METRO’s Marketing Policy in China

I. Background information

Since 1990s, numbers of international retail chain enterprises expanded into Chinese market one after another. METRO, the founder of warehouse type supermarket with headquarter in Germany, introduced this internationally influential new format into China. It not only impacted China’s circulation industry, but also brought in new strategy and concept to China’s commerce. It benefited the development of Chinese retail industry.

METRO was established in 1964. It ranked before 50 among the world’s top 500 and NO. 3 among the world’s commercial enterprises. METRO’s the world s No. 1 Cash & Carry system business. METRO came to China in 1995 in cooperation with the famous Jinjiang Group, establishing METRO Jinjiang Cash & Carry Co., Ltd. In 1996, METRO opened its first Cash & Carry and member system store in Shanghai.

METRO Jinjiang Cash & Carry Co., Ltd had opened 15 stores, among which Shanghai alone had 4 stores. There were over 110, 000 members in each store. The turnover ranked No. 9 in the national top 100 chain stores and sales reached 4.94 billion Yuan.

II. METRO’s characteristics

1. METRO’s warehouse type business combines the function of supermarket and warehouse. It can fill the sold-out goods rapidly and guarantee low cost and high efficiency by omitting the traditional independent warehouse and delivery center. Warehouse type supermarket is fundamentally different from normal supermarket in overall design.

2. Site selection

METRO is usually located near highways or main roads on outskirts in big cities. In this way, it avoids traffic congestion in downtown area and reduces investment risk with the relatively low price of land on outskirts. Moreover, exploring outskirts area is in tune with the trend of integration of urban and rural areas and takes up the advantageous region earlier than others. And the business range normally covers 50 km in radius.

3. Architecture design

METRO looks like a big modern warehouse from outside. It covers a business area of 15,000 to 20,000 square meters. The parking place is almost as large as the business area. With simple interior structure, it usually uses 4.5-meter high industrial shelves. On the lower part of the shelves, like normal supermarkets, goods are displayed, while the higher part functions as a warehouse, on which the same goods are stored. In this way, sales and storage are integrated. Forklift truck is easy to go between the shelves to fill the goods vacancy in time with big space between the shelves.

III. Good assortment

The stores offer a full range of goods up to 20,000 items, which can meet the customer’s one-stop shop requirement. Food takes up 40% of all the goods, with relatively stable varieties, while 60% are nonfood. Particularly strong are the fresh food offer, comprising fruits/vegetables, fresh fish, meat and dairy products. Nonfood segment is regularly adjusted according to the season and customer’s needs. It ranges from daily items, official items to small machine tools. Most of the goods are sold in bulk packaging or boxes. Single items are seldom displayed except household and mechanical appliances.

III. Marketing policy of METRO’s warehouse type business

Warehouse type supermarket does wholesale by the means of retailing. The store is the center for both service and wholesale & delivery. This kind of market position enables METRO becomes the super warehouse for professional buyers.

1. Limited target customers.

Normal supermarkets usually serve all ordinary consumers. Though ordinary buyers often do repeat purchasing in a short time, their purchasing is happened at random and with a small volume. Warehouse type supermarket focuses on limited customers and offers membership only to operators in industrial and commercial areas and group buyers. The members must be enterprises or other organizations with corporate capacity.

2. Mailing ad promotion

METRO usually does the promotion through mailing ads instead of mass media. They mail to members “METRO POST” every two weeks. The post, a colorful detailed catalogue covering the latest prices, newly added merchandise and recent promotional goods, tells members the latest goods information, helps enterprises cut purchasing costs efficiently and improve the fairness and openness in purchasing.

3. Particular commodities

Along with the low price policy, METRO attracts customers with sole and particular commodities and commodities with its own brand name since greater competition is rising in the retail industry. Particular imported goods such as cheese, butter, coffee, curry powder and interregional goods are offered in each store.e.g. Qingdao METRO is the first supermarket who sells southern style foods like dried salted ducks, lotus with glutinous rice. Moreover, commodities with its own brand name cover metal tools besides daily items.

