Upload
iremaamar
View
218
Download
0
Embed Size (px)
Citation preview
7/27/2019 A Look at Pakistani Retail Sector
1/17
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
7/27/2019 A Look at Pakistani Retail Sector
2/17
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
7/27/2019 A Look at Pakistani Retail Sector
3/17
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
7/27/2019 A Look at Pakistani Retail Sector
4/17
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.
7/27/2019 A Look at Pakistani Retail Sector
5/17
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
7/27/2019 A Look at Pakistani Retail Sector
6/17
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.
7/27/2019 A Look at Pakistani Retail Sector
7/17
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)
7/27/2019 A Look at Pakistani Retail Sector
8/17
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
7/27/2019 A Look at Pakistani Retail Sector
9/17
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.
7/27/2019 A Look at Pakistani Retail Sector
10/17
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
7/27/2019 A Look at Pakistani Retail Sector
11/17
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.
7/27/2019 A Look at Pakistani Retail Sector
12/17
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
7/27/2019 A Look at Pakistani Retail Sector
13/17
Promotion can be viewed as a major component of customer service because it providesinformation
Planning a Retail Promotional Strategy
7/27/2019 A Look at Pakistani Retail Sector
14/17
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
7/27/2019 A Look at Pakistani Retail Sector
15/17
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
7/27/2019 A Look at Pakistani Retail Sector
16/17
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
7/27/2019 A Look at Pakistani Retail Sector
17/17