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Trend of shopping malls in Pakistan

Published on 29th July, Edition 31, 2013

 

Pakistan economic growth might be slow but Pakistan’s retail market is one of the fastest growing economies in the world. Pakistan presents a huge opportunity to the world, to use as a hub provided it provides a few basic facilities. Pakistan’s retail market has experienced enormous growth in last decade. The most significant period of growth for the sector was between year 2004 to 2008, when the sector revenues increased by about 86 percent translating to an average annual growth of 9 percent. Standing on the threshold of a retail revolution and witnessing a fast changing retail landscape, Pakistan is all set to experience the phenomenon of global village. For retail industry, the future is promising; the market is growing, government policies are more favorable and emerging technologies are facilitating operations.

The retail sector through shopping malls is going through the phase of tremendous transformation. The retail sector of Pakistan’s economy is categorized into two segments such as organized retail sector and unorganized retail sector with the latter holding the larger share of the retail market. At present, the organized retail sector is catching up very fast. The impact of the alterations in the format of big shopping malls is fast changing the lifestyle of Pakistani consumers drastically.

Organized retail is reflected in sprawling shopping centers, multiplex-malls & huge complexes, which offer shopping, entertainment and food all under one roof. The last 3-4 years have witnessed the entry of a number of organized retailers, opening stores in various modern formats in metros and other important cities. Organized retailing has begun to tap the enormous market but its share is small. A number of large business houses have entered the retail business e.g. Chen One, Ideas etc. with very ambitious expansion plan. However, opinions are divided on the impact of growth of organized retail in the country. Concerns have also been raised that growth of organized retail may have an adverse impact on retailers in the unorganized sector.

Retailing in Pakistan is gradually inching its way toward becoming the next booming industry. The whole concept of shopping has altered in terms of format and consumer buying behavior. Modern retail has entered Pakistan as seen in sprawling shopping centers, multi-storied malls and huge complexes offer shopping, entertainment and food all under one roof.

The population of Pakistan is witnessing a significant change in its demographics. A large young working population with median age of 24 years, families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the retail sector in Pakistan. Retailing in Pakistan is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing number of global players investing in this sector. Recently Centaurus, a huge shopping mall, has opened in Islamabad, first of its kind in Islamabad. All big names, brands, fast food chains are now there under one roof. Such shopping malls were in Lahore and Karachi but somehow despite a city of bureaucrats, law makers and diplomats, Islamabad waited for years to get such a mall.

Most of the times, sector growth is partly a reflection of the impressive economic growth and overall rise in income level of consumers. But here in Pakistan, things are a bit different. Low tax collection, low economic growth, high corruption and high level of trend of buying branded items have become a hallmark of Pakistan’s economic behavior. Apparels and consumer durables are the fastest growing vertical in the retail sector. Mobile phone as a product category has witnessed the highest growth in the consumer demand amongst all retail products offering, with increasing penetration of telecommunication in towns and villages.

 

In fact, because the malls are offering “sometimes” attractive prices, they are squeezing out the small traders who can no longer afford to compete – thereby sharpening the divide between the rich and poor in Pakistan. Recent opening of Centaurus in Islamabad has virtually took the crowd from Jinnah Supper and Supper Market which were one time two main shopping spots of Islamabad. However, as a matter of fact, both organized and unorganized retail will not only coexist but also grow substantially. The reason is the retail sector is growing on an overall basis hence the benefit of this growth will go to both the sectors and both sectors will progress though the share of organized sector will gradually increase.

With the onset of a globalized economy, the Pakistani consumer’s psyche has also been changed. People have become aware of the value of money, especially when they think about paying tax. Nowadays due to the level of flow of money from known and unknown sources, consumers are becoming well versed with the concepts about quality of products and services. They have practically demonstrating old phrase; easy come, easy go, money jumping from one’s hand bag to others vault and vice versa.

Interestingly, the huge growth in organized retail does not involve a decline in the business of unorganized retail. Pakistan’s retail sector is highly fragmented, consisting predominantly of small, independent, and owner managed shop. The domestic organized retail industry is at a nascent stage. Pakistan got started with organized chain retailing just a few years ago. There are just very few categories, the most prominent being apparel, where organized retail chains have had a significant presence for more than 3-4 years. The major challenge facing the organized sector is competition from unorganized sector Traditional retailing has been established in Pakistan for some centuries. It is a low cost structure, mostly owner-operated, negligible real estate & labor costs & little or no taxes to pay. Organized retail can be translated into efficient supply chain management, which will lead to faster inventory turnaround, resulting in improved button lines.

Due to big shopping malls, consumers have gained on multiple counts. The impact is i) consumer spending has increased with the entry of organized retail ii) consumers are provided with wider variety under one roof at competitive prices. Whereas small shops and markets are affected in the following manner; it does not lost due to entry of organized sector. It has rather gained in terms of business as the overall retail economy is growing. They have also become competitive by adopting improved business practices & technology upgradation.

Shopping malls are also providing employment opportunities to thousands of people. If this trend continues then by providing direct employment to people in various sectors like small manufacturing sector especially food processing, textiles & apparel the unemployment rate will be reduced besides construction, packing, IT, transfer & other infrastructure sectors will also offer employment opportunities. Besides giving employment to professionals & skilled labor organized retail sector also generates a number of jobs for unskilled labor for the tasks of sorting, grading, labeling etc.

Such malls are attracting both at domestic level and global level and several support industries like IT industries, cold chain infrastructure and logistics and warehouse distribution services in order to strengthen the supply chain. Thus overall investment in retail sector is increasing and it helps in economic growth of the country. There is a need of balanced approach to retail where government has to play a very vital role in shaping the future course. Though tradition retail has been performing a vital function in the economy, but it has to shed off its shortcomings and inefficiencies.

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