This may be an anticipated farewell.
With 95 stores across 59 cities, apart from Beijing, Shanghai, and Guangzhou, the brand's presence in other cities averages one or two stores per city, hardly making a strong impression.
So much so that until the news of the business sale gained traction, some netizens on social media had an "epiphany"—"So Metro is a supermarket! I've seen it on the roadside but thought it was a brand similar to Michelin tires."
- A Glorious Past, a Fire Sale Present
This week, foreign media reported that German retail and wholesale supermarket group Metro has begun a tender to sell its business in China, with the deal reportedly valued at approximately $1.5-2 billion.
There is no smoke without fire; this is not the first time Metro has been rumored to be "selling itself." This time, the "rumored suitors" have shifted from Fosun International and Tencent to Alibaba and Suning.
A look at Metro Group's 2017-2018 fiscal year report shows that Metro China's mainland subsidiary, registered in Shanghai, generated revenue of €2.65 billion for the fiscal year, equivalent to approximately $3.03 billion at current exchange rates.
If the valuation of $1.5-2 billion for the China business transfer is true, it is indeed a "tearful fire sale."
The reason for the "fire sale" may lie in Metro's less-than-impressive performance. In 2018, Metro's net revenue declined by 1.6% year-on-year, and EBITDA fell by 5.3% year-on-year. Profit during the period only increased slightly by 0.9%.
Compared to Metro Group's total revenue of €36.53 billion last year, the China business accounted for only 7.3%, about 1/14, hardly a major contributor. In terms of revenue scale, mainland China ranks after Germany, France, and Russia, making it Metro's fourth-largest market globally.
Therefore, it is fair to say that Germany and Europe as Metro's business focus remain unshakable, especially considering the population sizes of these major markets. Giving up on China is not hard to understand.
In Germany itself, Metro's story is much more impressive.
In 1964, during Germany's vibrant economic recovery, a pair of brothers surnamed Schmidt, together with a family that ran an electrical wholesale business, opened Metro's first comprehensive Cash & Carry wholesale store in Mülheim, in the Ruhr region, Germany's industrial heartland.
"Cash & Carry" differs from traditional wholesale shopping by allowing customers to select goods themselves in a warehouse-style store, pay in cash, and take them away. It is considered a self-service wholesale format, primarily targeting small and medium-sized retailers, hotels, restaurants, and government agencies.
Metro's first store covered an astonishing 14,000 square meters, equivalent to two football fields. At the time, this was groundbreaking for a wholesale store. Perhaps inheriting the heavy industry genes of the Ruhr region, the entire store was set up like a huge warehouse workshop, with various goods neatly stacked on storage shelves.
This new sales model quickly captured the German consumer market. Within just a few years, similar stores appeared in major German cities—Berlin, Munich, Hamburg, and Düsseldorf. At this time, Metro also introduced a revolutionary service model—the direct mail system.
This meant that registered Metro customers received tailor-made product advertising materials every week. This simple move both optimized the shopping experience and stimulated potential consumer desire.
With this service model, Metro began a path of rapid expansion. In 1968, Metro Group opened its first store outside Germany in the Netherlands under the "MARKO" brand, and then began to enter other European countries.
In the 1970s, Metro grew through acquisitions, the most famous being the purchase of a 24.9% stake in the century-old German department store chain Kaufhof. In the 1980s, Metro led industry trends by not only selling computers in its stores but also introducing computers into systematic management of sales and inventory data.
As a result, the merchandise management system was regarded by Metro as the pillar of its retail company.
In the 1990s, Metro reached its peak, becoming the second-largest retail and wholesale supermarket group in Europe and the third-largest globally. The two names ahead of it were Walmart and Carrefour, which are more familiar to Chinese consumers.
It was also in the 1990s that Metro entered the Chinese market, bringing the Cash & Carry store model to China.
In 1995, Metro Group partnered with Jinjiang International (Group) Co., Ltd. to establish Jinjiang Metro Cash & Carry Co., Ltd. in Shanghai. The latest data shows that Metro holds a 90% stake in the joint venture.
In 1996, Metro opened its first store in China in Putuo District, Shanghai. Around the same time, Carrefour and Walmart also began their "Chinese life."
Unlike Carrefour and Walmart's "retail store style" targeting C-end customers, or IKEA's "Nordic minimalist style," Metro continued its typical "industrial warehouse style" in China—a somewhat unconventional shopping environment for Chinese people who prefer lively and festive atmospheres.
In terms of store location, due to the large floor area requirements and to save costs, Metro often chose roadside locations away from city centers—a typical European or American shopping scenario rather than a Chinese one. Additionally, there was the "membership system" that Chinese people found stubborn to the point of being dogmatic.
These factors made it difficult for Metro to make choices at every crossroads in the Chinese retail market.
- Choose Offline or Online?
It can be said that when Metro first entered the Chinese market, although it tried to provide professional assurance in the service quality of its "Cash & Carry" sales model, its service characteristics meant it did not target China's most promising personal consumer market.
Moreover, Metro has now encountered the massive transformation of China's retail industry.
Over the past decade, the major trend in China's retail industry has shifted from offline to online, and now gradually back to offline. For many foreign retailers, such changes have been too volatile, leading to a succession of exits from the Chinese market.
Compared to its peers, Metro's response was not slow, but following the new retail trend involved both aggressiveness and conservatism; there were well-timed transformations and awkward belated realizations.
