LAHORE: When prices rise, the major brunt is absorbed by end consumers; the retailers are the next who take the hit as they have to cut their margins to maintain sales; while the producers/importers increase prices corresponding to increase in cost.
This stark reality has pushed numerous households into poverty, while many small retailers have been forced to close their business. The dynamics of business in Pakistan are such that the industrial manufacturers and importers sell their products according to the cost, plus the usual margins fixed in their business plan.
Wholesalers buy these products at a fixed commission (10-15 percent). They then dispose of their stocks to retailers at three-five percent less than the retail price printed on the product.
Retailers are bound to sell these products at the fixed retail price. In case of price increase or shortages, wholesalers having bulk of the stocks increase their rates or reduce/eliminate the discount of the retailers.
The dilemma for the retailers is that customers insist on paying the printed price. Another risk for them is that the price control committees at district level apprehends them if they are found selling the products at higher than printed or controlled rates.
Moreover, the retailers have limited stocks and even if they sell their stock at higher rates they do not earn much. Administrative action is concentrated only on retailers.
We have seen that in recent months, no wholesaler was fined or apprehended for disposing sugar or wheat at higher than controlled rates to the retailers. But many retailers were slapped with fines for selling these commodities at higher than government announced rates.
This practice must change. Government planners must understand that the only genuine competition in Pakistan is at retail level.
If a product or commodity is available at all retail stores, it is not possible for any retailer to sell it at higher price.
It is ironical that in agriculture the actual producer is at the receiving end, while actual producers and importers of non-agricultural goods are on the driving seat. Middlemen though in both cases enjoy the privilege of immunity from charging higher rates.
The retail business in Pakistan is on decline. It is so in developed economies as well, but for other reasons.
In developed economies online sales outlets have marginalised the brick and mortar retail stores. It has equally impacted the retail chains as well.
In Pakistan, online sales have not gained momentum to disturb the retailers, but the chair stores have impacted their sales.
We see most fabric producers establishing their own stores in large numbers all around the country.
To make these stores more attractive, they also sell clothing made from their fabric, besides selling artificial jewellery and shoes with their brand names. This forces retailers and wholesalers of accessories out of the market.
In a similar manner, grocery stores were marginally impacted by the two mega international store chains in all major cities of the country. These large stores deal not only in grocery, but in clothing, stationary, fruits and vegetables, crockery, fish, meat, and mutton as well.
But these stores are limited in number. These mega stores impacted the business of numerous well-established medium-sized retail outlets in the city.
To recapture their lost clientele, these medium-sized stores started establishing numerous branches in the cities they operated in. Some have even moved to other cities as well.
This way these stores not only countered the impact of international megastores, but also encroached on the market of smaller retail outlets. Since they buy in bulk, these stores have also grabbed the share of wholesalers.
These stores have not restricted themselves to grocery, but have added numerous items that are marketed by international chain stores.
In this scenario, the retailers were already operating under immense pressure. They started giving discounts from their slender margins to retain their customers.
The economic depression also played havoc with their sales and increasing wholesale prices have pushed them to the wall. Numerous stores have closed. Many retailers are thinking of moving out to other fields.