Moving Goods

Traders as an Economic Factor: More Than a Target Group

Small grocery shops, kiosks, street food sellers – they make life easier for end consumers and in some places they mould entire neighbourhoods. An overview of what makes up the Trader market worldwide, what regional differences there are and why independent Traders are particularly important to METRO.

Independent Traders are local suppliers, saviours in times of need when a hunger pang strikes late in the evening, and often also a contact point for a quick chat for many residents. But the self-employed and their shops, which METRO groups under the collective term Trader, are not only characterised by their proximity to the end customer. Depending on the country and local conditions, they represent an economic factor that must be taken seriously: among other things, Traders benefit from the trend towards convenience products and – compared to the hotel and restaurant industry, for example – are less affected by restrictions on their business activities resulting from the coronavirus pandemic. On the contrary, as an alternative to supermarkets with their long queues, they have even been able to make up for the loss of customers and in some cases increase their sales, for example in Germany and Eastern Europe.
$name

What makes up the Trader market worldwide ...

But what makes retailers so interesting as a customer group – and so relevant as institutions? The Trader segment includes independent resellers such as small grocers, kiosks, street food sellers and petrol stations. What makes the Trader market so attractive for wholesalers: ‘There is a high level of local competition between many independent suppliers,’ says Daniel Quest, who is responsible for Global Trader Franchise at METRO. ‘In addition, the number of addressable customers is high.’ Among the reasons for this is certainly the fact that only 20% of end consumers are willing to drive more than 10 minutes to meet their basic needs. The remainder prefer to make purchases in their immediate vicinity and choose several small purchases rather than one large weekly one.

Compared to supermarkets and hypermarkets, the Traders’ shops have a high ‘convenience character’, Quest adds. This means that convenience and speed of purchase are the priorities for end customers. Instead of 20 types of pasta sauce on endless, unattractive shelves, there may only be 2 – but they are exactly the ones most customers want. The prerequisite for this: to know and continuously evaluate the end customers’ wishes. After all, with only 3 to 5 items, their shopping baskets tend to be rather small. On the other hand, customers come more often – if things are going well. And above all, they come again and again. However, the precise items that end up in their shopping bags differ from region to region.

... and what regional differences there are 

In Central and Eastern Europe, for example, drinks, quick snacks and cigarettes are the main items that pass across the counter in small corner shops. It is quite different in Pakistan or India, where more than 40% of sales are generated with fruit, vegetables and other fresh produce, says Quest. In Poland, on the other hand, a refrigerated counter with fresh sausage products is standard equipment in many owner-managed shops – even if the shop is small. More than 40% of retail outlets here are less than 99 square metres in size.

$name
$name

Small shops are also part of everyday life in Romania. Urban and rural life differ, sometimes considerably, in terms of purchasing power and consumer habits. In rural areas, where about 50% of the population live, most people grow and process their own fruit and vegetables at home. Many consumers prefer the traditional neighbourhood shops here – not least as a meeting place. At the same time, organised modern retail is spreading and international chains are on the rise. Which makes it all the more important for independent retailers to attract customers with professional shop design and efficient processes.

In Russia, traditional markets and small, owner-operated shops are estimated to account for around 30% of food retailing. But competition is enormous and the battle for the 145 million potential customers is fierce. At the same time, demand for healthy, innovative food is growing (84% say they have recently changed their eating habits), although many buyers are very price-conscious. And convenience food is also a trend in Russia. However, the size of the country alone means that eating and shopping habits differ. ‘We have customers in Russia who can only be reached by train every 2 weeks,’ says Trader expert Quest. ‘The conditions for a business are totally different when you operate in an area like that.’

Digitalisation is progressing at different speeds

Differences are also evident in other Eastern European countries. While people in Slovakia generally prefer to do their bulk shopping in hypermarkets at the weekend, smaller, closer-to-home options are the first choice for convenience purchases. In 2019, 14% of Slovakians also bought food online, which is a remarkable growth compared to the figure in 2015 (5%). In Serbia, the average shopper tends to buy smaller quantities more often, and in small markets or street shops nearby. E-commerce is still in its infancy here: in 2018, 54% of people had never shopped online. E-commerce is experiencing a real boom in the Czech Republic, with a growth rate of 50% in 2017 and 70% in 2018. The trend here is mainly in large cities, although many consumers want to buy online even in less developed regions. Small outlets, bakeries and the like are already spreading around Prague. Convenience stores are also said to have a high potential here.

What is franchise?

‘Franchise’ refers to a contractually regulated form of organisation. The franchisor grants the independent franchisees from the Trader segment the right to distribute goods or services using a name or trademark. METRO offers different franchise concepts in different countries.

More: Franchise for independent Traders
$name
On the subject of digitalisation and growth, it is also worth taking a look across continental borders. In Pakistan, for example, around 800,000 of the approximately 2 million shops are small, owner-managed shops. According to a Euromonitor survey, Pakistan is set to become the fastest growing market in the coming years, with 50% growth predicted by 2021; massive growth in consumption is already being observed. The widespread use of smartphones is expected to boost e-commerce in particular. India is also dominated by so-called unorganised trade, i.e. small, owner-managed neighbourhood shops. Here the ‘Kiranas’ account for more than 90% of retail sales. They are also experiencing an increasing need for digitalisation – for example, in terms of payment options. (More about retail in India: METRO Country Portrait India.)

How METRO supports independent Traders

METRO is responding to trends like these by expanding, among other things, its e-commerce offerings for the sector. METRO has long supported independent Traders with digital solutions, for example in India. Another form of support is franchise models, through which METRO offers self-employed people a professional framework for their business, including brand identity, own brands and advice.

‘Retailers are required to combine a range of products with specific services,’ says Quest. ‘METRO creates offers and solutions to make our customers competitive.’ As part of its franchising concept, METRO intends to further expand the Trader franchising model in countries such as Poland, Romania and Russia. In addition to products and marketing support, partners also receive training opportunities and other services. This makes the franchise segment one of the biggest strategic growth drivers for METRO. A franchisee purchases on average 3 to 4 times more frequently, and in larger quantities, from METRO than non-franchise customers. In fiscal year 2019/20, the METRO franchise model numbered more than 8,100 shops in 9 countries.

Key factors: price, margin – and personal contact

One thing that unites the independent retailers in any case is that ‘price and brand are key factors,’ says Quest. Customised products, such as menus in the hospitality industry, are a no go in the Trader business; competitors’ product ranges are fairly comparable. So, in order not to compete entirely on price, they need to create unique selling points. This may be freshly brewed coffee to go, to compensate for the lack of a good café nearby. Or personal contact – serving as a ‘therapy session’ and meeting point in the village. ‘Basically, there are 4 essential aspects that make a trader successful,’ Quest says. ‘First, the personal touch; second, the right and correctly positioned range of products; third, the location; and fourth, additional services such as lottery tickets or a parcel acceptance point.’ In short: everything that makes the life of the end customer easier. And that applies worldwide.

Dimitrios Tsanakas runs the most popular kiosk in Dortmund - a drinking hall that never sleeps. It is open 365 days a year. Tsanakas heart beats for its customers. The customers heart also for him. When he was in hospital, many came to visit him. They are there for each other.

Who is Serving You in Your Times of Need?


Also Interesting