Retail in Pakistan An

Overview
Published on February 27, 2016
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Sohail Ahmed
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Sales and Marketing Manager at Sadiq Group

RETAILING LANDSCAPE IN PAKISTAN

Retailing is the set of business activities that adds value to the products
and services sold to consumers for their personal or family use. Often
people think of retailing only as the sale of products in stores, but
retailing also involves the sale of services such as overnight lodging in a
motel, a doctors exam, a haircut, a DVD rental, or a home-delivered
pizza. Not all retailing is done in stores. Examples of non-store retailing
in Pakistan include Internet sales of clothing on Daraz.pk, the direct
sales of cosmetics by Color Studio at malls, DVD rentals at
neighbourhood stores.
Retail in Pakistan An Overview

The Retail landscape in Pakistan, with a population of 196 million, is

constantly evolving and transforming in its dynamism, as consumer
lifestyles keep changing with growing consumerism in the country. The
change is more apparent in the urban centres where the hypermarkets or
supercenters are heavily concentrated in metropolitan cities: Lahore and
Karachi. The retail sector has an immense contribution in the overall
economic activity of the country. According to statistics from the
Pakistan Bureau of Statistics for the years 2011-12, the retail sector is
worth $4.2 Billion, which represents around 18% of GDP. There are
approximately 2 million retail outlets in the country. Out of these retail
outlets, nearly 800,000 outlets represent FMCG channels including
'kiryana' stores (mom & pop), 'pan' shops (kiosks selling betel leaves and
cigarettes), department stores, medical-cum-general stores and the like.
There has been a massive growth of 130 per cent in private consumption
in the five years (2007-12), even though the GDP growth rate during this
period was sluggish.

Pakistans retail sector has embarked on a growth trajectory that can

predict the industry becoming a major hub for growing businesses.
Though retailers have existed in Pakistan for a long time, the induction
of global brands and outlets has really kick-started the sector, forcing
local retailers to expand their boundaries to compete with their larger
international competitors.

With a rise in disposable income, especially in the middle class, this

sector is now flourishing even outside of Pakistans mega cities.
Pakistan is an emerging market where the size of the retail market is
estimated around $42 billion, growing faster than the economy at a rate
of 5.3%. The sector could possibly be a huge job creator, and attracting
foreign investment into Pakistan, attracting global brands to the local
market. All that is needed is skilled labour, education, training and a
retail body to promote the sector and engage the government - joining
hands with stakeholders to create a platform to address local issues and
to present Pakistan at global platforms in future.

A report by Deloitte and Planet Retail included Pakistan in one of the

top ten emerging economies with huge potential for growth of retail
sector on the basis of first mover advantage by one or few retail players
in the market, product offer & availability, financial credit, regional
expansion and multi-format strategy. Another report by the Express
Tribune suggests that the retail sector in Pakistan is booming because of
women whose participation in the formal labour force has gone up from
16.3% in fiscal year 2000 to just over 24.4% in 2011.

Types of Pakistani Retailers

The sector in Pakistan can be broadly classified as;

Local trade such as Aghas, Naheed, Imtiaz, Best way, HKB, MCC etc.

Traditional trade such as Kiryana stores, neighbourhood stores, Jodia

Bazaar etc. The traditional segment is largest in terms of trade.

International Modern Trade (IMT) such as Metro, Hyperstar, Green

Valley etc.
Further classification of local trade, traditional trade, and international
modern trade is given below:

- Departmental Stores: offer a wide range of products to the end-

users under one roof. Consumers can get almost all the products they
aspire to shop at one place only. Departmental stores provide a wide
range of options to the consumers and thus fulfill all their shopping
needs. Their merchandise may include: Electronic Appliances, Apparel,
Jewellery, Toiletries, Cosmetics, Footwear, Sportswear, Toys, Books,
CDs, DVDs. Example: Chase & ChenOne.

- Discount Stores: offer a huge range of products to the end-users

but at a discounted rate. They generally offer a limited range and the
quality in certain cases might be a little inferior as compared to that of
department stores. Example: Chase Up, MCC etc.

- Supermarkets: A retail store, which generally sells food products

and household items, properly placed and arranged in specific
departments. It is an advanced form of the small grocery stores and
caters to the household needs of the consumer. It serves as a one-stop
shopping destination for customers to buy merchandise like bakery
products, cereals, meat, fish, medicines, bread, vegetables, fruits, soft
drinks, frozen food and canned food/juices. Example: Imtiaz, Naheed,
Farids, Aghas, & Al-Fateh.

- Warehouse Stores: A retail format which sells limited stock in

bulk at a discounted rate. These stores do not bother much about the
interiors of the store and the products are not properly displayed.
Example: Factory Outlets of Levis, Fifth Avenue.

