a look at pakistani retail sector

7/27/2019 A Look at Pakistani Retail Sector

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A Look at Pakistani Retail Sector:

The significance of retail sector in our economy can be gauged from the data published byPakistan 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 and the like.

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 ofmiddle and upper-income consumers

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 shehas.

Low Organised Retail Penetration :

It is important, at this point, to focus our attention on the format of retailing in Pakistan. Some

estimates suggest that the organised 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', organised 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 organised retail penetration of Pakistan iscurrently in single digit which reflects the primitive profile of retail outlets. However, this shows

that there is ample 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 unorganised due to channels like 'kiryana' and 'pan' shops


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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.

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 behaviour in Pakistan.

Government as 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 organised format

retailing has its presence even in small towns through these utility stores. Nonetheless, onecannot 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 materialised 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 number of outlets (around 135).

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


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largely depends on how pro-active role Pakistani entrepreneurs as well as professional working

for national and multinational companies operating here undertake

Some likely trends on the retailing arena in Pakistan include the following:

It is oversimplification to assume that kiryana stores, the key channel representingunorganised retail format, will enter in decay process at accelerated rate. These

neighbourhood 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 organisedretail 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 overthe 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 storeswill 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 globalretailers 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 modernisation may take a

roller-coaster pace.

The role of global retailers currently operating in Pakistan will continue to grow boththrough 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. 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 organised retail format in true sense. Any FMCG company


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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

outlets.

The Final Word :

Pakistan, being hidden hero of retailing, presents huge opportunities particularly in areas of

organised 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.

Literature review:

Past research has demonstrated that in offline ads, as the advertised price increases, it conveys

greater value (Grewal, Monroe, and Krishnan 1998). However, in an online arena, consumers

have the ability to check prices and verify the veracity of the advertised reference price. Thus,

increases in advertised reference prices may not enhance value perceptions and may even reduce

them.

In a series of studies, Chandrashekeran et al. (2011) demon-strate that consumers use the color of

the prices in marketing communications as a signal. Their findings show that prices in red

convey higher savings than do prices in black, though this result applies only to male consumers.

Women do not perceive a difference in the savings amount based on color. Yet in certain

circumstances, consumers appear to use the color of the price as a heuristic to evaluate the offer

value. The multitude of flyers that consumers receive display prices in a vast array of colors,

sometimes using many different colors within the same flyer. Research should continue to

investigate how consumers react tothese cues in settings with different or inconsistent colors.

Recent research has demonstrated the importance of in-store marketing (see review by Shankar

et al., 2011). Inman, Winer, and Ferraro (2009) demonstrate that more than 40 percent of

consumer purchase decisions depend on price and promotion elements.

Stilley, Inman, and Wakefield (2010a, 2010b) show that consumers maintain a mental budget of

what they expect to spend on a given grocery trip and the items they plan to pur-chase.

Therefore, savings on planned purchases (i.e., in-storeslack) enhance the quantity of items

purchased while savings on unplanned purchases may influence the purchase of more unplanned

items.


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Although the role of traditional displays on brand choice has been well established (Ainslie and

Rossi 1998; Allenby and Ginter 1995; Boatwright, Dhar, and Rossi 2004; Wilkinson, Mason,

and Paksoy 1982), the influence of new technologies on in-store shopping behaviors requires

additional exploration.

These new technologies, such as in-store digital messaging,interactive kiosks, and personalshopping assistants, also may help retailers target their customers better. For example, BJs and

Walmart employ in-store digital advertising displays to communicate offers or describe the use

of a promoted product (e.g., new laundry detergent). Kalyanam, Lal, and Wolfram (2006) report

on actual in-store signage experiments suggests promising sales lifts for promoted items. In-store

digital signage technology can expose consumers to dynamic messaging in the store, adjacent to

the merchandise. Consumers buy a great deal of merchandise without planning to do so in

advance, so this technology seems likely to attract their attention and increase purchase

behaviors.

Sales promotion:

Within the retail marketing mix , sales promotions have one of the strongest impact on short-

term consumption behavior. Sales promotions are beneficial to retailers in several aspect s: First ,

promotional variables such as in-s tore display and two- fo r- one are often use dtotrigger

unplanned purchases ( In ma n et a l. , 1 9 90 ; Mc Cl u re a nd West, 1969) . Second, sales

promotions encourage consumers to purchase nonpromoted merchandise (Mulhern and Pa dge tt,

19 95) . Finally, sales promotions accelerate the number of shopping trips to the store (Walte rs

and Rinne, 1986) . In addition, it has been argued that sales promotions encourage consumers tostock pile, leading to a reduction of the retailer s inventory costs (Blattberg et al., 19 81).

On the other hand, several researchers suggest that sensitivity to different types of sales

promotions might explain different promotional responses (Schneider an dCurrim, 1991;

Henderson, 1987) . Several individual characteristics might be at play: being a smart shopper

might lead to be coupon prone while being an impulsive buyer might lead to be display prone

(Blattberg and Neslin, 19 90).

