EXECUTIVE SUMMARY

A successful entrepreneurial journey of 35 years mainly outside Pakistan brought a sort of contentment which
anyone can be happy with for the rest of his life. But it was the hope given by the HE Prime Minister, Imran Khan

which incepted a true belief in us that Pakistan can also change its destiny. He taught us that when we don’t

shape our destiny for success, it will be shaped for us by circumstances and other people.

Pakistan gave us an identity. To me, it was a call of duty and our obligation to payback what Pakistan has given
us. It should have been done earlier but what was missing is a true leadership. Imran Khan’s honesty inspires his

followers and makes them have trust and faith in him. These followers are spread across the globe and I am one
of them.

The ordeal of sufferings and miseries of nation is very long. We’ve to make a commitment to use all our

expertise and knowledge in areas where we have been leaders abroad. If we could do so much outside

Pakistan, what can now stop us replicating these successes within Pakistan?

The ebb and flow of Utility Stores Corporation of Pakistan truly reflect the bad governance which has brought
this corporation stuttering towards closure. It’s about more than 200 million Pakistanis and 14,000 employees

who build up hopes. They are willing to embrace change, a change which gives them a confidence that newly
elected government will do it’s best to make Utility Stores profitable.

So with no business or personal interests, I volunteer to spearhead this organization and bring my expertise to

turn around. I have been a part of modern retail evolvement in KSA, UAE and Canada and we know what it
takes to make USCP a nation’s pride again.

This preliminary submission includes our basic business assessment and my views on the reformation of USCP. It

covers the retail landscape, pitfalls of USCP, the crux of problems, administrative support it needs and our action

items with their potential impact. These are off course the macro indicators. Once this report is accepted and

endorsed, the detail micro level business assessment shall be concluded to draft the business blue prints.
Retail Landscape of Pakistan

The retail scene of 6th most populous country is promising with $152 billion USD market cap. With these many
consumers, even a moderate level of economic growth renders a significant increase in the number of middle
class consumers.

Research and statistical data from Planet Retail (global retail consultancy) and Standard Chartered Bank
indicates that retail growth rate is kept between 8-10% with a potential to reach well over $170 billion USD by
2019.

 Third largest contributor to the economy (after agriculture and industry)

 Accounts for 18% of the total GDP
 2nd largest employer (16% of the total workforce)

Grocery Shopping gets a facelift

Modern retail infrastructure in Pakistan has been way slower compare to India and is primarily limited to largest
cities only. On a national level hypermarkets and superstores account for less than two percent of national food
retail sales. However the fact and biggest opportunity that there is already a significantly sized consumer market
available for retail investors is shown by the 40 million people who live in Pakistan’s 10 largest cities.

Grocery shopping, due to, urbanization is moving away from being a necessity to become a family activity.
Consumer shopping preferences, from a ‘product-price focus’ to an ‘assortment-experience’ focus, was noticed
by investors and foreign retail chains. Makro and Metro were the first entrants eyeing on this opportunity.
However their efforts to replicate their international business model did not resonate well with the local
audience as they were only focused on wholesales and shopkeepers with bulk purchase limitations. Naheed and
Imtiaz benefited from this tremendously. There was an instant realization which triggered them remodeling their
stores.

Planet retail estimates that only around 8.4 percent of the country’s grocery retail sales are generated by
modern businesses. Urban consumers prefer shopping as part of their activity at places which are aesthetically
pleasing.

Where does USC Stand in Retail League

With over 5000 stores, Utility Stores Corporation should have a market share of at least 20% but unfortunately
we blame sales decline as a main reason for stated losses in annual reports. We do not identify the causes of
this decline. They are simple; we have failed to attract customers anymore. The above retail landscape clearly
indicates that today USC is nowhere near to cater urbanized population.
Other well established players like Naheed, Imtiaz, Agha’s and many evolving cash and carry stores have
remodeled their stores and product lines based on consumer trends and preferences. CSD is another example
with over 100 stores running profitably and now also serving civilians besides armed personnel.

