Changing shopping trends marginalising retail sector

LAHORE: Economic depression has come at a time when the retail sector was already losing market to the large local and multinational stores. In the clothing sector, brands developed by all large manufacturers have marginalised them.

Metro and Hyper Star are not the only stores that have grabbed the business of small retailers; the number of large domestic grocery chains are much higher and are challenging the multinational stores as well as the retail outlets.

Retailers are at a loss as to how to cope with this stiff competition. Retailers charge higher rates for all items than the bigger stores that sell most daily use items and even electronics at discount.

The retailers cannot compete with them in prices because of two reasons. The first is that the larger stores purchase in bulk and distribute their products in all their outlets.

Their purchases are so high that they get almost the same discount that producers give to their wholesale distributors. Retailers procure their goods from the wholesalers.

The second reason is that they serve limited number of consumers and have to keep prices higher to stay functional.

When the multinational grocery chains started operating, the retailers were not affected because the outlets were established in big cities only. But the domestic store chains have spread all around in the big cities and have also opened up in smaller towns.

They also enjoy the advantage of economies of scale as they procure every product for all their outlets at the same discount that is offered to the multinational chains. Thus, sales of grocery retailers declined appreciably.

The massive devaluation impacted them badly as they keep low stocks and replenish them after sales. The larger stores had huge stocks of almost all items and they continued to offer them at discount, while the retailers had to procure at higher prices and sell accordingly.

Unfortunately, the country went in the grip of recession that further reduced their sales. Most of these retail outlets are operating in lower middle class or poor localities.

People living in these localities were the worst by the ever increasing unemployment, which further dented retail sales.

Currently, these retailers are promoting low priced toffees and candies to the children from which they are making higher profit. In grocery items, their margins have slashed appreciably.

Customers who have cash go to larger stores and buy products at discount. Only those that buy on credit flock the retailers.

Giving credit has also become risky because you never know when the buyer loses their job and would not be able to clear his/her dues.

This phenomenon is not restricted to grocery items only. Now all larger stores also sell home appliances and that too at discount.

A normal air conditioner shop and even the manufacturers charge for installation of split units, whereas larger stores sell at the same price or even at a lower rate, but with free installations.

Electronic markets in larger cities are losing their charm. All the known mobile phone brands are also available at these larger stores at a discount.

Customers trust the big store as they are convinced that these stores sell original products only. This is the reason they buy all imported shampoos, soaps, toothpastes and mobile phones from these outlets. The sales at retail shops established in different markets are gradually decreasing.

The worst hit retailers are the ones that established their clothing and garments outlets in different markets throughout the country. Now, every large manufacturer of fabric has opened its own outlets from where they sell their products under a brand.

They not only sell fabric but also readymade garments, artificial jewellery and ladies and children footwear. The fabric and stitched garments are the products of the producers and the rest are imported under their brand name from China.

This practice is impacting the business of different segments of retailers. There are at least seven brands each of which have established at least 100 outlets in the country and dozens outside Pakistan.

Normal fabric and garment retailers are finding it hard to compete with these bigger producers’ outlet chains. Then there are brands launched by some highly talented designers.

These brands have grabbed almost 80 percent of the high-end fashion garment market. If the trend continues, the normal retailers would have to think of changing their profession.