Sales promotion encompasses all promotional activities other than advertising, personal selling

and public relations . Blattberg and Neslin (1990) summarize the various definitions offered by

several author s ( Kot ler, 1988; We bster, 1965 ), and consider sales promotion as an action-

focused marketing event whose purpose is to have an impact on the behaviour of the firms

customers. Several important aspects o f sales promotions should be highlighted to complete

this definition . First, sales pro-motions involve some type of inducement that provides an extra

incentive to buy (Schu ltz and Rob inson, 1 982), and this represents the key element in a

promotional program. According to Strang (1983) , this incentive is additional to the basic

benefits provided by the brand and temporarily changes its perceived price or value. It is also


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primarily seen as an acceleration tool designed to speed-up the selling process and maximize

sales volume (Neslin et al., 1984) .

Finally, certain promotional mechanisms such as coupons inherently require searching costs

(Schneider and Currim , 1991) . Indeed, coupon- users are used to engage in coupon search and

sort (Bawa and Shoemaker, 1987) . Particularly, the liking of coupons seem s correlated withspecific behavior such as the intensive use of weekly store fliers containing coupons , as well as

information on sales (Lichtenstein et al., 1995) . In addition, to take advantage of the potential

savings, some handling effort is required, in cutting and redeeming the coupon s. Hence, using a

coupon is a thoughtful decision and it involves planning a purchase in advance (Kahn and Schmi

ttlein, 1992) . Other sales promotions for which decisions to buy are made in the store (e.g., tw

o-for-one or in-store displ ay) involve smaller effort and time commitment (Kahn and Schmittl

ein, 1992) .

While sales promotions have increased, the proportion of manufacturers total promotional

budget spent on advertising declined sharply in the 1980s, and has continued a steady decline inthe 1990s (Hoyt 1997; PROMO News 1998; Scott 1992). Proponents of sales promotion

interpret this change as the result of the increasing awareness of the

power of price promotions. Supporters of advertising inter-pret it as the cause for the decline of

national brands and the growth of price promotions. Their argument is that decline in advertising

and increase in sales promotions result in weaker brand loyalty, lower manufacturer prices, and

greater retailer power. Over the last two decades this debate has turned in to a major controversy

with implications for marketing strategy and practice (see for example, Blattberg and Neslin,

1990; Jones 1995; Mela, Gupta and Lehmann, 1997; Sethuraman and Tellis, 1991 for discussion

and re-search related to these issues).

The controversy revolves around the issue of whether advertising and sales promotions are

substitutes or comple-ments, and whether the use of one negatively influences the use of the

other. This advertising versus sales promotion controversy parallels a much older one in the

economics literature about advertising and prices. Many economists believe that advertising is a

means for firms to build market power. Firms do so by differentiating their brands, creating

brand loyalty, and making consumers insensitive to price differences (Comanor & Wilson,

1974). Thus advertising reduces price sensitivity and advertised brands can increase their prices,

leading to a positive relationship between ad-vertising and prices. Other economists assume thatadvertising is information (Nelson, 1970, Nelson 1974). As such, advertising increases

consumers information about their choices, allowing con-sumers to comparison shop.

Consumers become more price-sensitive and are better able to choose low-priced brands. As a

result, firms compete on price and end up serving con-sumers with lower prices. It follows that

advertising and prices are negatively related.


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The controversy regarding the relationship between ad-vertising and price sensitivity has

spawned many empirical studies in marketing. (Kaul & Wittink 1995) and (Shankar &

Krishnamurthi 1996) provide a detailed discussion of these studies. Both these reviews state that

it is difficult to draw general conclusions from prior studies because (i) some studies support the

differentiation theory while others

support the informative role or information theory of adver-tising, and (ii) because there are

significant differences inthe nature of the studies

To gain insight into these issues, we develop a symmetric duopoly model that analyzes the

relationship between ad-vertising, trade promotion, and retail promotion. The ana-lytical model

shows that the relationship between advertis-ing and retail price promotion depends on the role

of advertising. If advertising differentiates brands and sup-presses consumer response to retail

price promotion, then the relationship is negative. That is, a higher level of ad-vertising is

associated with a smaller price discount and, possibly, less frequent price cuts. But, if advertising

is informative enough to increase consumer response to retail promotions, then the relationship ispositive. A higher level of advertising is associated with a larger price discount and, possibly,

more frequent price cuts.