At once, it was fun for middle income population to visit USC stores, but now it’s only labeled as store for poor
or needy. It does not provide daily essentials. In terms of prices and stores clustering, the strengths of these
stores are unmatched. Yet, at the same time there is a huge requirement of remodeling the stores with multi-
format stores which are purely based on clustering, analytical technique used in stores opening and assortment
decisions based on area demographs.

Revving up USC

With international retail enablement experience of consulting some of the largest retailers like Panda, Danube,
Bin Dawood, LuLu, Dukan, Waitrose and Loblaws, I have a strong and practical experience of major retail
dimensions which are must haves to build a concrete retail business model.

The Appalling state of utility stores corporation is the gap where we do not see this running as a modern retail
organization, missing primarily all of the above six dimensions. We all assume that subsidy itself can save this
organization, but this won’t. It was not there before 2005; there was no subsidy on USC outlets and the
corruption element was at minimum. We’ve seen corruption and embezzlement taking roots with subsidy
introduction. A large part of food subsidies are diverted away from the intended uses. Either in Egypt or
elsewhere, these subsidies are a big question mark. The adulteration of goods, distribution to un-intended
beneficiaries, or selling subsidized foods at a higher price in black markets or open markets are things that we
call system leakages.

We therefore would like to reform this organization by balancing it as a modern retail while ensuring that we
care about moderating cost of living for all citizens. These trade intricacies will be addressed by devising a
refined business plan, which will be a fusion of best practices around the globe like NTUC in Singapore, STO
Supermart Maldives, KF in Sweden, Aldi in Germany & last but not least Maxico’s Tortivales. We are now at
where Egypt’s Tamween or India’s PDS struggling with the subsidy and distribution problems.

USCP’s powerhouse should be its thousands of stores, thousands of people working for it and tons of purchases
which will give it those benefits which other retailers cannot even think about. We would like to save this lifeline
and with a team of consultants, we are well positioned to take this challenging task of USCP reformation.

We do not want to reinvent the wheel. Some of the major steps that I propose include:

Restructuring Subsidies
Cash subsidies from the government shall be requested to stop. Subsidies have to be given in the form of food
stamps or food vouchers which usually provide a way to phase out general food subsidies, as in Jamaica, Sri
Lanka and Jordan. Benazir Income Support Program is already the best example of means test (verified)
targeting mechanism. These food vouchers can be integrated with BISP to transfer and target subsidies towards
the right and targeted beneficiaries. In the later stages as we continue towards progressive path, with
community involvement, USCP can start its own USCP Care fund which can contribute in many dimensions.

Quality Products
The stigma of food adulteration (reported in flour and Baisan) and substandard products (like ghee and edible
oil) brings with it an even greater need for robust food safety procedures. Right from procurement to contract
manufacturing, within warehouses and in stores, we will develop number of programmes to ensure we do not
compromise on this. The seven main building blocks of food safety will include

 Robust Standards
 Regular Audits Of All Facilities
 Product Assurance For Quality
 Food Protection Programme Targeting High Risk Products
 Maintain Awareness And Training
 Food Safety Champions In Store
 Supplier Development Programme For Best Practice
Effective Governance
We plan to institute effective monitoring and evaluation (M&E) throughout the system to help prevent leakages,
fraud, quality control and best practices with services that will make USCP, a customer friendly store.

International experience shows that effective monitoring systems require a strategic focus and political support
more than they require costly investments in Information technology. Prime Minister’s vision is very clear
towards this. Fortunately, we have his endorsement to go all out and ensure USCP is back on track and serve its
real purpose.

Multi-Store Formats
As indicated in retail landscape, 40 million population lives in top 10 cities. They are urbanized and their
preferences are completely different compare to B and C Class cities. Our footfall has gone extensively down
because we did not adapt their standards. With such massive retail infrastructure, no one else is in a good
position to launch multi-store formats. From convenience stores (like 7 Eleven, Cheers) to Supermarkets and
existing Utility Stores, we can target a broader spectrum of population with varying business models. There are
several ways of brand extensions. For example, USC can collaborate with PSO and state owned petroleum
marketing companies to open up convenience stores at Petrol Stations. These convenience stores can be
opened at major walkways along metro and train stations. You can select stores (existing) among
neighborhoods to offer daily essentials at low price and supermarkets to offer complete assortment at higher
prices compare to standard utility stores.