In 2010, Metro partnered with Foxconn to venture into consumer electronics chain stores—Media Markt (known as 万得城 in China)—but just three years later, Metro closed this business. Regarding the failure of Media Markt, the company stated in an announcement that it faced fierce competition in the Chinese market and found it difficult to profit. At that time, Gome and Suning dominated the market, putting Metro at a natural disadvantage in timing.
In 2014, Metro made a "forward-looking" judgment: believing that China's retail industry would focus more on small formats, it began to experiment with convenience stores, treating them as a "key business." In 2016, Metro opened four "合麦家" convenience stores in Shanghai, similar to Lawson and FamilyMart in product types, locations, and models.
However, from the plan's proposal to the closure of all stores, it was another failed three years. According to Dianping data, in 2017, there were over 15 convenience store chains in Shanghai with more than 10,000 stores. It is easy to imagine the difficulty of trying to gain a share with a newly created brand.
The successive failures of new businesses dampened Metro's confidence in aggressive offline expansion, which was also reflected in the conservative expansion of its traditional stores. In recent years, Metro's expansion speed has been maintained at about 3 to 5 stores per year, extremely slow, and locations have been far from city centers.
Metro has also had its glorious moments.
In 2015, Metro partnered with Alibaba to open a store on Tmall Global, cooperating in product supply chains, cross-border e-commerce, and big data. That year, during Tmall's Double 11 event, Metro sold 2.35 million liters of imported milk, achieving double growth in online sales and gross profit, with overall sales increasing nearly 300-fold.
But in the long run, Metro never placed its focus on e-commerce, and the growth brought by this business was minimal.
- Choose B or C?
With a To B store positioning and a To C membership system, Metro now wants to have both, but it just can't.
Nanjing's first Metro store opened in 1999. Initially, membership cards were only available to professional customers, with the card indicating the industry, such as catering or enterprises, and requiring relevant qualification certificates. The rules were also very strict: bringing children, wearing slippers, or not having a card meant you couldn't even enter the door.
Such "aloofness" made many individual consumers dissatisfied and somewhat puzzled.
China's retail market is a mass consumer market, and Metro seemed to be a maverick. However, at that time, Metro was at its peak, so such "customer rejection" was somewhat understandable.
Perhaps finally realizing the principle of "the masses have great power," Metro began promoting the "Metro Friend" membership card around 2013, which all consumers could apply for with their ID cards. However, the annual fee of around 200 yuan still deterred many people. After all, in the consumption environment of that time, few were willing to pay for "membership."
In recent years, with the shift in consumer attitudes and the success of high-end membership stores like Sam's Club, Metro has felt immense pressure. As a result, it has lowered its stance, constantly changing membership thresholds and offering temporary cards to attract new-generation consumers.
But Metro, accustomed to doing business with enterprises, really doesn't understand today's consumers. Industry insiders believe that China's retail environment is unique, with high density of competitors, leading to intense competition and impacting membership stores. Only by more precisely matching the detailed consumption needs of members can membership stores maintain sufficient stickiness and growth space.
Simply put, corporate clients focus more on cost considerations, while ordinary consumers want high cost-performance products and a good shopping experience.
When a person stops being self-centered, youth ends; when a person starts living for others, they begin to mature.
Metro's procurement standards typically focus on macro-level brand and product attributes, easily overlooking micro-level product grades and quality. This is a service and operational habit developed under a B-end strategy. Over time, it naturally fails to match the more detailed needs of new-era consumers.
Driving half an hour to the urban-rural fringe, spending several hours in a factory-sized supermarket, and possibly leaving empty-handed—Metro didn't fail because of the membership system; it simply couldn't afford to do membership properly.
Of course, Metro remains optimistic. The "retail + dining" store model is its new attempt, aimed at increasing experiential consumption and promoting cross-selling of products.
Typical successful cases of this model in the industry include IKEA and Yonghui Superstores' Super Species.
- Choose Alibaba or Tencent?
In recent years, the Alibaba and Tencent camps have waged an offline "acquisition war," from shopping centers and supermarkets to hypermarkets, almost carving up most of the offline retail giants in the market.
The Tencent camp mainly includes: Yonghui, Carrefour, Wanda, Bubugao, and HLA. The Alibaba camp includes: Intime, Sanjiang, Gaoxin, Suning, and Bailian.
Previously, Alibaba had twice attempted to acquire Metro, but the deals were fraught with twists and turns, largely due to disagreements over control. Alibaba's ambition is clear: to build its new retail empire by heavily investing in and acquiring mature offline large retailers to transform traditional stores and collaborate on new retail projects.
If Alibaba is like an emperor wanting to firmly hold power, then Tencent is more like a strategist, providing strategic support to each company it invests in: Tencent's newly announced Cloud and Smart Industry Group (CSIG) last year includes matching smart retail industry solutions.
Metro must be quite conflicted now.
Choosing Alibaba means handing over everything. But Metro has had multiple business collaborations with Alibaba before, and the few successes in e-commerce battles were supported by Alibaba. Moreover, Alibaba has rich experience in transforming and upgrading traditional retailers, as seen with Intime and RT-Mart.
Choosing Tencent could further consolidate its B-end advantages. Tencent is currently launching industry-wide solutions based on Tencent Cloud. From the cases after investment, Tencent often positions itself as a "tool" in retail, rarely intervening in actual operations.
After going around in circles, the question returns to the essence: where is Metro's future? Choose online or offline? Choose B-end or C-end? However, regardless of the outcome, this is already a question for Alibaba or Tencent to consider.
Source: 长三角NewBrand (ID:CSJ_NewBrand)
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