Interview: Hans-Joachim Koerber - CEO Metro,
India is on the brink of a revolution in its retail industry, said Hans-Joachim Koerber, Chief Executive Officer, Metro, that if managed correctly, will pay dividends beyond the retailer's bottom line.
The India Economic Summit 2005 focuses on India’s emergence as an economic power. What is your scenario for the state of India in 2015?
Various studies project that India will grow into one of the world’s top five economies by 2015 (it already is in terms of purchasing power parity). India will have a significant impact on the world, both in “hard” economic and trade terms as well as in “soft” cultural terms.
India still faces many challenges. It must combat poverty and raise the “Human Development Index". But I think that as India reforms its economy and engages fully with the world it will have substantial say in future global affairs
As Co-Chair of the Indian Economic Summit 2005, how do you think the Summit can contribute towards helping India fulfill its potential over the coming decade?
The economic summits of the World Economic Forum are designed to promote dialogue, idea sharing and integration of the world’s economy. In today’s world, this is a pre-requisite for the rapid development of national economies. I think the India Economic Summit and the discussions that Indian government and business leaders will have with their worldwide counterparts can help take today’s impressive Indian economy to the next level.
India is rated the fifth most attractive emerging retail market. In your experience, how must foreign investors adapt their strategies for the Indian market?
Each new market provides different challenges to commercial companies, be they wholesalers or retailers. The first challenge for foreign retail companies is the current barrier on foreign direct investment in India’s retail trading! I understand the worries that some people have about the entry of foreign retailers into India. But international experience has shown that the entry of organized retailers who invest in the supply chain of developing economies has always paid off for the local population. When international retailers and wholesalers do come to India, their first job will be to determine which format they will employ. The business and economic models of different formats vary widely. A crucial issue will be to adapt the successful concepts and approaches in other markets to India’s needs.
I think the main elements are a well-defined pricing strategy and a plan that addresses India’s sweeping diversity, especially in the food business. The challenge will be to create assortments that appeal to local communities in a country that is essentially a continent.
Given the very high cost of real estate relative to the price and margin levels, format and location strategies will have to be very different from those used in other markets.
Will the expected retail revolution impact rural retail and how?
Rural India is still very fragmented. In the medium term, I do not see a major change occurring on the rural retailing scene. Rural India will continue to be
serviced by small “mom-and-pop” grocery stores. Some of the initiatives in organized retailing being introduced by some Indian companies are more “semi
urban” than rural.
I would like to add that the advent of modern retailing will have a profoundly positive impact on rural India. The foundation of these strides will be retailers’ organization of the supply chain, and their major investment in an infrastructure that is devoted to collation, storage, grading and packaging of agricultural produce.
These changes will dramatically reduce today’s wastage level in fresh produce by 25 to 40 percent. These losses are the result of a long and fragmented supply chain.
Our experience in other countries and studies in India show that such changes will enable the farmer to get significantly better realization for his crop, and the consumer to enjoy lower prices and better quality. There is another benefit as well: this activity will create a large number of non-farm jobs in rural areas. This is a must if agriculture is to grow in India.
What role can foreign businesses operating in India play in helping to increase agricultural growth and rural incomes which are essential for India’s emergence as a major economic power?
One of the key issues for growth of the agricultural sector is the creation of non-agricultural jobs, especially in rural areas. Foreign businesses can play a very significant role here.
As I said before, foreign retailers will improve the supply chain, reduce wastage and create jobs. But they can do more than that. They will quickly link the Indian farmer to the companies’ global distribution and retail networks. Compared with other nations of the world, India has huge agricultural potential. It has a wide range of agricultural climate zones. It can grow almost anything and can even harvest three crops a year! Right now, though, the Indian farmer does not know what the international market wants, or does not have the ability to offer his produce to the international consumer. Foreign retailers will bridge this gap, and help Indian agriculture diversify and increase incomes.
Other types of foreign businesses, such as food processing and food marketing companies, will also have a significant impact on the agricultural sector.
One of the key issues facing the government is to remove all legal bottlenecks. This need applies in particular to the Agricultural Produce Marketing Committee (APMC) Act. This more than 40-year-old state-level law regulates that wholesale with agricultural products can only be done at “designated market yards” and seriously hampers any business - foreign or domestic - from investing in the agricultural sector. The government should also focus on creating a basic infrastructure like roads in rural areas.
