Retail Pakistan: Outlook, Challenges & Opportunities

RETAIL PAKISTAN

RETAIL PAKISTAN: OUTLOOK, CHALLENGES

& OPPORTUNITIES

An Executive Report By | Mantaq Systems

An Executive Report By: Mantaq Systems

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Retail Pakistan: Outlook, Challenges & Opportunities

Background
Despite political uncertainty and economic turmoil, experts believe that the
outlook for retailing in Pakistan remains positive. At the same time there are a lot
of unique, industry specific challenges such as lack of quality human resource and
limited infrastructure which are slowing down the growth of the industry as a
whole.

Retail thrived in a
downward economy as the
retail industry never really
reached its full potential

In the fast moving retail space one must thoroughly understand such potential and key challenges in order
to thrive and grow. This white paper attempts to look at the outlook of retail in Pakistan and understand
some of the common challenges that the retail industry faces as a whole. Key sources of information used
in this whitepaper were

Twin events in Lahore and Karachi, which were centered on a round table discussion of retail
business leaders, to discuss and possibly flesh out solutions for the unique challenges that the
industry faces.
Research conducted through inter-personal and telephonic interviews with retail business leaders
on their business priorities and challenges. Some of the leaders had participated in the pre-event
survey.

In addition to summarizing the key insights from our research we have also included quotes from some of
the most successful leaders in the industry.
Retail Outlook: Plenty of Opportunity
Retailing in Pakistan remains highly fragmented and is dominated by small retailers, which compete
within their own geographic areas in terms of price, personal relationships and product ranges. But
nowadays we are seeing a growing number of large retail chains opening multiple new stores every
month, especially in the major cities where there is a higher concentration of middle and upper-income
consumers. The retail business leaders in both the round table conferences agreed unanimously that
despite the challenges, Pakistan has a great market potential still waiting to be discovered.
Figure 1

An Executive Report By: Mantaq Systems

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Retail Pakistan: Outlook, Challenges & Opportunities

Figure 1 shows results from the pre-event survey. A majority of the retail business leaders we talked to
understood the potential in the market and deem growth as a top priority for their businesses. While
growth is seen as a priority by these retailers they dont see much of a challenge in it (See Figure 2 in
which shows responses of retailers with respect to challenges).
This is primary because most of the business leaders believed that the Pakistani retail market is still under
developed, especially in terms of lack of infrastructure and superior management processes. This creates a
great opportunity for the organized retail sector, who is already investing in world class systems and
processes. In addition they felt that the standard of living of the Pakistani population has slowly but
steadily improved over the past few years and consumption has shifted towards non-essential items and
luxury goods such as branded and leisurely soft goods. For supermarkets and hypermarkets, which sell a
mix of grocery and non-grocery products, the value share of non-grocery goods has gradually increased
over time as well. The Pakistani consumer is now hungry for goods beyond the daily necessity.
Figure 2

Understanding Evolving Consumer Tastes Is Critical

As cities are growing and more people are shifting from rural areas to urban areas there is an increase in
the number of particular consumer segments such as students, people with jobs, people going to gyms etc.
This social trend has had a direct and positive impact on demand for retail goods. As a result there is a
growing orientation towards branded, customized and value added goods amongst the Pakistani
consumers. While in the past, consumers usually shopped according to price, nowadays consumers pay
equal attention to product quality, shopping experience and packaging. Both online and offline media
have certainly empowered the consumer a lot. Consumer of today is much more intelligent and aware of
the options he or she has.
At the round table the retailers talked about a lot of evolving consumer segments that they found
interesting and lucrative. One such segment that came up during the discussion was of that of the
working women. As more women enter the workforce, more women gain economic independence and
higher social status. Hence, demand for female-specific products is on the rise. Retailers have already
responded by launching products and marketing activities which specifically target women.
The Pakistani retail industry no longer comprises of necessity brands and/or good only. The changing and
varying consumer preferences are creating a lot of opportunities for both new and existing retailers. In
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Retail Pakistan: Outlook, Challenges & Opportunities

order to win in this market, retailers need to understand the preference of their target customer segments
and align their offerings, store experiences and marketing messages accordingly.

Competitive Landscape: Organized Vs Unorganized Retail

Changes have occurred over the last decade in the retail sector in Pakistan such as new global brands
entering the market, large scale shopping malls opening up and several local retailers getting more
organized and growing significantly more than the rest of the pack. These trends are linked to the broader
socioeconomic changes, including growth in the urban middle class and disposable incomes of certain
segments in the market.
The traditional mom and pop stores face serious threats from the
bigger local and global retail chains. The bigger players have been
Its not that the organized sector
able to achieve significant sales growth by creating superior products
has snatched anyones share its just
and brand differentiations and implementing superior processes and
that the organized sector has been
technology infrastructures. In the past consumers did not have many
choices in terms of products or shopping experiences. Nowadays
growing at a faster pace
retailers, both local and global, from organized sector are setting
benchmarks of superior product quality and customer service. In
order to compete the smaller players would have to improve their offering and service. Due to the
growing fragmentation in the consumer market there is still a lot of opportunity. Its a matter of finding
the right customer segments for your brand and targeting them accordingly. Overall the majority of the
retailers welcomed the growing competition from both local and international brands as they see this as a
positive for the industry than as a threat to their individual brands. Interestingly, a couple of retailers even
admitted to seeing a surge in sales despite the success of competing brands.