4. Unit service for enterprises

METRO wins customer’s favor and confidence through “Customer Festival”, on which it shows its regard to small industrial and commercial enterprises by reiterating its service concept in which customers are business partner and the store and the customers should seek progress jointly. On the Customer Festival in April 2000, Shanghai METRO presented ten professional unit services for industrial and commercial enterprises. It enabled them to purchase the most comprehensive goods with the lowest payment possible by helping them select the most suitable goods. The unit services include suggested goods list for small decorating teams, tableware for small restaurant and suggested welfare goods list for enterprises and organization, to name just a few.

5. Sales format

METRO Group has other retail format like department store, discount store besides cash & carry store. Based on six-year Chinese market research and analysis, METRO only opened cash & carry store in China. The cash & carry store is self-service wholesale: customers pick their own orders, pay in cash and take away the goods themselves. This format meets the requirements of rapid and efficient sales and substantially cuts the store’s cost.

IV. Sales management of warehouse type supermarket

The success of METRO’s C&C marketing system in China attributes to its complete and highly informationized internal management system. METRO realized the informationization by creating a set of management system of goods and members information of its own.

1. Customer management

At first, the staff input the information on Registration Card filled out by members to create a member database. Member Information Management System put down automatically the purchasing record of each member, which allows METRO to make quick response to customer’s needs by looking at the purchasing frequency figures, consumption pattern and analyzing the dynamic developing trend of their needs.

METRO divides customers into “ABC” three groups according to their sizes and purchasing volume. The “Customer Consultant Group” provides customers, especially small and medium-sized enterprises with special consultant services after a careful analysis on customer’s pattern of consumption. At the same time, they communicate with major customers and present buying advice to them to help them cut costs. Through offering comprehensive services, METRO establishes stable relations with a large number of customers and gets updated with the variable market trend in time, so that they improve their initiativeness and flexibility in commodity management.

2. Commodity management

METRO makes centralized purchasing, i.e. all purchasing is made by the headquarter and the regional stores cannot purchase by their own. The headquarter determines the distribution according to sales situation of each store and makes uniform distribution. Uniform bulk purchasing strengthens headquarters’ control over purchasing and reduces costs. METRO controls all information about buying, selling and goods in stock by using Goods Information System; computer does everything including goods selecting, ordering, reordering, receiving, selling and checking out. The System prospects the sales, makes purchasing plan and generates order lists automatically according to the recorded information to limit the stock goods within a reasonable range.

3.Supplier management

As a multinational franchise retail group, METRO is demanding on suppliers’ goods quality and supplying stability. They acquire quality goods and guarantee reliable supply in compliance with the established comprehensive trading stipulation and a set of systematic procedure instead of signing a traditional trade contract with the supplier.

METRO made a special “METRO Supplier’s Manual” with contents covering each step of offering certificate, filling out information form, making orders, supplying, adjusting price, managing and paying bills, as well as trade rules and working system which should be observed by both parties. A long-term cooperation relationship is established between METRO and suppliers with an agreement from both parties; and they don’t have to sign contract for every single trade. METRO involves suppliers into its own management system and turns suppliers’ transport system into its own goods delivery system by standardizing purchasing process, thereby realizing cost-efficient running.

To maintain the partner relationship with the supplier, METRO often assists them in selecting the most economic delivery rout, receiving orders through Internet to cut order-disposing cost and provides them with market demands in time.

4. Sales plan management

Different from ordinary retail companies, in order to unify selling and purchasing, the sales plan is carried out by the Purchasing Department. To make sales plan is to work out programs in accordance with the promotional activities. In order to leave enough time for overall arrangement, one should be considerably far sighted when making the sales plan. The key to success is to make sales plan consistent with purchasing plan and combine purchasing-selling plan with suppliers’ promotion plan vigorously.

5.Finance management

METRO makes centralized and uniform control over finance by applying R/3 system provided by German SAP Company, the world’s largest supplier of company management software. The sales data of each store in China are delivered to the headquarter in Shanghai for them to do accounting. Purchasing payment is also controlled by the Shanghai headquarter. The finance personnel in each store shall only collect the daily sales amount and apply for daily expenditure reimbursement within the imprest fund set by the headquarter. This managing pattern makes the finance management open to a high degree and maintain the financial cost to a comparatively low level.

Photo from Baidu

Source:
Editor: Grace
Date: 2005-4-4 14:32:00

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