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Overview of Pakistans Economy:

Throughout the previous decade, Pakistans economy overall has flourished substantially despite the
internal or external hassles. The economy of Pakistan is the 26th largest in the world in terms of
purchasing power, and 44th largest in terms of nominal Gross Domestic Product even though the
country is sixth most populous in the world. Pakistan succeeded in attaining 4.14 percent growth in the
outgoing fiscal year 2013-2014 which is the highest level achievement since 2008-09. The economy has
taken a turnaround on account of following serious economic agenda and striving sincerely to
implement it. Early positive results, particularly stabilizing foreign exchange reserves, appreciation of
exchange rate, stability in prices despite heavy adjustments, remarkable industrial growth on account of
improved energy supply, exceptional increases in remittances and stock exchange.

Demographic Indicators:
2012
2013
2014
Total Population (Million)
180.71
184.35
188.02
Urban Population (Million)
67.55
69.87
72.50
Rural Population (Million)
113.16
114.48
115.52
Total Fertility Rate (TFR)
3.4
3.3
3.2
Crude Birth Rate (Per thousand)
27.2
26.8
26.4
Crude Death Rate (Per thousand)
7.2
7.0
6.90
Population Growth Rate (Percent)
2.0
1.97
1.95
Life Expectancy (Year)
- Females
66.1
66.5
66.9
- Males
64.3
64.6
64.9
Source: Ministry of Planning, Development and Reforms (Population Projections for the Year 2007-2030)

Demography is the study of the growth, change and structure of the human population. The demographic
indicators, therefore, are comprised of the collection of information that summarizes the historical
evolution of different changes related with population. Major demographic indicators are changes in the
size, structure, and population composition and population growth. Changes in the size and structure of
population are due to changes in the birth rate, death rate and the net migration.

Population growth rate :


Population growth rate is another important indicator used to describe the change in
population and play a focal point in the economic development of a country. Rapid
population growth can generate food security problem, environment problem and urban
congestion and it is the major factor behind the international migration. In Pakistan
population growth rate has shown improvement and it decreased from 2.0 percent
in 2012 to 1.97 percent in 2013 and 1.95 percent in 2014.
Age Group
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65 and above
Total
Percentage of Population 2012-13

Male
6.87
7.75
6.75
6.08
4.57
3.28
2.77
2.68
2.36
2.19
1.76
1.38
1.07
1.84
51.35

Female
6.53
6.92
6.04
5.30
4.66
3.80
3.16
2.85
2.38
2.12
1.55
1.16
0.82
1.36
48.65

Total
13.37
14.68
12.79
11.39
9.23
7.08
5.93
5.53
4.75
4.31
3.31
2.54
1.89
3.20
100

Source: Pakistan Labor force survey 2012-13

Urbanization :
Urbanization is one of the serious Pakistan problems. As development takes place from
agricultural to an industrial sector, large-scale migration of rural residents to towns and
cities takes place. During this process, the growth rate of urban areas is typically

increasing and the pace of overall population increase. In Pakistan cities are growing
rapidly as a result of the movement of people from rural areas in search of jobs,
opportunities to improve their lives and to make a better future for their children.
Moreover, the lack of basic facilities in rural areas like; electricity, sanitation, safe
drinking water, health care and schooling are some of the reasons for rapid urbanization.
Urbanization is not simply the growth of populations living within legal- administrative
boundaries of towns and cities. It also transforms both urban and rural lifestyles. The
annual population growth in urban areas is expected to increase further in coming years
which may be the prospect of Socio economic problems.

Source: Ministry of Planning, Development and Reforms

GDP growth Rate:

Source: Growth and Investment of Pakistan

The services sector has been growing at a faster pace than the commodity producing
sector of the economy for quite some time. This sector has emerged as the main
driver of economic growth and playing a vital role in sustaining economic activities in
Pakistan. The economy has gone through a major transformation in its economic structure.
The share of the services sector has increased from 56 percent of GDP in 2005-06 to 57.7
percent in 2012-13. The Services sector has recorded a growth rate of 3.7 percent in 2012-13.
The wholesale and retail trade is the largest subsector of the services. Its share in the overall
services sector is estimated at 31.5 percent.

