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NON-GROCERY RETAILERS IN

PAKISTAN

Euromonitor International

April 2013

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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