- Mom and Pop Store (Kiryana Stores): These are the small
stores run by individuals in the nearby locality/neighbourhood to cater to
daily needs of the consumers staying in the vicinity. They offer selected
items and are not at all organized. The size of the store would not be
very big and depends on the land available to the owner. They do not
offer high-end products and they would carry merchandise like: eggs,
bread, stationery, toys, cigarettes, cereals, pulses, milk and medicines.
About two third of FMCG outlets consist of neighbourhood 'kiryana'
stores, commonly called general stores, which sell multiple brand
grocery items of daily use. Such outlets are generally owned by a single
individual and managed by him alone or with some help from his family
members. The bulk of FMCG business comes from these 'kiryana' stores
due to large numbers, location (proximity to shoppers), convenience and
long business hours.

- Specialty Stores: These specialize in a particular product and

would not sell anything else apart from the specific range. Specialty
stores sell only selective items of one particular brand to the consumers
and primarily focus on high customer satisfaction. Example: Khaadi,
Junaid Jamshed, & Out Fitters.

- Convenience stores: Examples include Shell Select and Stop

Shop at Pakistan State Oil (PSO) stations that offer customers easy
access and convenience an easy stop-and-shop solution while you wait
to get fuel for your car.
- E Retailers: Customers can now enjoy shopping while sitting at
home. They can place their order through internet, pay with the help of
debit or credit cards/or avail the Cash-On-Delivery service and the
products are delivered at their homes only. This kind of shopping is
convenient for those who have a hectic schedule and are reluctant to go
to retail outlets. Examples: Daraz, Kaymu, TCS Connect, OLX and
ShopDaily.

- Other retail channels: include 'pan (Beatle Leaves) shops, petro

marts, department stores, medical-cum-general stores, book shops, road
side eateries and other specialty shops. Grocery stores include Meat One
and K & Ns (specializing in meat and chicken respectively), Simply
Sufi and other neighbourhood stores that offer convenience and
availability of grocery and dairy items.

- Multi format retailing: With consumer business taking a more

important role in driving economic growth, in the next five years the
retail industry will come into an era which opportunities and challenges
coexist. Several changes will take place, while industry players are
trying to establish their core competence in the market with diverse
consumer tastes and intense competition. This will give rise to an era of
multi-format retailing an inevitable future trend of the industry.
Consumer needs are becoming more individualized and diverse along
with the rising middle class in Pakistan, driven by the notable increase in
household income. Consumers are less price sensitive compared to
previous times, while they have become more aware of the brands and
cost-effectiveness of the products. Reasons for implementing multi-
format retailing strategy would include: meeting the diversified needs of
consumers, reducing competition pressure and diversifying operating
risks and achieving differentiated competition.

- Private label development: Retailers have an advantage over national

brands. They own the canvas where consumers shop. If they listen, they
can lead the shoppers to a better experience and lay the foundation to
build a true store brand! Price is key: it is the fundamental reason why
consumers buy and choose a private brand. Otherwise, they would
probably go with their usual, favourite brand. Originally, private brands
packaging designs were poor, which rather than reflecting lower prices
actually made consumers suspicious about product quality.

The economic downturn prompted many consumers to try private label

goods for the first time, and once they did so, they discovered that not
only was the pricing right, but the quality of the goods met or exceeded
expectations. Regardless of the pace of economic recovery, retailers
continue to have a tremendous opportunity to convert shoppers to
private label for the long term. Customers no longer view private
label/store label as a trade-down and, more often, see private label as
just another branded option8. Example: Poonam Rice of Imtiaz and
Metros OK and Fine Food Brands.

- Traditional grocery retailers continue to dominate

retailing: This is due to the extremely high number of retail outlets in
the country, with hundreds of thousands of small independent grocery
retailers in operation. These traditional grocery retailers performed well
during the review period in spite of their old-fashioned facilities and
basic approach to business, which is in fact strength for traditional
grocery retailers due the deep roots of these retailers in the social fabric
and financial mind-set of Pakistani people. Modern grocery retailers,
meanwhile, also experienced healthy growth during the forecast period
as the channel moved into less densely populated areas. Modern grocery
retailers offer a wide range of brands at competitive prices in order to
attract both affluent and middle-class Pakistani consumers.

- Independent retailers aggressively compete with

modern grocery retailers: Pakistans modern grocery retailers
such as Hyperstar, Metro, MCC and Imtiaz represent a potential threat to
independent players as due to their wide ranges of grocery and non-
grocery products at attractive prices. In order to compete with these
increasingly popular outlets, local rivals have begun to engage in
aggressive advertising campaigns using both electronic and print media.
Retailers such as Gul Ahmed, Junaid Jamshed and Sana Safinaz, among
others, also use billboards in major cities such as Karachi, Lahore and
Islamabad, also extending their marketing campaigns to smaller cities
such as Gujranwala, Faisalabad, Multan and Rahim yar Khan.

-Hypermarkets value sales growth rate outgrow

traditional grocery retailers: In terms of actual sales, traditional
grocery retailers continued to dominate grocery retailing in 2013.
However, value growth in modern grocery retailers outpaced growth in
traditional grocery retailers over the entire review period due to rising
income levels, a sense of modernization, the need for greater
convenience in terms of one-stop shopping and heavy marketing
campaigns by Pakistans leading hypermarkets.
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