Retailing in Pakistan

“Pakistan is world’s fastest growing retail market. Pakistan’s growing youth and their
freewheeling attitude toward rising incomes have turned the nation into the world’s fastest
growing retail market”

Bloomberg

With the induction of global brands and outlets, Pakistan’s retail sector at present witnessing a
booming and impressive growth. The local retailers are expanding their boundaries to compete
with their larger foreign competitors. In a report titled 'Hidden Heroes - The Next Generation of
Retail Markets', ten emerging economies, with huge potential for growth of retail sector, were
identified.

Based on a research by Euromonitor, the report identified Pakistan as the world’s fastest
growing retail market, predicting an annual expansion of 8.2% throughout the period ending
2021 with the retail stores to increase by a half to one million during the period.
Pakistan was included in the list of 'hidden heroes', ten 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.
Pakistan is considered a “frontier market,” in that it serves as gateway to land-locked
economies, including Central Asia, parts of Russia and northwestern China. Pakistan’s retail
stores are expected to increase by 50 percent to 1 million outlets in the five years through
2021.

Euromonitor

A Look at Pakistani Retail Sector

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.

After looking at the dynamics of retailing in Pakistan, one confronts an obvious question: how
retailing in Pakistan is going to be shaped in coming years and what are the implications for
changing scenario for one's own business. There are few indications which are likely to emerge
in future; however, it does not mean that local entrepreneurs should take these 'predictions' as
given and let other forces decide their destiny as regards retailing decisions. The future
direction largely depends on how pro-active role Pakistani entrepreneurs as well as professional
working for national and multinational companies operating here undertake.

Pakistan has an unorganized retail sector. There are inherent limitations which include lack of
economies due to small scale operations, lower level of functional expertise and lack of
financial strength. Such limitations negatively impact the ability of unorganized sector to display
its products. Great attention should be paid on the format of retailing in Pakistan.
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.

Local retailers need grooming and training to represent Pakistan at global platforms. The local
chains or brands should arrange trainings of the work force on regular basis. A major challenge
is the counter sale outlet phenomenon to trade marketers who find it extremely difficult to
implement various sales promotion tools like shoppers’ messaging and category management.

Retail sale
This statistic depicts the total of retail net sales in Pakistan from 2013 to 2018.

Statista Research Department

An optimistic retail industry is expected to attract investors

Foreign brands are increasingly investing in Pakistan, with the improving security and economic
situation in the country acting as a major catalyst for investor confidence. The influx of foreign
players has greatly contributed to the growth of several retail channels, including modern
grocery retailers, non-grocery specialists (especially health and beauty and apparel and
footwear specialist retailers), and internet retailing.

New dynamics
According to a research study conducted by Standard Chartered Bank last year, between 2011
and 2015, the size of the retail pie in Pakistan jumped from $96 to 133 billion, a 38.5%
increase in four years. The current value of Pakistan’s retail sector is estimated to be $152
billion, as per Planet Retail (a global retail consultancy) figures. It is the third largest
contributor to the economy (after agriculture and industry), accounts for 18% of the total GDP,
and is the second largest employer (after agriculture), providing jobs to more than 16% of the
total labour force.
e- Retail

Online shopping in the global space has become the norm. Nobody wants to enter a shop to
buy anything now. Store owners have also learned their lesson; if you are not online, you are
not in business.

In Pakistan itself, there are 31 million Internet users, of whom 15 million browse through
mobile devices, according to the Pakistan Telecom Authority. Pakistan’s 125 million active
mobile device users, out of population of 190 million, give it the fifth-largest base of mobile
phone users in Asia, says the Pakistan Telecom Authority. Pakistan’s market size and large
online population lay a strong foundation for Internet retailing. Internet retailing is not new in
Pakistan. It started in late 1997. Since then, several stores have been set up in various
categories, including gifts, books, music, movies, consumer electronics, computers, clothing and
footwear.

