Cash and carry business model


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Cash and carry business model

  1. 1. Cash and Carry Business Model<br />Cash and Carry model was developed by Lawrence Bately (he was entrepreneur and philanthropist) from Huddersfield.<br />Cash & Carry is a wholesale model. Although wholesalers buy primarily from manufactures and sell mostly to retailer.<br />But somebody say that cash & carry retailer directly buys product from producer and manufacturer and then sell to ultimate consumers. Because this business model brings together small, medium and large-sized producers, farmers, agricultural cooperatives and manufacturers, with the dispersed community of hotels, restaurants, caterers, traders, retailers and small to medium business enterprises, under one roof.<br />In this way, cash & carry operators able to make shorten supply chain (decrease the number of channel member) and reduce the high costs associated with a fragmented supply chain (estimated as high as 25% in India). Retailer will also be benefited from it. As they directly buy from producer which leads to high margin and high profits.<br />By creating demand through high margin among small and medium business, cash and carry operates able to buy in bulk quantities which give advantages to its customers. <br />Why companies showing their interest in this segment<br />It is the only retail format where 100% FDI is allowed and Indian Government also recognized the benefits it brings to economies and for various player. "The potential of the business is huge given the fact that the country has a very large number of kiranas, small restaurants & canteens, and a large number of farmers and small and medium business as suppliers to the industry.<br />The cash & carry segment in India is a relatively in small fraction of modern trade. Modern trade in India makes up just about 10%-12 % of the $ 350 billion retail trade in India and there are no benchmark estimates on the potential of cash & carry formats in India. On top of that, the retail landscape is littered with carcasses of C&C players who lost the race, even before it started for some.<br />Shoprite, a South Africa based retail major, one of the earlier movers in the country ran out of steam in late 2000. Though Indian retailers like Future Group and Reliance Retail have evinced interest in this business, but on-ground they don't have much to show.<br />Even international players like Carrefour and Tesco and Walmart had also tested the soil of Indian retail market<br />Metro Cash and Carry India, a 100 per cent subsidiary of Metro Cash and Carry International GmbH, Germany, the first to foray into the country more than five years ago with a store in Bangalore, currently has four stores and is opening a fifth one in Kolkata soon.<br />The Tata group’s Trent, UK retailer Tesco is the latest player to enter the business, after Wal-Mart declared an exclusive tie-up with Bharti Retail last year.<br />“The market potential for the cash and carry business is huge, in fact, as big as the retail sector in addition to the demand from hospitality players, traders and farmers,” said Mr Gibson Vedamani, CEO, Retailers Association of India.<br />The cash and carry model brings the small retailer into the organized channel by helping them buy in an organized manner, points out Mr Vedamani. In addition to this, entrepreneurs and retailers in Tier-II and Tier-III cities would have access to the entire range of products available in the market, he says. The cash and carry business intends to reduce several layers in the wholesale business.<br />Retail giant Carrefour announced its entry into the Indian market by opening its first cash and carry store for wholesale distribution in Dec. 2010.<br />It carry over 10,000 SKU and deal with professional businesses, institutions, restaturants and local retailer<br />The first store is located at Seelampur Metro Mall, spread across 5,200 square metres and developed by Parsvnath Developers.<br />"The potential of the business is huge given the fact that the country has a very large number of kiranas, small restaurants & canteens, and a large number of farmers and small and medium business as suppliers to the industry," a Metro spokesman said.<br />