Non Grocery Retailers in Pakistan

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    NON-GROCERY RETAILERS IN

    PAKISTAN

    Euromonitor International

    April 2013

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    E u r o m o n i t o r I n t e r n a t i o n a l

    NON-GROCERY RETAILERS INPAKISTAN

    HEADLINES

    Non-grocery retailers increases by 14% in current value terms in 2012 to PKR873 billion

    Strong income growth pushes greater spending on non-grocery items

    Higher non-grocery sales at supermarkets and hypermarkets negatively affect specialist

    retailers

    The number of non-grocery retail outlets grows by 1% to reach 128,326 stores in 2012

    Expansion in number of outlets is observed as main strategy for growth for major players

    Non-grocery retailers is predicted to post a strong constant value CAGR of 5% over the

    forecast period

    TRENDS

    Due to growth of the Pakistani population and higher level of disposable incomes, almost all

    channels of non-grocery retailers enjoyed strong growth in 2012. With higher incomes,

    consumers have more to spend on non-essential items such as non-grocery products. This

    was a common theme over the review period as the economy recovered from the 2008

    financial crisis and incomes recovered to their pre-crisis levels.

    Non-grocery retailers witnessed a growth of 14% in terms of value in 2012, which was

    marginally slower than the 17% growth rate of 2011. The decline in non-grocery retailers was

    observed due to apparel specialist retailer, which suffered a decline in its growth rate from

    17% in 2011 to 13% in 2012.

    While the value sales of non-grocery retailers is about 31% of total store based retailing as

    compared to 69% of grocery retailers in 2012, non-grocery retailing is nonetheless growing

    rapidly. As the standard of living improves in Pakistan, especially for the residents of the

    countrys big cities, regular consumer purchases have gone beyond lifes basic necessities.

    In terms of current value sales, the most important non-grocery retailers in Pakistan include

    apparel specialist retailers, electronics and appliance specialist retailers and jewellery and

    watch specialist retailers. These retailers have all established a strong presence in Pakistan

    due to rising popular demand for the products they sell. A large variety of others goods are

    also sold through non-grocery retailers such as health and beauty products and furniture and

    homewares.

    Apparel specialist retailers is particularly important in Pakistan because textiles are one of

    Pakistans leading exports. Locally produced apparel is of a high quality and aligned with localconsumer tastes. It is for this reason that local clothing brands are better known than

    international brands in Pakistan. A boom (in the last two to three years of the review period) in

    the branding and sale of lawn (a type of cloth worn in the summer season) has boosted the

    visibility and value sales in apparel. Lawn brands have increased in number to around 70 from

    a paltry 5-6 over the review period this was caused by the increased focus of local textiles

    on domestic sales as export markets dry up.

    Sports goods retailers enjoyed the a growth of 23% in term of value in 2012. An increase in

    the number of young people and wider availability of sports goods was the reason for this

    remarkable growth. Spirits remained high in terms of cricket fans as the 2012 Cricket T20

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    World Cup took place in September 2012. During such times, demand for sports goods

    increases substantially as people become interested in watching and playing the game.

    Football and tennis viewership has also increased; with Pakistani tennis star Aisam-ul-Haq

    rising into prominence after his US Open Doubles win in 2011 and higher coverage of club

    football as well as Euro Cup 2012. Mass merchandisers do not have any presence in Pakistan as local consumers still prefer to

    purchase non-grocery products from various retailing specialists which cover specific product

    groups such as apparel specialist retailers and home and garden specialist retailers. This is

    because these specialist retailers are considered to have a better understanding of their

    product areas and their customers needs as well as offering higher quality products.

    The share of home improvement and gardening stores and pet shops and superstores in

    Pakistan was marginal in 2012. This is because there is little demand for the products sold in

    these retail channels among the Pakistani population.

    Non-grocery retailers is growing rapidly in Pakistans urban areas in response to the rising

    disposable income levels among the urban population. The presence of non-grocery retailers

    is less prominent in rural areas where income levels are much lower than in Pakistans cities

    and there is less consumer demand for products beyond lifes basic necessities. However,

    non-grocery retailers started to move into Pakistans smaller cities and towns where it is

    acknowledged that there is huge potential for growth.

