The policy of right-sizing has resulted in lay-off of mostly white collar educated class. The net result could be reduced purchasing power of the middle class that comprised these people, which could have depressed the demand for products and services.
The government, it seems, has failed to come up with any viable policies to offer opportunities of skill upgradation and readjustment of such uprooted workers. With no social safety net like unemployment allowances or free education or health benefits and lack of skill enhancement opportunities, the middle class have continued to ‘diminish’ in the country and millions of people fell below poverty line over the years.
Moreover, of all jobs which are being axed in the name of “efficiency”, not even one-fifth those have been generated, leading to marginalization of this class. Today the country’s middle class is facing worst of times.
Dawn has put some questions before the senior executives of some multinational consumer product giants besides asking from retailers, wholesalers and other consumer durable producers reasons of shrinking buying power of the middle class, consumers’s reluctance to buy product in bulk, slow market expansion and introduction of small packs.
MNCs: Manager, External Relations, Proctor and Gamble Pakistan, Dr Edita Dvoncova believes that consumers’ consumption is shrinking and has still not recovered to pre-September 11 period. However, even though, middle class consumers look more for branded products manufactured under good quality control, which is hygienically packed, and gives them more confidence. The bulk products do not offer these benefits to them.
On market expansion, she said, one of the factors influencing markets expansion or stagnation is the risk. When consumers have some uncertainty, they prefer to spend less, and save for difficult moments. The situation will improve as soon as they can feel the stability is achieved.
Director Marketing and Sales, Clover Pakistan Ltd (a part of Lakson Group), Fazal Hussain Akbar, offers a different view on shrinking purchasing power. He says that the economic slowdown ultimately and in long run affects purchasing power of consumers but this is gradual.
On a query why markets are not expanding, Akbar believes that market expansion is a factor of economic prosperity or in other terms GDP growth, which has remained sluggish during the last few years. Turbulence within the country and war in Afghanistan have discouraged investment in private and public sector. This has resulted in stagnation but some companies continue to invest in expansion.
CARS: The rising sales of 800cc, which is usually considered as a luxury of the middle class, raise two questions whether the middle income group is really buying these small Sedans on their own or these are being purchased by people living in upper income group areas.
The fact is otherwise. Actually, the arrival of local, private and foreign banks in auto financing has boosted sales of these cars and their main buyers are people living in posh areas coupled with buying by the corporate sector for their executives. The genuine middle class can only dream of it to own a new car. They are bound to rely on used 800cc cars of five years back models.
According to figures compiled by Pakistan Automotive Manufactures Association (PAMA), sale of Suzuki Mehran 800cc has increased by 73 per cent to 9,964 units in 2001-2002 as compared to 5,169 units in the same period of 2000-2001. Likewise, its production has reached at 10,143 units in the outgoing fiscal as against 3,889 units in 2000-2001.
Similarly, Daihatsu Cuore sales have been going satisfactory to 3,174 in 2001-2002 as compared to 3,052 units in previous fiscal.
BIKES: The sole hope and option of a middle class consumer, after losing hopes in car, is fast fading away due to sky-rocketing prices despite the fact that the manufacturers have kept the prices unchanged during the last few years.
The figures of PAMA reveal that sales of Japanese assembled bikes (Honda, Suzuki and Yamaha) surged by 10.5 per cent to 120,083 units in 2001-2002 as compared to 108,649 units in 2000- 2001.
RETAILERS: This segment of the society has been notorious for making windfalls even if the prices are not increased by the manufacturers. But during the last few years, they have been continuously clamouring over low sales and paucity of buyers even in earlier dates of the months when usually salaried class draw their salaries.
WHOLESALERS: President, Karachi Wholesalers Grocers Group (KWGG), Anis Majeed says that consumers belonging to the middle class usually avoid to buy items from the city’s main wholesale markets like Jodia Bazar and Dandia Bazar from where selling usually takes place in 50 kg bags.
The overall market conditions have been dull and even big traders are reluctant to lift the commodity in bulk due to shrinking demand of consumer goods, he said.
ELECTRONICS: Electronic items particularly television sets have got a boom following the entry of Korean brands in the markets in the last two years thus giving a tough time to old players of popular Japanese brands.
A total of 450,000 TV sets were produced in 2001-2002 by nine manufacturers as compared to 372,000 sets in last fiscal, chairman of Pakistan Electronic Manufacturers Association, Sarfarzuddin says. — Aamir Shafaat Khan