November 14, 2004

While pre-Eid euphoria is a routine phenomenon at this time of the year, the rush this time round has been somewhat exceptional. This is surprising in view of relevant poverty, unemployment and inflation figures in society. It seems that where people had difficulty reaching up to the market, the market has restructured itself to come down to the potential buyer’s level

THE mood is set, and the expectations are high. Markets are reporting brisk business. If customer turnout is any indication, people are better prepared this year to celebrate the day. Extraordinary rush in markets indicate entry of a whole lot of new customers in addition to the traditional buyers at this time of the year.

This has been so despite the 33 per cent poverty, above five per cent inflation and rising unemployment which have apparently not been able to depress consumer demand. It seems that where people had difficulty reaching up to the market, the market has restructured itself to come down to the potential buyer’s level to accommodate new segments in their folds. It was also noticed that prices of fabrics, garments, shoes and accessories have not crept up proportional to the rate of inflation. In some sectors, on an average, they actually have come down this Eid.

The phenomenon is perplexing to experts, who are bogged down with high-value projects and faceless statistics. The economic dream team of the government, though ever ready to bag credit for all that is positive, was found groping for a satisfactory explanation to the facts that do not add up to justify their economic prophecies.

In the West, Christmas generates a lot of interest in economists, analysts and research agencies. Studies are conducted for the benefit of retailers and manufacturers to capture the trend. Demand is quantified sector wise and its impact on key economic variables is analysed in order to have a better understanding that is the cornerstone of all planning at macro as well as micro levels.

In Pakistan, retailers and manufacturers do make projections and devise strategies to respond to the impending demand in a befitting fashion. They, however, are found to be too secretive, for reasons of their own, to share their findings with the public.

As for the government and the academicians, they are either too busy or too indifferent to such developments. A higher level of consumer spending, upsurge in business, role of credit in fuelling the upsurge, its impact on domestic savings, etc., are not probably considered subjects worthy enough to merit their attention.

In the absence of firm-up data, some study or survey on the subject, one had to depend on the first and second-hand information gathered from different sources and stake-holders to draw some generalized conclusions to understand different features of pre-Eid hectic economic activity. These can at best serve as pointers.

Contacts in different cities, big and small, confirmed that this year there are more people out shopping for Eid than was the case last year. Representatives of market associations validated the impression. “Last year we did a good business, and, as expected, this year it is even better,” says Atiq Mir, Chairman of the Karachi-based Alliance of Market Associations.

Markets in bigger cities have diversified with the expansion of municipal limits. Spokespersons of these markets located in different areas authenticate the presence of the trend. It was revealed, however, that it is more pronounced in middle class areas.

Dr Akmal Hussain, a senior economist associated with the Islamabad-based Pakistan Institute of Development Economics (PIDE), attributed better turnover of customers this year to rising disparity of income. “Income inequality means that rise in the country’s income is not equitably shared. This translates into more income for the already earning classes. In all probability, it is this factor that is behind the current spurt in the market,” he said.

There is little doubt that consumers do not forego shopping in sympathy for others. “If someone is doing well, they are not going to stop in sympathy for others faring worse than they are,” said an analyst.

Reports from the market, however, contradict this notion. There are people of all classes, and not just the wealthier class, out shopping for Eid.

Dr Asad Saeed, an economist from Karachi, attributed the trend to three factors: to what he calls, ‘the pent up consumption’; disincentives to save; and to fears of rising inflation. He felt that there are no signs suggesting structural changes in the economy for the better. “The employment situation has worsened, real wages have gone down, and distributional aspect of growth is negative. The better market activity could just be cyclical,” he said.

Atiq Mir attributed the rush also to an improved law and order situation in the country. It, however, was little hard to accept the explanation. In Sindh ethnic violence may have subsided, but the country is experiencing a deadlier trend of lawlessness in the form of attacks by the so-called ‘terrorists’. Besides, the general crimes level has not gone down by any standard. Incidents of thefts, robberies, kidnappings for ransom, harassment, car, motorcycle and mobile telephone snatching are reported every day from all parts of the country. May be people of the country have experienced this fear for so long that now they have come to accept it as something that they are destined to live with. This acceptance of the fear factor as an unavoidable reality beyond their control, may be, has enabled them to carry on with their lives in a more normal manner than is possible otherwise.

The other day, while wandering around the downtown area, I bumped into a middle-aged couple at a garment shop in Karachi’s Bohri Bazaar, with a long trail of children holding hands. When asked what were they in the market for, the man took it as an insult. “I beg, borrow or steal, but make sure that my children get new clothes and do not feel like an outcast in the locality,” pat came the reply from Ahmed, who works as a peon in a private firm.

“Is it not our right to indulge at least once a year,” he continued, making it a point to stress that he had enough to get something for everyone in the family, and that too of their choice. Ahmed was in a hurry to go round the market, and in no mood to be bothered any more.

On an average, the market worth of a peon is about Rs3,000 per month. His Eid budget could at best be Rs2,000 or so. What can one fetch with that paltry an amount, and for a family as large as Ahmad had? Representatives of market associations confirmed that the market has the depth to answer the calls of all segments. “Yes one can enter the Eid market with any budget and it would not be a disappointing experience to a realistic buyer,” Mohammad Arfeen Siddiqui, of the Allahwallah Market Association, Karachi, maintained.

Dumping and import of low-quality, inexpensive items has changed the complexion of the market beyond recognition. It has humbled the retailers and the local manufacturers who are forced to reduce their margin of profit and earn from better turnover.

As for the variety, a presentable ladies suit can be bought for as low as Rs200. May be not in the same market, but there are suits available for Rs20,000 as well. And there is a whole range of varieties to fill the 200-20,000 gap. You can get what you can afford.

In the footwear sector, prices of even renowned brands are less this year than what they were the last year. “Shops are stocked with fairly decent Chinese shoes which are available for Rs300-400. There is no option for us, but to reduce prices to attract buyers,” said the owner of a local shoe company.

“Profit margin per item seems to have lost significance in an expanding, highly competitive market. High turnover ensures better returns,” said the owner of a super market in a posh locality.

Clothes, shoes and accessories have been definite hot-sellers, powering the balance sheets of firms dealing in these categories this Eid. Commenting on the falling prices in fabric, garment and footwear sector, Dr Akmal Hussain said that earlier policies of import substitution when tariff were high to provide captive market to the local business corrupted this class. They misused the opportunity by keeping margins too high at the cost of the consumers. Lowering of tariff barriers has exposed the locals to competition which has led them to mend their ways. He felt that in the short run the industry will feel the stress, but in the long run the new scenario will benefit the industrialists by making them dynamic.

The benefits of the transforming market, however, are not uniformly distributed. It has facilitated the new entrants from the lowest rung of the society, but, as a class, it has always been the strong 60 per cent middle bracket, that comprises the most enthusiastic shoppers, which has gained the most. For the elite, price is not an issue. They go for brands and very often travel to more suitable markets overseas for occasions such as Eid; that is, those among them who actually care to celebrate the festival. But, naturally, that is beside the point here.

The big question is, will the Eid hangover also get reflected at the marketplace beyond the festival? And, can the trend of demand upsurge actually provide momentum to the economy to settle at a little higher level of activity?

Unfortunately, there is little chance for this to happen. First, items of foreign origins have consumed a major chunk of the demand. So benefits will accrue to the manufacturers of exporting nations. Second, it was more of a cyclical phenomenon, already accounted for in the current level of development activity.

No one thinks that the current mood is going to last. “Business is at its best around this time every year, and retailers wait for the season all year round,” said a market observer.

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