MAKRO CASH AND CARRY CHANGING LIFESTYLES...

Bringing consumer benefits through low price and high quality...

MUNTAZIR HAIDER
Apr 16 - 22, 2007

DEFINING CASH AND CARRY

There is prevalent ignorance to what Cash and Carry is all about. A widespread thought is that it's just another form of a wholesale market. Actually, Cash and Carry wholesale represents a type of operation within the wholesale sector. Its main features are summarized best by the following definitions:

o A form of trade, where goods are sold from wholesale warehouse either on the basis of self-service, samples (customers select articles using an ordering system) or a combination of both. Settlement is on cash basis and the inventory is carried away by the customers.

o Primary function is to purchase from manufacturers and sell to retailers of all sorts.

o May also perform value added operations

o There are significant differences between "classical" sales at the wholesale stage and the cash and carry wholesaler: These differences are based in particular on the fact that customers of the cash and carry wholesaler arrange the transport of the goods themselves and pay the goods in cash and not on credit.

o In a retail context, the term has a similar meaning: customers pay cash for the goods they purchase (the retailer does not offer credit accounts) and carry them away themselves (the retailer does not offer delivery service).

ABOUT MAKRO

Makro Cash & Carry is the leading cash-and-carry distributor for food and non-food products in the Asian region. It is a high volume, low cost low price; no frills cash & carry wholesaler, with the core customer base being the retailer, caterer and professional in the service sector. The vision of Makro is:

To be the "first choice where professional customers want to do business".

Makro provides the one-stop solution to customer business needs based on a business to business concept. Customers purchasing for trading, reselling or for processing, conversion into other products which he/she will sell (e.g. vegetable purchased by a restaurant) or for use while conducting their commercial activity (e.g. office stationary used by an office, tea used in the canteen). Retailers, hotels, restaurants, caterers and complimentary business users come to Makro to take advantage of wholesale value, choice and service. Cash & Carry means that business customers do their own order picking, pay in cash and carry their purchases away. The advantages over traditional delivery wholesale operations are the better price/performance rate, the scope of the food and non-food product mix, the immediate availability of the merchandise and the longer business hours per week. At present, Makro has presence in five countries in Asia, with a total of more than 70 stores, covering a net selling space of 600,000 m≤. It employs more than 7,500 people and serves hundreds of thousands of professional customers everyday, resulting in an annual turnover exceeding US$ 2 billion. The customer base consists of approximately five million registered professional customers, which stands equivalent to 10 million Makro cards (the cards offered to the B2B regular clients, not to the walk-in customers).

MAKRO'S PRESENCE

Following is a summary of Makro outlets by the end of year 2006:

MAKRO COUNTRIES

NO. OF OUTLETS

Thailand

29

Indonesia

19

Philippines

15

China

05

Pakistan

02

Brazil

51

Argentina

15

Venezuela

24

Colombia

09

Total

168

Pakistan and Chile are two new Makro countries as of 2006. The Makro South America head office is located in Sao Paulo; the head office of Makro Asia is in Bangkok, Thailand. The Makro concept has been successfully introduced in Asia since 1989 with the opening of its first store in Bangkok, Thailand. Makro was the first to introduce modern wholesale and trade concepts in the region. The company has expanded rapidly in Asia by opening more stores and moving into new markets, resulting in a leading position in the cash-and-carry wholesale sector.

ARRIVAL OF MAKRO IN PAKISTAN

The Netherlands-based wholesaler in Asia and South America, launched its first outlet in Pakistan, situated in the financial-hub Karachi, on November 21, 2006. The outlet, named Makro-Habib, is located on Manghopir Road and is a joint venture of SHV (the parent company), the Netherlands and the House of Habib, Pakistan. At the opening, the Managing Director of Makro-Habib Pakistan, Marek Minkiewicz showed intentions of investing $200 million in Pakistan by the end of 2008; this would in-turn offer employment and training to over 4,000 Pakistanis.