Private Label
To help moderate the cost of living for all citizens, we must provide them with essentials that are not simply
affordable but also meet certain standards. With such sort of retail infrastructure, USC is in a best position to
extend the scope of private labels. On one side, this will help in improving the product mix and on other side, it
will stop traders do profiteering. Private label will also reduce procurement prices by another 18-20%. These cost
benefits can be transferred to the community. We plan to create an economic eco-system by supporting local
food processors enabling them to produce quality goods and implement better manufacturing practices. We’ve
seen this trend quickly growing in Panda & Othaim (KSA), Lulu (UAE), Aldi, Lidl (Germany), Dukan (KSA), Tesco
(UK), NTUC Fairprice (Singapore) & BIM (Turkey)
Product Assortment & Space optimization
Careful selection of all daily essentials and ensuring their availability helps to stay competitive. Assortments are
derived based on store clusters and the associated shoppers. USC does not stock many of the essentials which
leave shoppers go other places to look for these. With a hands-on experience of working with top retailers, we
know the science of assortment and category management. I suggest increasing the product mix to offer quality
goods at great value and savings. Every square inch of a retail store counts, if we do not have the necessary
product, we waste our space and incurs huge cost.

Keeping Prices Low – Cost Optimization

Keeping prices low is the main mission towards moderating cost of living. I suggest for source diversification,
forward buying and contract farming. Not only this will help in reducing costs but also it creates a value system
for our farmers and producers to directly work with USC. This value chain will provide farmers and processors,
an access to better prices directly.

Three primary actions to cut down costs would be:

Extending the Scope of our Distribution Centers: There will be better supplier discounts for centralized logistics
and volume discounts product-wise as suppliers only need to send products to the assigned DCs instead of to
the stores. DCs will also allow for higher volume purchases, enabling us to enjoy volume discounts.

Direct Sourcing: Source directly from manufacturers and producers cut off the middlemen and eliminate trader’s
margin to deliver the cost benefits to consumers. While this may help local producers, it will help farmers to
directly deal with Utility Stores to get better prices.

House brands: Increase the ratio of house brands to reduce costs. This is covered in Private Labeling segment
Smart Procurement: The use of smart procurement through MIS systems with prediction algorithms to forecast
demand through real time visibility of stock movement at DCs and Utility Stores. Better administration with
screening Committees, marketing and price negotiation committees that will work under the board of directors
will help to formulate a system where we can rely on the direct procurement instead of PPRA. Purchasing cycle
is illustrated below for reference.

Loyalty – Customer Engagement

MGR (modern generation retail) framework is the key to create long lasting customer relations to engage with
them. Initially I would suggest offering loyalty schemes. MGR can also adapt the BISP (Benazir Income Support
Programme) cards at utility stores (neighborhood stores) while loyalty card with promos to be offered at new
formats incl supermarkets and convenience stores.

Centralization
Centralization from procurement to stockings helps supermarkets to reduce their prices and improve
profitability. Core benefits include improved service levels, increased front-end SKU holding and supply chain
cost reduction.
Inventory is the “engine: of the retail business; it generates all of the Gross Margin dollars and it is responsible
for customer satisfaction (or the lack of it). But inventory soaks up cash, often lots of it in case of scale where
USC is operating.

Automated systems allow creating a correlation among inventory purchases, its stocking, allocation and
distribution. One of the first few measures would be the regional supply chain networks and exemption of PPRA
rules to directly negotiate prices and create long term relations with suppliers.

Staff Enablement
The workforce of Utility Stores Corporation will be trained through in-house training center that will train them
with courses necessary to understand modern retail practices. This includes but not limited to category
management, logistics, customer services, food safety, product knowledge, merchandizing, retail management
and business administration. We intend to retain all employees and in fact open up more job opportunities for
citizens.

I believe in developing each staff to their full potential. Regular performance reviews will be conducted with zero
tolerance towards corruption and negligence. Each employee at USCP will expect an average of 25 hours of
training per year, equating to over 350,000 hours of training across the utility store business within the very first
year.
Innovation to Stay Competitive

Technology helps to mitigate risks, leakages and administer a system in a perfect way. From store footfall

analysis to clustering and space planning, the use of IT is inevitable. Tagging all items and moving them

according to demand creates a value chain where inventory leakages become near impossible.

