Superstores driving mid-tier retailers out of business | Business | thenews.com.pk
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Business

November 15, 2017

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Superstores driving mid-tier retailers out of business

Superstores driving mid-tier retailers out of business

LAHORE: Sales of conventional retail outlets have been marginalised by big domestic and multinational players, who are slowly eliminating mid-tier retailers, but neighbourhood retailers serving the lower middle income and poor localities have not be affected.

In the fabric and readymade garments sector, bigger players have introduced brand outlets in large numbers across the country; particularly covering major cities. Earlier, these companies used to produce fabric only and supplied it through dealers to thousands of retail outlets.

Many retail outlets of readymade women’s garments also flourished side by side with the fabric retailers. According to media reports, women’s fabric brand sales crossed Rs400 billion in 2015-16. This in other words means that annual sales of Rs400 billion have been siphoned out of retailers sales.

Some may argue that these brands must have enlarged the market for fabric. The impact of market enlargement could be in the range of Rs100 billion; the rest has been wrested from the retailers share.

Retailers that sold fabrics from mills have now turned into brands, and established their shops in posh markets of each city. Some of them have closed down or have changed their business, while some have also started stitching dresses for survival.

Many retailers also sell readymade dresses that can be altered by their in-house tailors at no additional cost to the consumer. Consumers now have a choice to either buy costly dresses from brands or buy lower priced clothes from these retail outlets.

The mid-tier retailers in grocery business are finding it hard to compete with multinational cash and carry stores. These outlets sell everything from a matchbox to a wide range of grocery, fruits and vegetables, full range of home appliances, bakery products, dairy products, beverages, crockery, and processed and uncooked mutton, beef and chicken meat.

These outlets offer special discount on large variety of goods. The prices of many items are similar to that of ordinary retail stores but many products are much cheaper than available at conventional retail outlets.

These multinational stores are established in big cities. Some of them offer special discounts to retailers, and are attractive for shopkeepers who come to the big cities to buy their inventories.

Such outlets have impacted the sales of retail shops in well-to-do markets. The affluent buyers who frequented retail outlets now go to multinational super stores, some of which are operating in posh shopping malls.

Consumers can buy anything at these super stores with confidence that they will not be handed over fake or substandard products. Lower tier outlets operating in neighbourhoods have not been affected by the bigger stores since they cater to the middle and low income groups. Since most poor consumers lack the resources to buy their grocery in bulk, many of them buy from the neighbourhood shopkeeper on credit.

These low-tier outlets are comparatively expensive compared to the super stories. However, in poor localities, consumers have no choice but to buy from such outlets because of limited resources.

A local shopkeeper can sell poor customers 250 gram sugar, pulses, and ghee, or two kilogram of wheat flour because their capacity to spend in a day is much less compared to those who buy in bulk. These stores will continue to prosper unless the economic conditions of poor localities improve.

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