    COMPETITIVE LANDSCAPE

    Non-grocery retailers in Pakistan is very fragmented with many retailers covering different

    product areas. Canteen Stores Department is one of the leading non-grocery retailers. Run by

    the Pakistani Ministry of Defence, it serves a large and targeted customer base

    encompassing the personnel of the Pakistani Armed Forces, residents of Cantonment Board

    areas and the general public.

    Due to the fragmented nature of grocery retailers, it is difficult to comment on any significantincrease or decrease of any single players share/sales in a year.

    Non-grocery retailers in Pakistan includes both established branded retailers and smaller

    traditional retailers. Established brand retailers position themselves according to high-quality

    product ranges and modern store design. Brand value, premium location and sophisticated

    interior design also add to the specific value of the products sold in such outlets. The goods

    sold by these retailers are often of established brands and sell for higher prices. Hence,

    established branded retailers usually target middle to high-income population segments.

    Small traditional non-grocery retailers do not focus as much on the branding of their products,

    focusing instead on store location and affordable prices in a bid to attract customers. There is

    little differentiation in place in terms of the stores and these often sell the same

    brands/products across the board. These retailers cater to the needs of lower income

    population segments.

    Established brand retailers are concentrated in Pakistans major cities. The majority of them

    are located in shopping centres and high streets. Hence, while they service a niche segment,

    specifically Pakistans more affluent consumers, they have only limited regional coverage.

    Both domestic and international non-grocery retailers have a strong presence in Pakistan and

    target different consumer groups. International retailers focus on upper-middle income

    consumers. Recognising the need to cater to local consumer tastes, many international

    retailers have integrated local elements into various aspects of retailing such as their store

    design and product ranges. However, the extremely high prices of the products render them

    accessible to only a small portion of the population. Run by local staff members, these stores

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    provide the same friendly environment that domestic retailers offer. Domestic retailers cater to

    all segments of the population, the mass market in particular. Their competitive strength lies in

    lower prices, a larger customer base and a better understanding of local culture and

    consumer needs.

    There were no significant new entrants in non-grocery retailers in Pakistan during 2012. Mostglobally renowned brands in different product ranges such as apparel, electronics, beauty

    products and furniture are already available in Pakistan.

    PROSPECTS

    As the economic situation improves in Pakistan, non-grocery retailers is likely to experience

    strong growth over the forecast period. Falling inflation is also expected to boost consumer

    spending.

    Non-grocery retailers is predicted to grow by a constant value CAGR of 5% over the forecast

    period. This growth will be around the same level as the constant value growth over the

    review period The growth is expected to be driven by beauty specialist retailers, electronics

    and appliance specialist retailers and furniture and homeware store retailers.

    A continued influx of low-priced products from China and East Asian countries such as

    Thailand and Malaysia will drive growth in non-grocery retailers in Pakistan over the forecast

    period due to the lower prices and widespread availability of these products that would

    encourage consumers to purchase more non-grocery items.

    Non-grocery retailers will continue to choose highly profitable locations in shopping centres

    and on the high streets of Pakistans major cities in order to ensure that they capture the right

    consumer segments and gain the highest possible returns. Companies are likely to spend

    more on marketing and advertising as business and consumer confidence improves and

    competition intensifies. There is also a trend in terms of expanding to new residential areas

    and new shopping centres in order to gain a semblance of the first mover advantage.

    Besides department stores, health and beauty specialist retailers and sports goods stores are

    also expected to post strong growth during the forecast period. This is because Pakistani

    consumers are becoming more image conscious. Urbanisation brought about changes in

    lifestyle towards a greater emphasis on leisure activities. Hence, there is growing demand for

    health and beauty products and sports goods.

    All non-grocery retailing channels in Pakistan are expected to enjoy positive growth over the

    forecast period, apart from jewellery and watch specialist retailers, which is set to decline by a

    constant value CAGR of 1%. This is because the price of gold and silver has skyrocketed and

    alternative cheaper options, such as artificial jewellery gained higher share.