Unfortunately at Utility stores, the complete enterprise, supply chain and sales cycle is manual or using very old

technology which results in issues such as transparency, planning, execution at the top level. The sheer size of its
operations demands positioning the right inventory in the right place and at the right time. It needs leverage of

real time demand signals, live insights into its sales, forward looking forecasts as well as understanding the

consumer behavior across regions and seasons.

I’ve a practical experience of implementing all technology cores that address the major retail dimensions

addressed in earlier sections. It has often been assumed that an ERP can do everything or a POS can do the

front end sales. The hard reality is that either of the system alone cannot cover all of these points. That’s one of

the reason that no local IT company has been able to advise systems that can address the problems altogether.

I’ve implemented such systems where shelves are connected with manufacturers to do demand forecasts based
on sales trends and then intimating manufacturers to automate fulfillment. Backstore inventory, warehousing,

space planning, clustering, category management, loyalty, mobile shopping, checkouts are all part of the
systems which are needed to address the Utility Stores Problems.
I suggest Utility Stores shall make a point to achieve the following to efficiently address operational issues:

 A Central control unit that manages end to end supply chain

 Multi period, Multi-echelon unified commerce inventory planning
 Order Optimization
 Root Cause Analytics
 Segmented stores and products strategy
 Greater consumer satisfaction by true space-aware assortment optimization
 Real time Sales information to verify supply chain

This can be completed if we create a central control unit that communicates with all stores in real time for price
updates, POS data, sales trend analysis and inventory look ups.

Central Control
TP.net Centralized (HQ) Handling
Return

Transaction
Storage

Central Server
Transaction Upload
Store 1

Store n
Store
Store Server
Server Store
Store Server
Server

Online
Transaction
Download
PoS PoS PoS
Remote Service Remote Service Remote Service

POS 1 POS n POS

Store 1 Store 2 Store n

The major components would be::

POS SYSTEM

 Modern & Open world class, internationally tested at similarly large chains.
 Comprehensive functionalities (Both at store and HQ Level)
 Brings international best practices
 Advanced and Plug in based adaption concept
 Easy to integrate to 3rd party applications
 Automated Promotion handling
 Shortened User trainings
 Rapid Store Rollouts
 That can increase operational efficiency
 Has strategically planned growth path.
Back End System/s
Back end may end up being one or group of specialized applications that can assist the USC in:

 Procurement Insights
 Store Commerce
 Digital Commerce
 Smarter Forecasting
 Efficient Allocation and Replenishment
 Retail Hardened Warehouse Management
 Omni Channel Marketing/Merchandizing/Sales Planning
 Multi Format support

These systems would eventually help USC to create and build the connective tissue that will put shoppers at the

heart of the retail business. It’s a collaborative retail often referred as omni-channel retail systems for a complete

and comprehensive consumer journey.

Apart from transparency and optimization of the current system, USC must also enable itself with systems that
are capable of demand, forecasting, fulfillment and category management.
Concluding Remarks

With current retail landscape, I see an immense potential within USC. The tremendous and tedious work of
extending USC with 5000 plus branches is already done, where a lot much has been spent in terms of capital
investments. With retail market capitalization increasing every year, it’s time we reap the benefits.

After reviewing the audit reports, doing a macro analysis and going through senate and national assembly
hearing reports on USC, I won’t simply blame declining sales as the only cause of the problem. It’s the way we
managed the store or rather it’s the way we could not evolve with changing dynamics which has brought us to
this stage.

Utility Stores Corporation of Pakistan has a growth potential of tapping an at least 25% of the market share
within the next 5 years. My submission includes some of the measures which if adapted well, will help in
reducing costs and increasing sales. This will help to regain the brand positioning and make USC a household
brand where people can proudly walk-in.

My consulting experience of working with biggest retailers, convenience and corner stores would allow me to
replicate the successful model with our local perspective.

I can firmly assure that I can turn around this corporation into a profit making organization where people from
all walks of life can feel an attachment with a care perspective.

Let us make this corporation “A Nation’s Pride”.