House brands are gaining popularity in a thoroughly complex, fragmented and unorganised retail universe of Pakistan as stores expand their merchandising mix. Unmarked packs occupy shelves next to recognised labels in many segments of consumer products in big department stores and small shops.
Market watchers noted that the house brands’ share is still a small fraction of the market pie but has consistently been growing. Almost all big department stores — Imtiaz, Fateh, Naheed, Utility Stores etc. — are capitalising on the loyalty of their expanding customer base. Many small neighbourhood kiryana stores that used to deal in loose products have also started sorting, grading and packaging daily kitchen items for a premium.
According to a commissioned online survey of store chains in Pakistan, 10 Metro Cash & Carry stores dominate the house brands’ market pie with a 55 per cent share, followed by 16 Imtiaz stores by a distance. Its share was projected at 29pc. The share of Carrefour was 9pc while that of Utility Stores, the largest chain with about 6,000 outlets, was 7pc. The remaining is shared by the rest. According to another source there are 22 Al Fateh, nine Chaseup and three Spar stores in Pakistan.
Small neighbourhood stores that used to deal in loose products have also started sorting, grading and packaging daily kitchen items for a premium
“We invested to give our customers more than the products they pay for. We offer a taste of modern lifestyle in shopping. As footfall increased, it was a natural next step to induct house labels in our merchandising stocks,” the manager of a successful retail chain commented from Lahore privately.
“It is a part of our survival strategy as competition gets tougher and margins on manufacturer brands squeeze. Packaging cuts wastage, minimises pilferage and makes stocking efficient in small space of shops. We have an advantage of knowing our customers personally. The trust built over years of relationship helps us to market private labels,” said Adil, a shopkeeper in Nazimabad, a middle income locality in Karachi, while discussing the trend.
“A visit to the store near my home is much easier. I don’t have to pick and choose myself. Dilber, the salesman, has a fair idea of my budget and family’s taste and preferences. I don’t care about the label as long I get value for the money spent,” a busy family person who does weekly groceries told Dawn. “It took me a few trips to a faraway big department store to appreciate the value of the corner shop for my two-member family,” he added, hinting at the crazy rush at the popular store and the hassle of parking in a limited designated area.
Yousuf Jamshed, director of LXY Global, a retail consultancy firm, believes a sizeable number of customers in Pakistan are switching to private labels after patronising manufacturers’ labels for years because of aggressive marketing strategies adopted by stores besides everything else. He regretted the patchy data available on the key sector. “I have yet to meet an officer in the economic ministries who cares about or understands this huge sector that touches practically everyone.”
When reached over the phone, a top bureaucrat in Islamabad said the Federal Board of Revenue (FBR) and the Competition Commission of Pakistan (CCP) take some interest in the sector for their own objectives but the retail sector does not fall in the ambit of any ministry.
Responding to a question about the size and evolving profile of the retail sector, he told Dawn: “The latest numbers are from the 2005 economic census. Ideally, the census should be conducted every 10 years. The fact is that despite efforts to record transactions, the retail-sector supply chain continues to be dominantly cash-based and operates beyond the pale of the formal economy mostly.
“A summary has recently been moved by the Pakistan Bureau of Statistics (PBS) for the economic census, an extensive, expensive exercise that enumerates all forms and kinds of economic activity. It will take at least three years at a projected cost of Rs9 billion if the cabinet approves it.
“It will provide requisite data for better insights into the economy but sadly I don’t think the government feels the urgency to approve it.”
Commenting on the regulatory oversight, he said multiple administrative layers of government are involved in pricing, monitoring and issues involving the location of commercial activity. He mentioned weak consumer courts and CCP in discussion.
Muhammad Zubair, who recently assumed charge as chief economist at the Planning Commission, directed the queries regarding the size and depth of the sector to Sarwar Gondal, executive in charge of the PBS hoping the subject was covered in their series of sub-sector studies. Mr Gondal did not recall any such study offhand and promised to get back if he found one.
The operators of popular manufacturer brands were approached for comments on house labels but their response did not reach in time. Privately explaining the reluctance, a senior executive told Dawn that there is resentment but even MNCs dare not irk megastore operators. “With no regulatory oversight, these multi- billion-dollar department stores have assumed size and influence of mafias that no company can afford to annoy. They have the power to influence our sale numbers just by pushing back our products on display racks.”
The retail and wholesale trade is the biggest segment of the services sector in the country creating over 18pc of GDP. According to independent estimates, it employs almost 8.5 million workers and generates roughly Rs8.3 billion worth of incomes. Pakistan Economic Survey 2019-20 acknowledges the role of private consumption in growth. It states: “The pattern was likely to continue, however, due to Covid-19, private consumption suffered significantly. In percentage of GDP, it dropped to 78.5pc in 2019-20 compared to 82.9pc in 2018-19.
It adds: “The services sector has declined provisionally at 0.59pc mainly due to a 3.42pc decline in the wholesale and retail trade sector.”
Published in Dawn, The Business and Finance Weekly, February 15th, 2021