    Given the ongoing uncertainties in the Pakistani economy and the availability of low-cost

    imported products, non-grocery retailers in Pakistan needs to be able to react by expanding

    its product range so that consumers can have more attractive options in times of high inflation

    and prices.

    CHANNEL FORMATS

    Chart 1 Non-Grocery Retailers: The Body Shop in Islamabad

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    Source: Euromonitor International

    Chart 2 Non-Grocery Retailers: Ideas by Gul Ahmed in Islamabad

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    Source: Euromonitor International

    Chart 3 Non-Grocery Retailers: Levis in Islamabad

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    Source: Euromonitor International

    Chart 4 Non-Grocery Retailers: Borjan in Islamabad

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    Source: Euromonitor International

    Chart 5 Non-Grocery Retailers: Mobile Zone in Islamabad

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    Source: Euromonitor International

    Chart 6 Non-Grocery Retailers: Margalla Sports in Islamabad

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    Source: Euromonitor International

    CHANNEL DATA

    Table 1 Sales in Non-Grocery Retailers by Channel: Value 2007-2012

    PKR billion, retail value rsp excl sales tax

    2007 2008 2009 2010 2011 2012

    Apparel Specialist 248.8 294.5 312.1 337.1 392.7 443.8Retailers

    Electronics and 30.0 39.1 50.2 56.7 65.5 76.5Appliance SpecialistRetailers

    Health and Beauty 25.8 27.9 30.7 34.2 38.3 43.2Specialist Retailers

    Home and Garden 5.7 7.5 9.2 10.8 13.7 16.6

    Specialist RetailersLeisure and Personal 57.4 67.4 78.9 91.6 107.3 120.7

    Goods SpecialistRetailers

    Mixed Retailers 10.7 12.9 15.1 17.7 22.4 27.4Other Non-Grocery 60.9 77.2 91.3 105.9 126.0 145.0

    RetailersNon-Grocery Retailers 439.3 526.5 587.5 654.0 766.1 873.0

    Source: Euromonitor International from official statistics, trade associations, trade press, company research,trade interviews, trade sources

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    Non-Grocery Retailers 1.3 1.2 6.3

    Source: Euromonitor International from official statistics, trade associations, trade press, company research,trade interviews, trade sources

    Table 5 Non-Grocery Retailers Company Shares: % Value 2008-2012

    % retail value rsp excl sales taxCompany 2008 2009 2010 2011 2012

    Canteen Stores Department 1.2 1.2 1.3 1.1 1.2Waqar Traders Pvt Ltd 0.2 0.2 0.2 0.2 0.2Cool Industries (Pvt) Ltd 0.2 0.2 0.2 0.2 0.1Sony Corp 0.1 0.1 0.1 0.1 0.1Service Industries Ltd 0.0 0.0 0.1 0.1 0.1Bata Pakistan Ltd 0.0 0.0 0.0 0.0 0.0Others 98.3 98.3 98.2 98.4 98.2Total 100.0 100.0 100.0 100.0 100.0

    Source: Euromonitor International from official statistics, trade associations, trade press, company research,trade interviews, trade sources

    Table 6 Non-Grocery Retailers Brand Shares: % Value 2009-2012

    % retail value rsp excl sales taxBrand Company 2009 2010 2011 2012

    Canteen Stores 1.2 1.3 1.1 1.2Department

    Waqar Electronics Waqar Traders Pvt Ltd 0.2 0.2 0.2 0.2Waves Cool Industries (Pvt) Ltd 0.2 0.2 0.2 0.1Sony Centre Sony Corp 0.1 0.1 0.1 0.1

    Servis Service Industries Ltd 0.0 0.1 0.1 0.1Bata Bata Pakistan Ltd 0.0 0.0 0.0 0.0Others 98.3 98.2 98.4 98.2Total 100.0 100.0 100.0 100.0

    Source: Euromonitor International from official statistics, trade associations, trade press, company research,trade interviews, trade sources

    Table 7 Non-Grocery Retailers Brand Shares: Outlets 2009-2012

    sites/outletsBrand Company 2009 2010 2011 2012

    Bata Bata Pakistan Ltd 255 260 270 272Servis Service Industries Ltd 225 230 235 237Canteen Stores 45 48 48 48

