News and Announcement


Friday, December 23, 2016

The country is now in a better fiscal position and on the path of economic recovery.


Pakistan was included in the list of 'hidden heroes' 10 markets which are expected to register phenomenal growth in retail sector in coming years. There were a few reasons for including these countries in the list: first mover advantage by one or few retail players in the market, product offer & availability, financial credit, regional expansion and multi-format strategy.

More than 50% of Pakistan’s economy is services based, with trade-related and communication services among the largest. Industry accounts for nearly a quarter of GDP, and includes an export-oriented textile sector, as well as chemicals and food processing.

Pakistan currently has bilateral trade agreements in place with different countries including Afghanistan, China, Iran Indonesia, Sri Lanka, Malaysia and Mauritius. These preferential and free trade agreements mean that parties enter into binding commitments to relax access to each others’ markets’ for goods, services, and investment. Pakistan is also a member of the South Asian Free Trade Area (SAFTA), an agreement that aims to establish free trading between its members (a region home to around 1.6 billion people) by 2016.
The companies operating in Pakistan, whether national or MNCs, are making use of retail sectors for their products in accordance with their own understanding and knowledge about local retailing. There are only handfuls of FMCG companies, nearly all of them being MNCs, which have access to 'actionable' data about retail sector in Pakistan. 
Estimates show that the organised retail penetration in Pakistan (as percentage of overall retail sales) is around 5%. According to one study, organised retail (also known as modern trade) penetration in different countries show varying degree of achievement: India 5%, China 20%, Indonesia 30%, Thailand 40%, Malaysia 55%, Taiwan 81% and USA 85%. The organised retail penetration of Pakistan is currently in single digit which reflects the primitive profile of retail outlets. However, this shows that there is ample opportunity to improve the format of our retail sector. Despite the arrival of international players like Metro, Makro and Hyper Star (Carrefour), growth in petro mart and launch of retail chains by local entrepreneurs, the retail universe in Pakistan remain predominantly unorganised due to channels like 'kiryana' and 'pan' shops.

The unorganized retail sector has a number of inherent limitations eg lack of economies due to small scale operations, lower level of functional expertise and lack of financial strength. Such restrictions negatively impact the ability of unorganised sector vis-à-vis product displays, shoppers' messaging and the like. However, it does not mean that unorganised sector does not contribute anything positive towards the society in general. The so-called unorganised sector is generally quick to meet customers' requirements primarily due to their involvement in neighbourhood community. Lower operational costs and 'customer service withwarmth' are also hallmarks of this sector.

During the last few years, Pakistan has witnessed the arrival of a few global players which has set a new direction for local retailing. The merged entity of Metro-Makro now operates a number of stores in major cities including Karachi, Lahore, Islamabad and Faisalabad. There is a sizeable number of end consumers visiting these stores for their grocery and other shopping at these stores; however, bulk sales transactions also take place with small retailers who are supposed to be the real target of these stores.

The liberal government policy towards FDI(Foreign Direct Investment) for retailing coupled with changing buying habits and rising expectations of shoppers will continue to provide enough incentives to global retailers to explore Pakistani market for any expansion plan. There have been unconfirmed reports about possible entry of Wal-Mart, the biggest retailer in the world, in Pakistan retail arena.

The role of government in retail sector needs to be reviewed since it manages, mostly directly, thousands of retail grocery stores and mini super markets through entities like Utility Stores Corporation (USC) and Canteen Stores Department (CSD). USC manages around 6000 stores which sell grocery items of daily use to general public at reasonable prices. We read and hear a lot about public hue and cry regarding quality of products being offered at utility stores; however, we tend to overlook the extent of public service these stores are providing by virtue of their geographical spread in the country. It is indeed heartening to note that organised format retailing has its presence even in small towns through these utility stores. Nonetheless, one cannot overlook the need for bringing more professionalism in running such state run retail chains.

The true potential for business generation through these stores is not being materialised by a number of companies, both national and MNCs. These stores present huge opportunities for implementing various 'basic' trade marketing tools in order to enhance sales volume as well as engage shoppers. Same opportunities exist for CSD stores, though at much smaller scale due to limited number of outlets (around 135).

Unlike many other countries including developing ones, Pakistan does not have many chains of retail outlets. To many it may be quite surprising particularly in view of successful operations of national chains. One such success story is that of Gourmet Bakers, a family venture started in Lahore more than two decades ago. Now this chain of bakers has around 100 outlets nearly all in Lahore selling bakery/confectionary items in addition to their own beverages (Gourmet Cola) and dairy products.

The retail chains in footwear have been operating in Pakistan since long. Servis has got more than 400 outlets selling their products. Different retail formats are being used by Servis (servis stores - 300 plus, servis megastores and factory outlets). Bata has been operating in the country even before independence in 1947. English Boot House with its seven branches (as per its website) has been focusing on Karachi only.

The changing consumption habits and exposure to modern way of life have given momentum to growth of apparel and life style chain stores; Amir Adnan, Bareeze, Al Karam, Ideas by Gul Ahmed, Chen One, Cross Road, JunaidJamshed and few others have become house hold names.

IMF Managing Director Christine Lagarde during her recent visit to Pakistan appreciated Pakistan's economic agenda saying the country was in 'better fiscal position' and had the potential to become top emerging economy of the world.  She also lauded the government for coping with multiple challenges and achieving macroeconomic stability in a short period of three years. 
Undoubtedly, Pakistan is now in a better fiscal position and certainly out of economic crisis but still a lot is to be done on economic front. Due to the economic reforms, she said, Pakistan's foreign exchange reserves had improved, fiscal deficit had come down and circular debt had reduced significantly, besides increase in tax base and revenue collection.


Student at School of Professional Advancement,
UMT, Lahore

© Copyright UMT, 2015. All Rights reserved.

Website Credits: OCM-UMT Back to Top