A CHALLENGE FOR LOCAL COMPETITORS

This global giant is committed to modernize trade in an unprecedented way in the country. Makro Cash & Carry can simply be described as the wholesale trading, as stated by the company, with an entirely new distribution approach. The advantage as compared with conventional wholesale lies in:

o more competitive price
o scope of the food and nonfood assortment
o the immediate availability of merchandise
o and the customer-oriented working hours

Both the B2B and B2C models are deployed. This open-to-all policy makes the effects of Makro's introduction more widespread. Big retailers like Alfatah, HKB (in Lahore) on one end will lose institutional customers and also many individual customers who are willing to travel down to Ravi road to purchase in bulk. Local retailers near Makro's outlet are also suffering as now customers would get better quality meat, vegetables and other grocery items at lesser price even if they do not buy in bulk. This will make these local shops reduce their profit margins for the benefit of the consumers. Makro in Lahore would be offering such commodities at lower and more stable prices. It is worth waiting a reaction from the big retailers as mentioned in Lahore; and D-Mart, Naheed, Agha's, etc. in Karachi. It is up to these local vendors to take Makro as a competitor or another wholesaler to have purchases from. Most of the product assortments available at Makro include agricultural produce, FMCG, pharmaceutical products, jewelry, fashion clothing, consumer durables and electrical appliances. Institutional buyers like hotels and restaurants have welcomed the introduction of Makro as they can get all they need under one roof and at better prices.

OPERATIONS

The supermarket uses systems of grading and modernizing the supply chain of farm products and is in the process of bringing in a new supply system for retail traders. The supermarket stocks items in bulk and would focus on small- and medium-sized retailers, hotels, restaurants, caterers and various other businesses.

PRODUCTS OFFERED

Makro centers are fully equipped to satisfy the needs of professional businesses such as hotels, restaurants, caterers, canteens, fruit and vegetable vendors, general stores, bakeries, etc. who buy meat, poultry, fresh fruits and vegetables, dairy products, spices, grocery items, oil, ghee, etc. in bulk to meet their business requirements.

FACILITIES AND BENEFITS

The supermarket has a parking space for up to 400 vehicles. The outlet has already registered more than 60,000 retailers. The major benefit of registering is that the retailers are no longer in need to travel to congested wholesale markets in Jodia Bazaar, Saddar and Empress Market; this is actually very time consuming and hectic. The outlet is spread over an area of 120,000 sq feet, where 250 employees would serve customers in different shifts from 6 am to 10 pm, throughout the week. A total of five stores are planned for Karachi.

GROWTH OF MAKRO

The branch in Karachi is the 173rd Makro outlet. The group has already opened another branch in Lahore, and is expected to open yet another one in Karachi on Shahrah-e-Faisal in the current year. Makro has intense growth plans, as it intends to open seven stores by the end of 2007 and 12 by 2009 across the country. This is quite an anticipated move by the giant store, with Metro Cash and Carry planning its arrival in the Pakistani market and speculations of Spinneys also planning its venture, Makro probably is in the phase of stealing the show with the first mover advantage. The long-term vision was the establishment of 30 stores in Pakistan, of which 12 would be established in the short term.

ECONOMIC GROWTH SYMBOLIZED

These projects are bound to bring feast for the local customers as they would have more options to shop from, more intense competition, and more discounts, possibly leading to reduced prices and thus, better affordability and standards of living. It's been a while since the local public has been targeted and exploited by the local area shopkeepers and the shortages of various commodities. These huge vendors bring with them exceptional expertise of satisfying the customers at all costs. This probably is the true impact of globalization that the general public might have been looking forward to see for a long time.

NUMBER OF STORES IN MAKRO CASH AND CARRY

COUNTRY

2003

2004

2005

2006

INTRODUCTION OF MAKRO IN ASIAN MARKET

THAILAND

23

29

29

29

1989

INDONESIA

13

15

18

19

1992

PAKISTAN

-

-

-

1

2006

PHILIPPINES

11

12

14

15

1996

CHINA

4

5

4

5

1996

MALAYSIA

-

-

-

-

1993

TOTAL

51

61

65

69

 

Source: Makro Asia