Retail Sector

Topics: Retailing, Supermarket, Department store Pages: 8 (2024 words) Published: March 3, 2013
A Look at Pakistani Retail Sector
The significance of retail sector in our economy can be gauged from the data published by Pakistan Bureau of Statistics according to which retail and wholesale sector worth is Rs 3.6 trillion representing around 18% of GDP 2011-12. Further, there are around 2 million retail outlets in a country of 180 million people(India: 15 million outlets for 1.2B people). Out of these retail outlets, approximately 800,000 outlets represent FMCG channels including 'kiryana' stores (mom & pop), 'pan' shops, department stores, medical-cum-general stores and the like.

Retailing in Pakistan remains highly fragmented and is dominated by small retailers, which compete within their own geographic areas in terms of price, personal relationships and product ranges. But nowadays we are seeing a growing number of large retail chains opening multiple new stores every month, especially in the major cities where there is a higher concentration of middle and upper-income consumers

As cities are growing and more people are shifting from rural areas to urban areas there is an increase in the number of particular consumer segments such as students, people with jobs, people going to gyms etc. This social trend has had a direct and positive impact on demand for retail goods. As a result there is a growing orientation towards “branded”, customized and value added goods amongst the Pakistani consumers. While in the past, consumers usually shopped according to price, nowadays consumers pay equal attention to product quality, shopping experience and packaging. Both online and offline media have certainly empowered the consumer a lot. Consumer of today is much more intelligent and aware of the options he or she has.

Low Organised Retail Penetration :

It is important, at this point, to focus our attention on the format of retailing in Pakistan. Some estimates suggest that the organised retail penetration in Pakistan (as percentage of overall retail sales) is around 5%. According to one study of FMCG sector conducted by a consultancy named 'Booz &Co', 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

Entry of Global Retailers :

During the last seven 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 ten stores in major cities including Karachi, Lahore, Islamabad and Faisalabad. We find 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. Two stores, one each in Karachi and Lahore, have been opened by France's Carrefour under the brand name of 'Hyper Star'. Dubai based Majid Al Futaim Group, which has Carrefour franchise in a number of regional markets, plans to expand the network of Hyper Star in Pakistan as well. The opening of such stores has helped shoppers to enhance their exposure in respect of product portfolio, latest merchandising tools and promotions. Such an exposure duly supported by electronic media has been instrumental in shaping shoppers behaviour in Pakistan.

Government as Retailer :

The role of government in retail sector needs to be reviewed...
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