2011
2012
2013

GDP
Purchasing
Power (in $
billion)
531
554.2
574.1

GDP real
Growth rate (in
percentage)
3.7 %
4.4 %
3.6 %

Per capita income


Per capita income is regarded a s one of the key indicators of economic well-being over a
period of time. With the emergence of more analytical tools and s o p h i s t i c a t e d
indicators, numerous indicators and measures of well- being are added to economic
literature. Per capita income is defined as Gross National Product at market price in dollar
term divided by the countrys population. Per Capita Income in dollar terms grew at a modest
rate of 3.4 percent in 2012-13 compared to 3.8 percent growth last year. The per capita
income in dollar terms has risen from $ 897 in 2005-06 to $ 1,368 in 2012-13. The main
factors, which are responsible for increase in per capita income, include acceleration in
real GDP growth, relatively lower growth in population and the stable exchange rate.

Below table shows the improvement and acceleration of per capita income of the eight
preceding years:

Source: Growth and Investment of Pakistan

IMPORTANCE OF RETAIL SECTOR IN PAKISTAN:


The retail industry is a sector of the economy that is comprised of individuals and companies
engaged in the selling of finished products to end user consumers. Sales figures and economic
data are sometimes reported separately for restaurants and automotive-related businesses, but by
definition they are considered to be members of the retail industry as well. All the factors
elaborated in the overview of Pakistans economy clearly manifests that service sector, retail
sector has flourished over the years, especially the retail wholesale services. Retail services
proves to be more profitable for the economy in contrast of vintage retail sector. Pakistan's
service sector accounts for about 53.3% of the GDP. The wholesale and retail trade constitutes
about 30% of the service sector contribution to the GDP of Pakistan.
Whereas significance of retail sector in Pakistan have substantial prospects like:

Growth opportunities
Market potential
Market size
Growth in GDPs
Increasing purchasing parity

Growth in FDI
Improved technological infrastructure
Cheap Labor availability

All these factors will lured the retailers worldwide to enter in to the markets of Pakistan.

Retail Formats in Pakistan:


1) Small retailers:
Small retailers in Pakistan proves to be more profitable than larger ones. Retail markets like
Azam cloth market, Abid market, Hall road, Hafeez center are dominate in major cities of
Pakistan. Sales are on continuous increasing trend from 2010-2015, in 2010 retail sales are USD
87.6 billion and in 2015 it moves to 133 USD billion a formidable increment have been noticed
during such period.

2) Super markets and Wholesale retailers:


The retailer has to be very familiar with the environmental factors. Also, they have to remain
watchful of the continuous change taking place in the environments since the change in these
factors has and will always have vital impact on survival, growth, profit making and ultimate
success of the business. . Successful Retail Chains like Hyperstar, Metro & Makro has opened
the avenues for the upcoming retailers. In Lahore, large numbers of households do the grocery
shopping at Hyperstar, Jalalsons, Alfatah, HKB, Metro, Makro and CSD. This shows the
changing lifestyle and shopping preferences of the urban population of Pakistan.

Important sectors:
1) Food and beverages:
It is estimated that the average Pakistani consumer spends up to 42% of his income on
food. Historically customers prefer to shop from kiryana stores for fresh, hand-picked
fruits and vegetables and negotiable prices. But now the trend has been shifted towards
local supermarkets and wholesale centers, where consumer shops for better quality,
quantity, variety as well as competitive prices. The biggest surge in the food industry has
come across in the form of restaurants and cafe.

2) Apparel:
Having experienced a fashion revolution in the last couple of decades, Pakistan has
become home to a number of powerful fashion houses and countless exquisite of
local and international apparel brands. The market is well segmented, providing for
men, women and children of all ages. The biggest surge in demand has to come about

in the designer lawn segment from textile houses to individual designers, the PKR 9.6
billion worth designer lawn market catches fuel from the onslaught of innumerate
fabric design every day.

