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Wal-Mart in Pakistan: An impetus to fast emerging retail business

Published on 19th Dec, Edition 51, 2016

 

Country presents huge opportunities in areas of organized retail format

Since the modernization of global retail industry in 1990s, the international chains are exploring opportunities in turning this most impressive economic component of modern business cycle, a key participant of retail sector.

The retail industry is a sector of the economy that is comprised of individuals and companies engaged in the selling of finished products to end user consumers.

Market analysts told PAGE that international retail and wholesale sector players are showing interest in Pakistan that possesses huge potential for growth. Few years ago, the country’s retail sector was mere $5 billion but now it has crossed the mark of $50 billion.

While over 50 percent of Pakistan’s economy is services based, shopping malls, has become common place in big cities like Lahore, Islamabad and Karachi.

Despite the arrival of international players like Metro, Makro and Hyper Star, growth in petro mart and launch of retail chains by local entrepreneurs, the retail universe in Pakistan remain predominantly unorganized due to channels like ‘kiryana’ shops.

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; however, bulk sales transactions also take place with small retailers who are supposed to be the real target of these stores.

Unlike many other countries, 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. Such success stories are that of Gourmet Bakers, K&N, Fazal Din.

Another success story of international chain is of Hyperstar. Giving details, a spokesman of Hyperstar, Lahore said, “Hyperstar reputation has been built, above all, on the quality and freshness of the products, customer service and competitive prices. Selling goods with quality choices in food, personal care, communication, leisure, entertainment and household goods while continually meeting the needs of local consumers with the ranging from needed to refrigerate food to clothes under one roof, is trendy as shoppers pick specialized stores.”

He said Hyperstar’s own retail brands are a significant medium for brand differentiation and customer loyalty, contributing substantially to the organization’s growth in sales. “We are totally focused on meeting the expectations of our customers. Our mission is to be the benchmark in modern retailing in Pakistan.”

Experts said there is ample opportunity to improve the format of our retail sector. The unorganized retail sector has a host of inherent limitations like lack of economies due to small scale operations, lower level of functional expertise and lack of financial strength, they said, adding: Due to gradual increase in chain of retail outlets, growing petro marts and larger grocery stores.

According to them, 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 are rumors about possible entry of Wal-Mart, the biggest retailer in the world, in Pakistan retail arena. With the arrival of international player, there would be major implications for local retailing. If some other major international retailers decide, in coming years, to enter Pakistan, not only the country would get substantial inflow of foreign investment but people would be able to get quality products at reasonable rates.

 

On the other hand, 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 6,000 stores which sell grocery items of daily use to general public at reasonable prices. We heard a lot about public hue and cry regarding quality of products being offered at utility stores. It is indeed heartening to note that organized 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 materialized 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.

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, Junaid Jamshed and few others have become house hold names. Further, chains of pharmacies coming up mostly in urban town in recent years have been instrumental in building buyers confidence as regards medicines. Such pharmacies have standardized set-up and are managed by qualified professionals. Servaid, Fazal Din, Mahmood Pharmacy, Zaka Pharmacy are some of the prominent chains of pharmacies operating in the country. These pharmacies do carry variety of fast moving goods in addition to medicines and other medical items.

The role of global retailers currently operating in Pakistan will continue to grow both through same store growth and additional stores. However, the growth rates in coming years may not be very different from current growth rates which, by any standard, are quite impressive. Existing chain of retail outlets irrespective of channel (grocery, pharmacy, apparel etc) will continue to expand their network though their focus is likely to remain on first (and in few cases, second) tier towns. Franchise based retail outlets are likely to grow both in numbers and their significance. Some financially strong local group may initially launch some flagship outlets and following the success of those outlets they may start entering into franchise arrangement with existing stores. This model, if run professionally, may be a win-win situation both for the franchiser (readily available and willing retailers) and franchisee (outlet brand name, standardized shop presentation, reliable supply chain, training etc).

Pakistan needs more professional people to manage affairs of retail sector. First challenge is to provide adequate training to existing small scale entrepreneurs and work force if we have to move to organized retail format in true sense. Any FMCG company which take the lead in providing basic but formal training in, say record keeping, storage techniques and merchandising, may be able to develop loyalty among retailers. Further, it will lessen the workload on trade marketing teams of companies selling the products at the outlets.

Pakistan presents huge opportunities particularly in areas of organized retail format. Pakistani entrepreneurs and professionals need to take advantage of these opportunities. Those who take initiatives, have clarity about their destination, formulate their retailing strategies and implement the same, will get first mover advantage. Time is ripe for exploring the potential; of this sector.

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