Retailing

A place of business usually owned and operated by a retailer but sometimes owned and
operated by a manufacturer or by someone other than a retailer in which merchandise is sold
primarily to ultimate consumers.

Introduction
Retailing is a specialized marketing activity. It comprises all business activities involved in
the sale of goods and services, directly to the ultimate (final) consumer for personal, family
household or non-business use. Retailing is the last stage in a channel of distribution. "The
ultimate objective of al1 marketing endeavors is to reach the ultimate consumer with the
product he needs at the time he wants, at the price which suits him. Retailing augments in the
achievement of this ultimate objective."

Roles

They collect a variety of products and services from a wide variety of suppliers and
offer them for sale.

They provide information to consumers, as well as to other channel members.

They frequently store merchandise, mark prices on it and pay for items prior to,
selling them to final consumers.

They conclude transactions with the final consumers.

History of Retailing in Pakistan

Retailing in Pakistan, and for that matter in most of the Third World Countries, has
traditionally been a small scale business, meant mainly for small and less or not educated
entrepreneurs. Till late sixties, large scale retailing institutions like Super Markets,
Departmental Stores, and Discount Houses were unheard of in Pakistan.
However, utility Store and canteen stores Department, a type of mini super markets, are
functioning since the time of independence. In late sixties, in Lahore, a super market chain
with the name of COOP stores was introduced.
In the rural areas of Pakistan, the retailing still follows the same traditional "HUTTI' system
small shops which provide very necessary daily use items to the villagers from available
stores. These days almost all grocery items, cosmetics, vegetable ghee, and other essential
items including shelf medicines are available on HUTTIES.
In the urban areas of Pakistan, almost all types of related outlets exist. The main retail urban
outlets are:

Small retailers

Large retailers/ wholesale retail stores

Department stores

Super markets

Utility stores

Medical & general stores

Specialty stores

Juma, Mangal or Itwar Bazars

SMALL RETAILERS:
These are very similar to HUTTIES found in the rural areas of the country. Normally these
types of stores are located in suburbs of the cities and towns and take care of the demands and
requirements of the people living in that area.
LARGE RETAILERS/ WHOLESALE RETAIL STORES
These are few in numbers as compared to small retail stores. These are the types of stores
which, in Karachi, were originally found in few areas. However, with the development of the
city, such like stores were opened in several areas.
DEPARTMENT STORES:
A department store is a large retailer employing about 25 or more people and usually selling a
general line of apparel for the family, household linens and dry goods and furniture, home
furnishings appliances, radios, and televisions. It is organized into separate departments for
purpose of buying, promotion, service and control.
In Pakistan, we do have department stores, but these stores do not qualify for discussion
under large scale retailing. The people who manage these stores are generally the owners or
family members of the owners who are guided solely by their gut-feeling. Most of them did
not have the exposure to any professional training or any kind of higher education. With the
passage of time, however, more and more educated persons are now entering into the
retailing business.
SUPER MARKETS:

A supermarket is a departmentalized food store. Pakistan entered the super market era at a
time when some western European countries were moving from super market to
'Hypermarche'. The first supermarket in Pakistan was opened at Karachi in 1968.
UTILITY STORES
Initially, utility stores were opened to provide goods on subsidized prices to government
servants only. However, later to ensure regular provision of essential commodities to general
public at reasonable prices. Utilities stores stock and sell daily use items at lower prices
compared to general market. The utility stores corporation of Pakistan, a government
controlled autonomous body is a limited company and has several hundred branches all over
the country.

JUMMA/MANGAL/ITWAR BAZAARS:
The institution of these Bazaars can be described as a step towards "consumerism" in
Pakistan. In these Bazaars all daily use items are available. These can be termed; as discount
houses since as per claims, the commodities are available at much cheaper rates. The
middleman and his share has been eliminated and the producers directly sell goods to the
end- users. The normal complaint about these Bazaars is that sub-standard goods are sold at
comparatively cheap rates. However, this fact cannot be denied that except for nominal
official rent and license fee to be paid to Government, no other overheads are to be borne by
the sellers and hence sellers at these Bazaars remain cheaper as compared to stores housed in
big buildings and malls.

Pakistan has been identified as one of ten hidden heroes of the next generation of retail
markets, following a new wave of consumerism. Whether you are selling your products
through network of retail outlets managed by others or you are running your own retail set up
(individual shop or chain of outlets), you should be well equipped to leverage their tailing
business for achieving your business objectives. It is therefore essential for you to know the
latest market trends and sources of future growth for retailing industry in Pakistan.
A Look at Pakistani Retail Sector
The lack of concrete and reliable data does not allow companies in Pakistan, whether national
or MNC, to formulate 'fact-based' plans for product availability, channel wise trade marketing
activities, rolling out trade incentives or similar undertakings. Research companies like
Nielsen and Ipsos do provide data (retail audit, limited census etc.) about retail sector with
major focus on FMCG retail but very few Pakistani companies make use of such services due
to the 'perceived' higher costs. Because of this mind-set of Pakistani entrepreneurs, we rarely
find vigorous 'market insight' function in local enterprises and these individuals thus rely on
gut feeling instead of on hard numbers. It is not to deny that many business decisions are

