R&D, Purchase, Operations, and Sales & Marketing — have their targets and goals to meet by taking a systematic approach and with the necessary systems and processes in place, and these are reviewed on a weekly basis. Since every operation is managed on an app, the managers are able to work toward meeting their KRAs and business goals, and there is clear visibility on execution and results,” informs Azim.

Technology and online prowess

Technology is now the oxygen that retail breathes. For any retailer and supermarket owner, operating without the tools of technology can become a virtual nightmare. “Technology tools and solutions are making life easier for the retailer, employees, and customers. You cannot scale-up your operations and you cannot even carry out your everyday routine functions without technological aid and support,” says Azim.

“Whether it’s billing, stock counting, raising POs, running loyalty programs or ensuring that all your systems are running in sync, one needs to fall back on technology. At the same time, it is imperative that retailers keep upgrading their stack of technology solutions in keeping with the emerging market exigencies and demands. For being up-to-speed with technology, retailers should invest 0.5% of their total annual sales on upgrading their technology solutions and IT systems, adds Azim.

On being asked about Metto’s digital capabilities, Iffat says that the supermarket chain has its own mobile app and its own web page for taking online orders. About 5-6% of all our orders come through this channel, which shows that online is yet to become an important part of our sales. For food and grocery, people still prefer visiting the stores and they like to touch and feel the product before deciding on a purchase.”

However, during the pandemic and the days of lockdown, Metto saw a sharp spike in online orders, to the tune of 60-70% of overall store sales. During the complete lockdown phase, it even crossed 90% , she reveals. Azim says that all the products and catalogues at Metto stores can be seen on the app and the web page, and a third-part service provider has been tasked with ensuring that the user interface is easy and smooth.

The road map to future

Turning his thoughts to the profit potential of the grocery business, Azim feels that that it depends on the person and how he is able to handle the business. “Today, in my ow neighborhood, I see lots of new supermarkets opening up, some of them by people who were not into any business earlier but have been professionals working for different industries. Clearly,

there must be something that is bringing them to dip their feet in this business. But whether they are able to run a profitable enterprise will depend on how faithfully and sincerely they adhere to the basic tenets of this business and play the game by the rule book. If you stick to the math and work by the numbers, profits are bound to come by and they will grow as you scale and multiply your business.

Once bitten, twice shy might be a cliché but for Azim the rules of retail are like the Rosetta stone he keeps going back to for shepherding his business. By acting on the basics of retail science and keeping those lessons at the heart of the business playbook, Azim now feels confident to move to newer chapters that will define Metto’s growth journey in the future.

“With all the structures, systems, and processes in place, it has now become very easy for us to move to next orbit of growth and scale-up the business fast. Once a location for a new store gets finalized, our team gets on into the action, taking up their specific functions and executing those as per the deadline. The reporting structure is such that it’s easy for me to spot any deviance and issues and fix them before they blow up,” explains Azim.

“Thanks to technology, and the way it has helped put in place systemic structures along all vital parts of our business, we no longer apprehend the problems associated earlier in operating stores across different cities and distant places. The need to have a physical personal presence to manage spatially distant stores has been taken care of by technology and stores can be managed as well remotely without physical proximity,” opines Iffat.

For the next couple of years at least, Metto’s growth and expansion would be centred around the cities of Cuttack and Bhubaneswar. “We want to grow in clusters and not in a scatter-shot way, so that we have an upperhand on the control,” says Iffat.

Azim adds that he expects his two new stores to rack up combined sales of Rs. 1.5 crore on a monthly basis for the first year of operations. ‘‘With future prospects looking promising, the company has already attracting investor attention and interest. Metto has already taken on board a private equity partner willing to finance and invest in building the company to 10 times its current size, signs off Azim.

This article was published in September Edition of Progressive Grocer 2022. To read more articles, subscribe to the magazine.

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