3) Footwear:
With more than 500 manufacturing units spread across the country, Pakistan's
footwear industry produces over 120 million pairs annually for domestic consumption
and over 2 million pairs for export, on average. Lahore is the hub of footwear activity,
being home to 306 or 59% of the total manufacturing unit. Overseas footwear have
also established their foothold in Pakistan. These include Bata, Hush Puppies, Pierre
Cardin, Logo, Charles & Keith, Nike, Aldo, Ecco and others.

4) Health & Beauty:


People becoming intensely curious about health, the commercial health club industry
in Pakistan is emerging as a lucrative business. In addition to fitness centers, spas and
beauty treatments readily available in hotels and clubs like the Lahore Gymkhana,
Model Town Club and Defence Club in Lahore, many such independent units have
dotted the country. Shapes, for instance, is a renowned fitness center with several
branches across Pakistan.

5) Electronics:
Pakistans consumer electronics market is expected to grow by yearly average of about
13.3% to USD3.3 billion by 2016. Hall Road in Lahore has historically been the hub of
all trade and retail activity in the electronics market. Many have also set up after sales
customer care centers which guarantee solutions to problems regarding return, exchange,
maintenance and repair.

6) Home furnishing:
The home furnising sector of Pakistan has also grown in recent years. Many vital
sponsors like Gul Ahmed, Al Karam, Nishat and ChenOne have made an entire floor
for home accessories. Pakistan Wood industry is also well developed and captures
about 95% of the countrys total market for furniture. Chiniot in Pakistan is well
known for its beautiful wood carved furniture and brass inlays. It is not amusing,
therefore, that the city alone meets 80% of furniture demand in the country. . The
demand for quality furniture, like other quality home accessories in Pakistan, is

constantly on the rise and a number of state of the art showrooms have been devoted
to it.

Retail formats by Regional concentration:


The retail sector in Pakistan demonstrates in major cities like Karachi, Lahore, Islamabad
and Faisalabad in the shape of shopping centers and complexes. Karachis recently built
Dolmen Mall, for instance, stands tall and broad above a number of small to medium
sized malls. Another state of the art mall, the Centaurus, is nearing completion in
Islamabad. However, further real estate investments in these retail-concentrated cities
remain the need of the hour and new shopping complexes need to be built.

Punjabs Potential:
Unarguably Pakistans most densely populated province with major divisions like
Lahore, Rawalpindi, Gujranwala, Faisalabad, Multan etc. Punjab is the perfect
destination for retail outlay. After Karachi, Lahore, with a current population of over 9
million, is the 2nd largest city of Pakistan and ranks 122 amongst the richest cities of the
world. However various international chains despite political instability, real estate
experts and businessmen have come to believe that Lahore is a natural breeding ground
for multinational companies, banks & international brands.

RETAIL OWNERSHIP FORMATS IN PAKISTAN:


1) INDEPENDENT RETAILER:
An independent retailer is someone who is completely responsible for his or her own
business. The retailer owns or has bought an independent store and has built the
business from the ground up by assessing all needs of the store, which can include
staffing, marketing, merchandizing, sales, etc. enormously prevalent in Pakistan.

2) Franchising:
Franchising is a business strategy for getting and keeping customers. It is a marketing
system for creating an image in the minds of current and future customers about how
the company's products and services can help them. It is a method for distributing
products and services that satisfy customer needs. In short, franchising is a strategic
alliance between groups of people who have specific relationships and responsibilities

with a common goal to dominate markets, i.e., to get and keep more customers than
their competitors.
Product or Trade Name Franchising: distribution of a product

Business-format franchises include everything necessary to start and


operate a business in one complete package.

3) JOINT VENTURES:
A business arrangement in which two or more parties agree to pool their resources for
the purpose of accomplishing a specific task.

4) STRATEGIC LISCENSING AGREEMENT:


Strategic licensing, by which the developer of intellectual property, technology or a
product embeds it in the licensee's product for distribution, is typically a win-win for
the companies involved. In Pakistan we can see very fewer cases regarding SLA.

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 practices 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.
However Pakistan, is being concealed conquer of retailing, presents enormous
opportunities specific in areas of organized retail format. Pakistani entrepreneurs and
professional retailers need to take advantage of these opportunities. Those who take

initiatives, have manifested about their destination, formulate their retailing strategies
and exercise the same, will get first mover advantage. Others may not be that lucky.

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