The Current State of E-commerce in Pakistan

Pakistan is not left

behind in the
current wave of e-
commerce. On a
daily basis,
international
products are
imported into
Pakistan through
different e-commerce platforms. Of course, the local retailers are also getting involved in the e-
commerce business. No doubt, Pakistani consumers are becoming smarter. They have started
developing their distinct interest and trust in the different e-commerce stores that they
consider reputable.
The success and popularity of these websites have shown that online sales are the future of
retail in the world. Many consumers in Pakistan are embracing the online store and this could
be seen in the amazing turnover of the retail sector.
An encouraging growth of 93.7 per cent has been registered in e-commerce activities as sale
was Rs20.7 billion in Fiscal Year 2017.

There is no formal estimate on online retail sales in Pakistan. That is because most payments
are settled through cash on delivery or third-party payment gateways in the case of
international sales by ethnic clothing retailers and gift shops. Pakistan has no barriers for
international retailers selling their products and services online. U.S.-based Amazon.com Inc.
ships items to Pakistan.

Challenges

Online retail in Pakistan faces multiple challenges, the major one being payment. Although
people use their credit card to make purchases the world over, the most preferred method in
Pakistan is cash on delivery (COD); it is in some cases the only option, the main problem being
there are no payment facilitation vendors like PayPal in Pakistan.

There are many online stores that deliver substandard quality even though they have high-
quality products displayed on their sites. These e-commerce platforms have jeopardized the
trust that Pakistani consumers have in them. Only online stores that offer original products
remain the choice of many online shoppers today.

Yet despite this, online shopping is alive and thriving, whether it is through a website or
through Facebook.

The Future of E-commerce in Pakistan

Many years ago, the idea of going online to purchase an item was as strange as erecting a
ladder from the earth to the sky. It is inconceivable that a time will come that you will seat in
your pajamas at home and open a laptop to make an order for your dress or groceries. Well,
the rest is history. You don’t even need to wait to get to your laptop before you make your
order now. Right on your mobile device, you can open an e-commerce app and make an order
for anything.
Pakistan’s much-awaited entry into 3G and LTE services in 2014 has increased internet
accessibility and will also most likely propel the growth of online purchases.
The future of ecommerce trends lay in the ability of online business to gain their foothold and
establish trust in online shopping and e-commerce initiatives.

Several initiatives are starting with online businesses in Pakistan to reach out to their
potential market, build up their credibility, and garner consumer trust. This is especially true
for risk-averse shoppers. Online brands such as OLX have now begun to set up significant
advertising budgets for mainstream media advertising, as well as targeted digital marketing
initiatives through social media.

Many visionary local players such as Shophive, Homeshopping, ROZEE, Just4girls.pk, and
Pakwheels, as well as giant foreign investors such as Rocket Internet with their diverse online
initiatives such as Jovago, Tripda, and Foodpanda, are all jumping in to establish their market
share in the emerging e-commerce industry of Pakistan, within their respective domains.
Various other local and home operated business have also flourished through Facebook pages
as a result of rapid penetration of the internet and smart phones, COD services and the
overall growing trends of online shopping.
Daraz scored Pakistan’s first 3 billion rupee sale in revenue in 2017. 76% of this traffic was
mobile, compared to 55% in 2016,
attesting to the increasingly
mobile-first nature of Pakistani e-
commerce, showing the growth
and potential of e- commerce in
Pakistan.

All these businesses have emerged

in spite of all the barriers such as
misconception and mistrust of e-
commerce in Pakistan, security
concerns regarding online
transactions, low access to
technology, low literacy rates, and limited infrastructure and logistical support. All in all, this
goes to show that the market and timing is ripe for e-commerce in Pakistan irrespective of a
few hiccups and the industry is all geared up to create massive waves in the country.

The Final Word

Pakistan, being hidden hero of retailing, 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. Others may
not be that lucky.