THE retail sector is booming in Punjab on the back of rapid urbanisation and rising consumer spending that is fuelling significant investment in this sector across the province.

The growth in retail business is not restricted to a few large cities; it is thriving even in smaller urban centres and towns.Estimates of Pakistan’s retail market vary. The Punjab Board of Investment and Trade (PBIT) estimates retail industry to be worth around $42bn with annual sales exceeding $105bn. The State Bank of Pakistan says retail sales grew to $133bn in 2015 from $96bn in 2011.

Retail is the third largest sector of the economy after agriculture and industry, contributing about 18pc to GDP, and is said to be the second largest employer providing jobs to 17pc of the total workforce.-

Major retailers agree that rapid urbanisation with most cities connected through a vast well-built road network, spike in remittances, increase in average disposal urban household incomes, better-than-the-rest-of-the-country security conditions, higher returns, and young population are some of the major factors driving retail boom in Punjab for the last several years.

Many like Yousaf Jamshed, CEO of LXY Global, believe that the retail sector in Punjab is earmarked to attract large foreign investments and woo leading global brands in the near- to medium-term.

“The retail scene in the province is getting very exciting,” Jamshed, who is organising a Retail Leaders Conference — third in as many years — in Lahore later this month. “The (retail) business is growing at a very fast pace across the province as sprawling malls are coming up not only in the larger cities but also in the smaller ones.”

Changing retail formats — hyper stores, super markets, malls, etc providing everything under one roof — are also influencing consumers’ behaviour

Unlike past, most foreign brands prefer to launch their business operation in Pakistan from Lahore before expanding to Karachi or elsewhere in the country, he added. “And the (local) brands are competing fiercely to capture greater retail space in Punjab’s large market.”

Jamshed says the retail leaders’ conference will provide a platform for both local and foreign companies and investors and firms to enter into joint ventures, and afford them a rare opportunity to discuss payment solutions and consumer trends.

Ahmed Khan, head of leasing at Nishat Emporium, one of the country’s largest shopping mall being built by the Nishat Group in Lahore, argues that the sprawling malls coming up both in large cities as well as in smaller towns are indicative of the ongoing retail boom.

“With the industry in the provinces reeling under energy shortages and high cost for several years now, more and more businessmen are investing in the retail sector to take advantage of the boom in the business,” he insisted.

Indeed, a number of textile exporters are focusing on commercial property development as well as launching their own clothing labels as the country’s textile and clothing exports are becoming uncompetitive on the international markets.

Changing retail formats — hyper stores, super markets, malls, etc providing consumers everything under one roof — are also influencing consumer behaviour and contributing to growing sales.

Heavy investments being made by the big business groups like Nishat and Packages in the modern shopping malls and markets in Lahore and elsewhere shows the growth potential of the retail industry. Some of the investors argue that implementation of the China-Pakistan Economic Corridor (CPEC) will unlock Punjab’s true retail potential.

“The CPEC will unleash a major retail revolution across Punjab as well as in rest of the country,” said the chief executive of a large business group that has recently launched its clothing line. “Everyone is now bracing for the opportunity CPEC is expected to bring,” he said, requesting anonymity.

Kashif Ashfaq, chief executive of ChenOne, is of the view that heavy investments pouring in retail business and launch of new (local) brands is good news for consumers. “The increasing competition between brands selling same products in the market has resulted in price wars. But this fierce competition has its downside as well: only large business groups with deep pockets will survive this phase at the end of the day, eliminating smaller players from the competition or pushing them to sidelines,” he argued.

He says numerous investment opportunities have cropped up in areas like food, apparel, footwear, health, beauty and furniture as lifestyle of urban middle class in Punjab undergoes a major change due to introduction and availability of numerous brands in the recent years.

“The changing lifestyle in the cities is forcing many to spend more even if they have to borrow. The credit card sales at our stores have jumped to 60pc of our total sales from 40pc a year ago, for example,” he concluded.

Organised retail sales boom has also fuelled demand for commercial real estate in cities and pushed rentals to all-time high. “The high rentals are also making it difficult for the smaller players to enter the market and cutting into the profits of the existing retailers,” Kashif said. “Sometimes you have to open your outlet in areas and malls where it doesn’t make much business sense. But since your competitors are there, you cannot afford to stay out even if it means heavy losses.”

Published in Dawn, Business & Finance weekly, March 28th, 2016