Qualified HR: A Major Issue In The Pakistani Retail Industry

Both at the round table conference and during interview discussions, they were a lot of issues that various
leaders raised such as lack of retail expertise, tax evasion, limited infrastructure and systems etc. But one
issue, that was claimed to be the biggest hurdle for retail growth, was the lack of qualified human
resources especially in back offices. In the pre-event interviews a lot of retailers mentioned improving
inventory management and increasing customer wallet shares
[Chart 2] as one of their biggest challenges. Though they admitted
As a career choice not a lot of
lack of world class processes and IT systems was one of the
reasons for this but the core problem was the shortage of properly
people, especially from the
trained employees, who could actually use these processes and
younger generation opt to work in
systems to drive growth for them.
retail. As an industry we need to
Interestingly the retail leaders believed that establishing a retail
institution or introducing retail related courses wouldnt entirely
resolve this issue. They wanted more people, especially from the
younger generation, to choose retailing as a career. A lot of the
retailers claimed to be offering base salaries, benefits and career

An Executive Report By: Mantaq Systems

collaborate to improve this brand

image through affiliations with
universities and colleges

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Retail Pakistan: Outlook, Challenges & Opportunities

growth opportunities at par with the rest of the industries yet graduates considered other industries such as
banking, engineering, FMCGs etc to be better career options.
In order to solve this perception several solutions were discussed. One of the key initiatives that was
discussed was to introduce a structured industry wide internship program for upcoming graduating
students from local universities. The students would get on hands experience in working for a retailer of
their choice, where they would have the opportunity of working in various departments of retail
organization on a rotational basis. A couple of retailers had already done this in the past and were
successful in retaining some of the candidates. This would was termed as win-win for both the retailer,
who would get to test the student to see if he/she is a suitable candidate, and for the student who would
hopefully be able to the see that it would exciting and rewarding career for them. A couple of retailers
even mentioned having achieved some level of success in hiring employees through college internship
programs.

The Need For An Industry Association Run By A Fulltime Board

There always has been awareness in the retail community about formally forming a retail association,
which would work in the collective interest of the industry and focus on solving their common problems.
A couple of retailers mentioned the forming of a few segregated groups, which at times emerged in the
past to resolve one time issues, such as increased sales taxes. But
these groups tend to dismantle with time due to everyones busy
If anyone of the players in the value
schedules. Everyone admitted this being as a result of lost focus due
chain of retail would have to play more
to everyday fires in their own businesses.
than their role than it would be difficult
A solution is perhaps to follow the example of other industries such
for the industry to grow as a whole
as IT where the head of an industry association is a full time paid
employee. Solving issues mentioned above requires full time
dedication and perseverance. Not only such an association would
have to bring retailers together but other organizations in the ecosystems such as suppliers, universities,
consultants etc as well. Everyone in the value chain would have to contribute to ensure the continued
growth of the industry. There were many discussions around this topic and hopefully we would see
something concrete around this in the upcoming months.

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Retail Pakistan: Outlook, Challenges & Opportunities

Conclusion
In short the outlook of retailing in Pakistan is significantly positive. Despite economic downturn, political
uncertainly and industry specific challenges, the growth the industry
has seen, over the past few years, is a solid indicator of its success and
Retail in Pakistan is still in its infancy,
potential. There is a huge opportunity in the market for both the
the chances and scope for growth in
existing players and the new entrants. The key is it to identify the right
retail are huge. We are still running in
focus area for your business, in terms of consumer segments, and go
the dark ages as compared to retailing
about it in an organized fashion.
worldwide.
Moreover we saw a high level of awareness and consensus on all of
the key industry challenges amongst the leadership of various
retailers, which is a positive start. The next step now is to formalize a sustainable game plan to solve these
challenges through a common platform so that the impressive growth of the retail industry could be
sustained or even accelerated.

An Executive Report By: Mantaq Systems

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Retail Pakistan: Outlook, Challenges & Opportunities

About Us
Mantaq Systems is a premiere retail centric IT company in Pakistan that has constantly geared itself to
meet the dynamics of the retail industry by introducing world class technologies and bringing vast
knowledge expertise. With more than 60 man years of retail experience we have successfully
implemented on more than 900 stores in Pakistan and GCC. We have marked footprint over a large
number of verticals which include Apparel, Footwear, Grocery, Pharmacies and Specialty Retail stores
At Mantaq Systems, we bring you the most comprehensive software platform to manage your growing
retail business. To bring you the best in the world, we have partnered with the global leaders of best in
class software and crafted a solution that serves thousands of successful similar retail businesses
worldwide. Our consultants have a thorough understanding of retail business, a solid command on
technology and years of experience in integrating technology into business, both locally as well as
internationally. Some of the key solutions areas we serve are

Customer Experience Management

Store Operations Management

Marketing & Customer Loyalty

Merchandise Planning and Operations Management

Supply Chain Planning and Execution Management

Business Intelligence

An Executive Report By: Mantaq Systems

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