    DepartmentSony Centre Sony Corp 30 36 36 36Waves Cool Industries (Pvt) Ltd 12 14 14 16Waqar Electronics Waqar Traders Pvt Ltd 15 15 15 15Others 123,148 124,589 126,110 127,702Total 123,730 125,192 126,728 128,326

    Source: Euromonitor International from official statistics, trade associations, trade press, company research,trade interviews, trade sources

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    Table 8 Forecast Sales in Non-Grocery Retailers by Channel: Value 2012-2017

    PKR billion, retail value rsp excl sales tax

    2012 2013 2014 2015 2016 2017

    Apparel Specialist 443.8 465.0 495.3 525.3 554.8 584.5Retailers

    Electronics and 76.5 79.6 83.8 88.9 95.3 101.8Appliance SpecialistRetailers

    Health and Beauty 43.2 43.4 44.1 45.1 46.4 48.1Specialist Retailers

    Home and Garden 16.6 17.6 18.7 19.8 20.7 20.9Specialist Retailers

    Leisure and Personal 120.7 122.3 125.5 129.1 132.9 134.1Goods SpecialistRetailers

    Mixed Retailers 27.4 29.5 32.3 35.4 38.9 43.0Other Non-Grocery 145.0 148.3 153.2 158.6 164.8 171.3

    RetailersNon-Grocery Retailers 873.0 905.7 952.9 1,002.1 1,053.8 1,103.8

    Source: Euromonitor International from trade associations, trade press, company research, trade interviews,trade sources

    Table 9 Forecast Non-Grocery Retailers Outlets by Channel: Units 2012-2017

    outlets2012 2013 2014 2015 2016 2017

    Apparel Specialist 90,072 91,172 92,372 93,672 94,843 95,791Retailers

    Electronics and 1,664 1,694 1,729 1,769 1,813 1,849Appliance SpecialistRetailers

    Health and Beauty 9,935 10,157 10,396 10,660 10,919 11,172Specialist Retailers

    Home and Garden 1,169 1,194 1,221 1,253 1,285 1,311Specialist Retailers

    Leisure and Personal 15,771 16,064 16,393 16,770 17,104 17,413Goods SpecialistRetailers

    Mixed Retailers 95 102 110 119 128 138Other Non-Grocery 9,620 9,710 9,810 9,930 10,039 10,139

    Retailers

    Non-Grocery Retailers 128,326 130,093 132,031 134,173 136,131 137,813

    Source: Euromonitor International from trade associations, trade press, company research, trade interviews,trade sources

    Table 10 Forecast Sales in Non-Grocery Retailers by Channel: % Value Growth 2012-2017

    % current value growth, retail value rsp excl sales tax

    2012-17 CAGR 2012/17 TOTAL

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    Apparel Specialist Retailers 5.7 31.7Electronics and Appliance Specialist Retailers 5.9 33.2Health and Beauty Specialist Retailers 2.2 11.2Home and Garden Specialist Retailers 4.8 26.3

    Leisure and Personal Goods Specialist Retailers 2.1 11.1Mixed Retailers 9.5 57.2Other Non-Grocery Retailers 3.4 18.2Non-Grocery Retailers 4.8 26.4

    Source: Euromonitor International from trade associations, trade press, company research, trade interviews,trade sources

    Table 11 Forecast Non-Grocery Retailers Outlets by Channel: % Unit Growth 2012-2017

    % unit growth2016/17 2012-17 CAGR 2012/17 Total

    Apparel Specialist Retailers 1.0 1.2 6.3Electronics and Appliance Specialist 2.0 2.1 11.1

    RetailersHealth and Beauty Specialist Retailers 2.3 2.4 12.5Home and Garden Specialist Retailers 2.0 2.3 12.1Leisure and Personal Goods Specialist 1.8 2.0 10.4

    RetailersMixed Retailers 7.8 7.8 45.3Other Non-Grocery Retailers 1.0 1.1 5.4Non-Grocery Retailers 1.2 1.4 7.4

    Source: Euromonitor International from trade associations, trade press, company research, trade interviews,trade sources