The India Economic Summit 2005 focuses on India’s emergence as an economic power. What is your scenario for the state of India in 2015?
Various studies project that India will grow into one of the world’s top five economies by 2015 (it already is in terms of purchasing power parity). India will have a significant impact on the world, both in “hard” economic and trade terms as well as in “soft” cultural terms.
India still faces many challenges. It must combat poverty and raise the “Human Development Index". But I think that as India reforms its economy and engages fully with the world it will have substantial say in future global affairs
As Co-Chair of the Indian Economic Summit 2005, how do you think the Summit can contribute towards helping India fulfill its potential over the coming decade?
The economic summits of the World Economic Forum are designed to promote dialogue, idea sharing and integration of the world’s economy. In today’s world, this is a pre-requisite for the rapid development of national economies. I think the India Economic Summit and the discussions that Indian government and business leaders will have with their worldwide counterparts can help take today’s impressive Indian economy to the next level.
India is rated the fifth most attractive emerging retail market. In your experience, how must foreign investors adapt their strategies for the Indian market?
Each new market provides different challenges to commercial companies, be they wholesalers or retailers. The first challenge for foreign retail companies is the current barrier on foreign direct investment in India’s retail trading! I understand the worries that some people have about the entry of foreign retailers into India. But international experience has shown that the entry of organized retailers who invest in the supply chain of developing economies has always paid off for the local population. When international retailers and wholesalers do come to India, their first job will be to determine which format they will employ. The business and economic models of different formats vary widely. A crucial issue will be to adapt the successful concepts and approaches in other markets to India’s needs.
I think the main elements are a well-defined pricing strategy and a plan that addresses India’s sweeping diversity, especially in the food business. The challenge will be to create assortments that appeal to local communities in a country that is essentially a continent.
Given the very high cost of real estate relative to the price and margin levels, format and location strategies will have to be very different from those used in other markets.
Will the expected retail revolution impact rural retail and how?
Rural India is still very fragmented. In the medium term, I do not see a major change occurring on the rural retailing scene. Rural India will continue to be
serviced by small “mom-and-pop” grocery stores. Some of the initiatives in organized retailing being introduced by some Indian companies are more “semi
urban” than rural.
I would like to add that the advent of modern retailing will have a profoundly positive impact on rural India. The foundation of these strides will be retailers’ organization of the supply chain, and their major investment in an infrastructure that is devoted to collation, storage, grading and packaging of agricultural produce.
These changes will dramatically reduce today’s wastage level in fresh produce by 25 to 40 percent. These losses are the result of a long and fragmented supply chain.
Our experience in other countries and studies in India show that such changes will enable the farmer to get significantly better realization for his crop, and the consumer to enjoy lower prices and better quality. There is another benefit as well: this activity will create a large number of non-farm jobs in rural areas. This is a must if agriculture is to grow in India.
What role can foreign businesses operating in India play in helping to increase agricultural growth and rural incomes which are essential for India’s emergence as a major economic power?
One of the key issues for growth of the agricultural sector is the creation of non-agricultural jobs, especially in rural areas. Foreign businesses can play a very significant role here.
As I said before, foreign retailers will improve the supply chain, reduce wastage and create jobs. But they can do more than that. They will quickly link the Indian farmer to the companies’ global distribution and retail networks. Compared with other nations of the world, India has huge agricultural potential. It has a wide range of agricultural climate zones. It can grow almost anything and can even harvest three crops a year! Right now, though, the Indian farmer does not know what the international market wants, or does not have the ability to offer his produce to the international consumer. Foreign retailers will bridge this gap, and help Indian agriculture diversify and increase incomes.
Other types of foreign businesses, such as food processing and food marketing companies, will also have a significant impact on the agricultural sector.
One of the key issues facing the government is to remove all legal bottlenecks. This need applies in particular to the Agricultural Produce Marketing Committee (APMC) Act. This more than 40-year-old state-level law regulates that wholesale with agricultural products can only be done at “designated market yards” and seriously hampers any business - foreign or domestic - from investing in the agricultural sector. The government should also focus on creating a basic infrastructure like roads in rural areas.
posted by InCar Group Press Room at 14:36
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