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The boom of retail markets in Pakistan

Published on 13th July, Edition 28, 2015


Pakistan’s retail sector is growing with great momentum. The retail industries have become a major hub for growing businesses. Though retailers have existed in Pakistan for a long time, the induction of global brands and outlets have forced local retailers to expand their boundaries to compete with their larger international competitors.

The entrance of supermarkets and malls during the last eight years created a new community of enthusiastic shoppers drawn from the upper and middle classes. There has been a massive growth of 130 per cent in private consumption in the last five years (2007-12), even though the GDP growth rate during this period was slow. A sharp look suggests that the economic slowdown has been far from stable, with some sectors flourishing, while others are plunging. Large shopping malls opening up have become common place in cities like Lahore and Karachi. Shopping malls in smaller cities like Dera Ghazi Khan, Sukkur, Sargodha, etc as well are also showing a growing trend.

Customers in Pakistan are buying with great enthusiasm in spite of the fact that inflation has made life of the middle class depressed. More and more malls, which also have restaurants, sport complexes, and a large number of shops, are coming up in large cities of Pakistan. They have well-organized security systems that traditional shopping centres lack.

It is estimated that the average consumer spends up to 42 per cent of his income on food. A Karachi-based study shows that a majority of households with 6 to 8 family members shop at general stores, whereas those with smaller family sizes 3 to 5 shop at large supermarkets. It is also observed that those having an average monthly income exceeding Rs35, 000 shopped at supermarkets. Those with less income chose general stores. Convenient and quality shopping has led consumers towards modern retail shopping options. According to another study, a majority of consumers wants to buy quality products in adequate quantities under one roof. For about 52 per cent of those surveyed, convenient and attractive display was also a strong driving force.

Employment base of industry

India is one of the most attractive destinations for retailers from all across the globe. It is currently the fifth largest global retail market. The Indian retail industry estimated at $435 billion is expected to witness a compound average growth rate of 18.1 percent over the next 4-5 years and reach $ 848 billion.

The employment base of the industry is expected to reach 56 million by 2022 across conventional and specialized retail segments. Shortage of trained manpower at various levels and lack of retail training institutes have prompted several retailers to launch in-house training programs for their staff or setup their own training facilities in India.

Encouraging trend in Pakistan

Trends in Pakistan are also seen quite encouraging, as far as the development of new retail formats and the establishment of a large number of global chains’ retail outlets all across the country is concerned.

There are several giant retail stores and malls, with their branches and middle-size superstores spread across the large cities of Pakistan. The introduction of new domestic and international brands over the past few years has created the need for well-organized shopping malls where they can all be housed together.

The retail business is considered very much profitable. As the retail boom gains momentum, global chains that came in the early phase are now expanding their business. Local retail chains are reported to have experienced healthy growth, and are able to compete with global giants. In a 2011 report, Deloitte included Pakistan amongst the 10 hidden ‘heroes’ of the next generation of retail markets.

The increasing economic contribution of women to the average Pakistani household has also led to an increase in the variety of products marketed to women. Ten years ago, feminine hygiene products would hardly ever advertise. Now there are massive billboards advertising them in cities across the country. Even banks have begun targeting women. Bank Al Habib advertises its savings account products to women through television and print publications.

With a rise in disposable income, especially in the middle class, this sector is now flourishing even outside of Pakistan’s 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 percent.


More new entries

A central Texas-based US fried chicken chain is all set to enter Pakistan. The Golden Chick Restaurant — Chicken Tender-Fried Chicken will initially open three restaurants this year and aims to raise the number to 30 joints in subsequent years. The company signed a ‘letter of intent’ with Crescent Star Foods (Pvt) Limited (CSF), a wholly-owned subsidiary of the Crescent Star Insurance Limited.

The Golden Chick Restaurant would be set up in Lahore while two others would be set up in Karachi and a smaller town. Market sources suggest that Pakistan ranks among the top 20 chicken consumers, with poultry consumption at 834,000 tonnes a year. A person indirectly related to the business presented current numbers which show KFC at the top with 37 per cent market share followed by McDonalds 26 per cent Hardee’s 6 per cent, Fat Burger 3 per cent Johnny Rockets 2 per cent and Burger King 2 per cent.

Introduction of multinational food franchises, initiated in the 1990s, was in the midst of non-existent local fast food restaurants. Today, the trend is spreading fast and the industry experts believe this to be just the beginning for the flourishing industry. Some reasons for the phenomenal rise of the industry are that Pakistani middle-class has welcomed the cuisine due to variety of bargain deals, products, atmosphere, attitude and strict hygiene standards.

Most people associated with the fast food industry believe that the demand is not about to end. With higher spending power of the middle and upper middle classes and the country’s demography that places youth of under 19 (prime consumers of fast food) to constitute an overwhelming 45 percent of the entire population, the market share and margins of most players are assured. Of all the fast food outlets in the business, only KFC was concentrated in chicken while the remaining also catered to other items such as beef burgers.

This sector is a huge job creator, and attracting foreign investment into Pakistan, attracting global brands to the local market. It needs skilled labor, education, training and a retail body to promote the sector and engage the government. The way Pakistan’s retail market is booming is a good sign but some local players need some grooming to represent Pakistan at global platform. There is a need for training of man power, clearing supply chain issues and other related problems. Though global brands arrange trainings regularly, local chains often fail to do this.

Good marketing

Presently along with the high-end deals, franchises are focusing on medium- and low-end deals which target the middle and lower income classes as they constitute a much larger portion of the population of 200 million.

The middle-class is now the priority for many franchisers. McDonalds the middle-class is the real target as they spend more on fast food of their disposable income. With the introduction of plenty of choices available in the industry, the masses have gained awareness and this awareness is the key to healthy competition.

Marketing is the other key for franchises to grow their respective businesses. Previously amid insignificant competition, the restaurants did not give on to the importance of marketing. Tough competition also proves to be a blessing for the consumers because of the choices and great bargain and promotional deals available.


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