taken even when all the facts are not available; however, this is not desirable especially if
such facts can be made
available.
At this stage, some basic numbers about retail sector in Pakistan make an interesting reading.
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.
About two third of FMCG outlets consist of neighborhood 'kiryana' stores, commonly called
general stores, which sell multiple brand grocery items of daily use. Such outlets are
generally owned by a single individual and managed by him alone or with some help from his
family members. Unlike developed markets, the majority of 'kiryana' stores in Pakistan do not
have walk-in areas and thus rely on counter sales only.
The counter sale outlet phenomenon is a major challenge to trade marketers who find it
extremely difficult to implement various sales promotion tools like shoppers' messaging,
planogram and category management. The bulk of FMCG business comes from these
'kiryana' stores due to large numbers, location (proximity to shoppers), convenience and long
business
hours.
Other retail channels include 'pan' shops, petro marts, department stores, medical-cumgeneral stores, book shops, road side eateries and other specialty shops. It is interesting to
note that a number of 'pan' shops, particularly in urban Sindh and Punjab, carry various fast
moving items like beverages, candies and biscuits in addition to their core products ('pan' and
cigarettes).
A significant number of these 'pan' shops, particularly in Sindh, is very small and have semipermanent structures. In Punjab, however, one finds bigger 'pan' shops carrying more
products than their counterparts in Sindh. These 'pan' shops provide a platform where people,
mainly young, get together, particularly in the evenings, for socialization.
Low Organized Retail Penetration

It is important, at this point, to focus our attention on the format of retailing in Pakistan.
Some estimates suggest that the organized 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', organized 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 organized retail
penetration of Pakistan is currently in single digit which reflects the primitive profile of retail
outlets. However, this shows that there is sufficient 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 unorganized due to channels like 'kiryana' and
'pan'
shops.

The unorganized retail sector has a host of inherent limitations e.g. lack of economies due to
small scale operations, lower level of functional expertise and lack of financial strength. Such
restrictions negatively impact the ability of unorganized sector regarding product displays,
shoppers'
messaging
and
the
like.
However, it does not mean that unorganized sector does not contribute anything positive
towards the society in general. The so-called unorganized sector is generally quick to meet
customers' requirements primarily due to their involvement in neighborhood community.
Lower operational costs and 'customer service with warmth' are also hallmarks of this sector.
The owner of a small 'kiryana' store in some 'mohalla' in Karachi or Lahore knows personally
the residents of that locality as opposed to owner of departmental store in a main shopping
area. Organized retail, on the other hand, offers large variety of SKUs (stock keeping units)
innovative point of sales material and product displays for effective shoppers' engagement.
The contribution of organized retail is expected to increase due to entry of global retailers,
gradual increase in chain of retail outlets, growing petro marts and larger grocery stores.

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.
The opening of such mega stores few years back sent uncalled-for warning signals to small
neighborhood retailers who feared that shoppers' traffic would be diverted towards those
'glittery' mega stores. In overall retail market of $40 billion, the reported turnover of $350
million is not significant at least at this stage.
However, a look at evolution of organized retail in other international markets suggests that
the growth rate of the unorganized sector will lag behind that of its organized counterpart
mainly due to innovative merchandising tools and shoppers' incentives promotions.
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 behavior in
Pakistan.
The 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 have been unconfirmed reports about possible entry of Wal-Mart, the biggest retailer in
the world,
in Pakistan.
Although there is no official confirmation from the retailer itself about its plans for Pakistan,
the entry of Wal-Mart with annual turnover of $421 billion is bound to have major
implications for local retailing. It is, therefore, not surprising at all if some other major
international retailers decide, in coming years, to enter Pakistan, a silent hero for retailing.
Government as a Retailer
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
6000 stores which sell grocery items of daily use to general public at reasonable prices. We
read and hear a lot about public hue and cry regarding quality of products being offered at
utility stores; however, we tend to overlook the extent of public service these stores are
providing by virtue of their geographical spread in the country. 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 no of outlets.
Retailing in Pakistan-What lies ahead
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.
Trends
-- It is oversimplification to assume that kiryana stores, the key channel representing
unorganized retail format, will enter in decay process at accelerated rate. These neighborhood

outlets will instead continue to exist on Pakistan retailing map though their growth is likely to
be much lower than that of modern-trade-format outlets particularly global retailers and local
chains of departmental stores/super markets.
-- Kiryana Stores channel will continue to embrace some of basic techniques of organized
retail format particularly POP material and product displays. This process of evolution has
already started as the share of branded products at such outlets has been growing over the
years. This process will not only continue but accelerate in coming years.

-- The current war of getting shelf space at global retail outlets and local department stores
will intensify in future. The scope of this war will expand to department stores of second-tier
towns as well as large grocery stores. The culture of 'paid shelf space' at retail outlets will
spread and more national companies are likely to enter into this game which, at present, is
primarily
MNCs'
domain.
-- Although no crystal ball is available, few predictions regarding future role of new global
retailers can be made. New chains of grocery and life style stores are likely to enter primarily
in urban centers (including second tier ones). In case some giant global retailer like Wal-Mart
decides to enter Pakistan, the process of retail modernization may take a roller-coaster pace.
-- 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.
-- Franchise based retail outlets are likely to grow both in numbers and their significance.
Some financially strong local group may initially launch some leading 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.
Conclusion
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

be that lucky.
Here in Pakistan weve witnessed a retail revolution (or at least a sustained spurt) of some
kind as well. Lower duties, better smuggling strategies, and generally freer borders on all
sides (except one) means more Pakistanis now have access to more goods than at any point in
the past. The size of this retail pie is now close to $50 billion. It has been growing at a real,
(inflation-adjusted) rate of 5.3pc per annum for the past few years.
References:
(The writer is Business Consultant, Terra Biz)

Dawn/news/1157893
slideshare /zirram/changing-retailing-in-pakistan