The implication for retailers is that they should, in gen-eral, be more willing to pass-through the

trade deal offered by manufacturers and increase their frequency and depth of promotion for

brands in highly advertised categories. If competition is predominantly across brands within a

store, then, because advertising plays the informational role and increases price competition,

manufacturers in highly adver-tised categories may need to offer greater trade deals in

equilibrium.( Raj Sethuraman*, Gerard Tellis,2002)


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Haji Kareem Bakash

Introduction

Haji Kareem Bakash is one of the most renowned departmental stores of Lahore. It was started in

1927 and its first branch was opened at Mall Road. Now it is in its third generation. It has three

main branches at Mall Road, Allama Iqbal Town and Liberty. These are the three main branches

which are operating but the interesting thing is that the branch working at liberty has different

management and the owner is also different but the rest of the branches and many SBUs that

have started by the Haji Kareem Bakash people. It was opened as a departmental store it was the

store that introduced the concept of departmental store in Lahore. It was opened to cater the

upper class or the high income people to provide them the quality products along with quality

services. The covered area of the retail outlet at liberty is 50000 square feet. It has more then 250

employees in all of its three outlets and their distribution is as follows:-

No. of employees at the outlet of liberty is 100

No. of employees at the outlet of Mall Road is 80

No. of employees at the outlet of Allama Iqbal Town is 70

Mission Statement

The Mission of HKB was to provide variety of products or everything less than one roof in this

way fulfills the requirements of customers and provide them the quality services.

Retail Format of HKB:

It was opened as departmental store having the following characteristics:-

High Prices

High Level of Services

Product Variety


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It is a single owned store as we know that the store owned and controlled by a single owner is

called an independent store and it is not the part of a corporate chain but if it has more then one

outlet as Haji Kareem Bakash has then it would be called as single store Multi unit

organization.

Retailing Concerns of HKB:

The basic objective of a retail outlet is to have a proper balance between

Customers merchandizing needs

Retailers performance standards.

So in right merchandizing blend a retail outlet need to consider following things.

The right product

The right quantity

The right time

The right place

The right price

The right promotion / appeal

And in retailers performance standards the retailer must have some standards to judge his

financial performance because his objective is not only to satisfy his customers by offering them

product of their own choice but also to earn profit.

Now we will see that how Haji Kareem Bakash the departmental store fulfills these tasks.


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The Strategic Plans:

These are the long terms plans involve defining the course of action of the retail organization.

HKB includes following four components of strategic plans in defining their long term course of

action.

HKBs Mission

Providing everything under one roof.

Customer satisfaction.

Quality products

HKBs Objectives

Increase the customer traffic.

Increase in sale value by 25%

Increase the no. of loyal customers.

Build a store image of selling high quality products.

Increase the labor productivity by 10%

Increase the merchandize turnover by keeping hot selling products.

Increase the return on sale by 5%

HKBs Portfolio

Includes various type of SBUs hold and managed by HKB there are.

Mens fabrics department

Shirting, suiting


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Ladies

CRT (Children ready to wear)

Handbags

MRT (Men ready to wear)

Cosmetics

Stationary

Grocery

Promotion Strategies:

They use following things for promotion of HKB

Print media advertising

Bill boards

Banners

Brushers

Pamphlets

They are not using electronic media or even the entire broadcast media for the advertisement

purpose because in their opinion no single channel attracts their target customers and also they

are not sure about the timings that at which time people see the particular channel so they believemore on out door advertisement then broadcast because there is more waste in broadcast media.


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Retail Promotion

Any communication by a retailer that informs, persuades, and/or reminds the target market about

any aspect of that firm

Elements of the Promotional Mix

Impersonal personal

Paid

Unpaid

Management of Promotional Efforts Must Fit Into a Retailers Overall Strategy

A retailers location will help determine the target area for promotions Retailers need high levels of traffic to keep merchandise movingpromotion helps build

traffic

Retailers credit customers more store loyal and purchase on larger quantities makingthem an excellent target for promotions

Promotions can increase short-run cash flow Promotional creativity and style should coincide with building and fixture creativity


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Promotion can be viewed as a major component of customer service because it providesinformation

Planning a Retail Promotional Strategy


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Promotional Objectives

Public Relations

Public Relations - Any communication that fosters a favorable image for the retaileramong its publics

Nonpersonal or personal Paid or nonpaid Sponsor-controlled or not PublicityAny nonpersonal form of public relations whereby messages are

transmitted through mass media, the time or space provided by the media is not

paid for, and there is no identified commercial sponsor

Advertising

Paid, nonpersonal communication transmitted through out-of-store mass media by anidentified sponsor


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Key aspects Paid form Nonpersonal presentation Out-of-store mass media Identified sponsor

Newspaper Advertising

Yellow Pages

The average consumer looks at: 4.32 ads. 70% of consumers look at the bigger ads when they are not sure where to make a

purchase.

65% of consumers feel that a large ad signifies a business with an established reputation. 83% of consumers start looking at ads in the beginning of a heading.

Direct mail

Television Ads

Billboards/Outdoor Ads

On average, a billboard is only viewed for 7 seconds! A good rule is to use about 8 to 10 words in your entire ad! Your message must be very short so it can be easily read by the people driving 60 to 75

miles per hour by your sign.

Personal Selling

Oral communication with one or more prospective customers for the purpose of making a sale

Sales Promotion

Encompasses the paid communication activities other than advertising, public relations, and

personal selling that stimulate consumer purchases and dealer effectiveness


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Procedures for Setting a Promotional Budget

All-you-can-afford method Incremental method Competitive parity method Percentage-of-sales method Objective-and-task method

Promotion and the Hierarchy of Effects


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a look at pakistani retail sector

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