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Project on Retailing Business in Pakistan
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IntroductionThe importance of the retailing is seldom subject to serious questioning from the standpoint of its economic and social contribution .Yet, the value of retailing as an academic scholarly endeavor worthy of the serious student in the professional school of business administration has been challenged. This challenged has been successfully met on most fronts, and retailing continues to be offered throughout most, if not all, of the four –year colleges and universities and throughout the community colleges of the country. Retailing deals with important economic and management problems and thus constitutes an important area for management activity. If we were to compare Pakistan just three decades ago (not a particularly long period in the life of nations) to what it is today, the extent and nature of the difference would be of startling proportions.
Liberalization and communications revolution has also brought the global corporate culture to Pakistan; the habits of people are changing rapidly with changing life styles, changing ways of living, customer pattern and buying behavior. All the things are changing.
These corporate sector-promoted activities and the glamour and pomp that surrounds in Pakistan is in sharp contrast to the physical and social conditions in lower and lower-middle income settlements. There is an introduction of fast-food chain stores, garments stores and international branded stores of different consumer items is available every where, they have opened up their branches in all the big cities of Pakistan. Huge advertisements, colorful and well-lit, dominant the urban landscape and dwarf badly constructed, badly lit businesses and homes.
It is the emergence of new aspirations related to consumerism, and the desire for belonging to “contemporary” world as portrayed by the media.
In this report regarding “Retailing Business in Pakistan, every aspect of these new stores where the aspiration of many people are met. As the societal culture is changing so do the purchasing pattern of people. To meet their demands there is an advent of new shopping stores that have a new look now the shopping is not the matter like of old days.
Retailing has been defined as the distribution of goods and services to the ultimate consumer. Retailing is the pivotal point around which all marketing of consumer goods revolves. Manufacturers and wholesalers rely on retailing to provide the structure in which their goods flow quickly, smoothly, and in large volume. Now consumers depend on retailers to buy goods to meet their needs and to make it as convenient and enjoyable as possible to do the shopping that fills those needs.
Now retailing is dynamic. It is the world of merchandizing, embodying a world of things and ideas, contributing to a world of excitement and beauty. There are beautiful, well lighted, air-conditioned stores where the customers leisurely shop. The stores are operating near the target market and staying o0pen at times most convenient to customers. The stores have adjusted their merchandise offerings to provide for one-stop shopping.
What is Retailing? Definitions of Retailing
“Retailing consists of the sale and all activities directly related to the sale of the goods and service to ultimate consumer for personal, non-business use.”
Michael j.Etzel, Bruce j.walker, William j.sranton.
“Summation of all activities that result in offering for sale goods and/or service individuals and /or organization, purpose of ultimate consumption.”
“Retailing covers all of the activities involved in the sale of the product to final consumers”
E.Jerme MacCarthy, William D.perreault, JR.
“Retailing is the act of marketing goods to ultimate consumers.”
Rom j.Markin, Jr
Who is retailer?
“A firm engaged primarily in retailing”
Michael j.Etzel, Bruce j.walker, William j.sranton
“A retailer is a person or organization selling 50% or more of his products to consumer.”
A.Esward spitz, Alan B.FlaschnerThus we can conclude from the definitions of retailing that it is the activity process of selling products and services, and marketing the goods to the final consumer.
Products are goods grown or manufactured and available for sale. And services are benefits or satisfactions that improve the appearance, health, comfort or peace of mind their uses. Retailing is the last link in the chain of marketing between those who produce or provide products and services at the one end and the consumer or users at the other. Its purpose is to serve the needs and wants of the consumers.Examples of retailing activities are:
A student selling flowers on street corner
McDonald’s
Open air market
Prince departmental store etc.
Even though manufactures, wholesalers and retailer may sell to consumer .A consumer does not buy a product for resale nor does he use his purchase to run a business.
3. The importance of retailing in economy of Pakistan
Retailing is very important in economy of every country. In Pakistan with changing life styles and customer needs, the marketers are sensitive to equating new and improved good and services with the needs, desires and fancies of consumers. Retailing in the institution that is most closely in touch with consumers, and in many ways is best able to interpret these needs. Here we have made an effort to analyze that to what extent that retailers are skillful in interpreting consumer needs, servicing as the consumer’s purchasing agent, and to the extent that they develop good assortments of merchandise (styles, materials, colors, prices and sizes) and present them in an effective manner so that consumers find it easy and attractive to buy.
Here in this report “Retailing Business in Pakistan” is discussed, taking in view the three big markets of Pakistan.1. Karachi
2. Lahore
3. Multan
1. KARACHI
Urban population of both sexes: 9,269,000 people
Male population: 4,978,000 men
Female population: 4,291,000 women
Annual growth rate: 3.45 p.a.
Average family size: 6.45 people / family
LAHORE
Urban population of both sexes: 5,063,000 people
Male population: 2,660,000 men
Female population: 2,403,000 women
Annual growth rate: 3.22 p.a.Average family size: 6.84 people / family
3. MULTAN
Urban population of both sexes: 1,182,000 people
Male population: 628,000 men
Female population: 554,000 women
Annual growth rate: 2.86 p.a.
Average family size: 7.28 people / family
For studying the “Retailing Business in Pakistan” these 3 cities are enough as 2 of them are the largest cities of Pakistan and it is necessary to have a look on their Retail Stores and comparing them with Multan’s Retail Stores.
Thus from these figures, it is shown that the retailers and consumers of these cities play a important role in economy .The retailer response to economic and consumer changes. Buying power changes because of the rate of inflation and the mobility of the population. These changes effect the volume of business between retailers and consumers, and between retailers and suppliers .In times of increasing inflation, consumers demand higher quality and more durable products. They are quick to complain if products do not satisfy them .As people with higher incomes move from urban areas to suburban areas, retailers with stores in urban areas go out of business. They carry merchandise appropriate for the new suburban consumers or carry merchandise for the low-income consumers left behind. In short the retailers in these cities must respond to economic change by carrying products that will satisfy their consumers. They must also carry reduced inventory in response to the reduced demand that is likely to occur as consumers find that their rupees are buying less and less. Changes in the line of products offered by the retailer may also bring about a whole set of retailer-suppliers relationship.
4. Difference between Retailing Wholesaling
Retailers sell in smaller quantities (individual units) on a more frequent basis where as the less frequent typical order quantity sold by wholesalers and producers is much larger (cases and truck lots).
Retailer’s place of business is open is to the general consuming public, but producer and wholesalers do not normally make over –the-counter sales to the general public (factory and wholesale outlets are exception).
Retailers charge higher per –unit price than those commonly associated with producer and wholesaler (loss leaders are a notable exception).
Retailers tend to use a one –price policy whereas producer and wholesaler make more extensive use of variable prices based on some from of discounting structure.
Retailers rely on consumer to make the initial contract by visiting the store or placing mail or telephone orders, where as producers and wholesaler employ outside sale representative to make initial sales contacts (at-home retailing is a notable exception).
Retailer place greater emphasis on the external and internal atmospherics of their physical facilities and fixtures as major merchandising tools.
5. Wheel of Retailing
Wheel of retailing theory says that new types of retailers enter the market as low–status, low-margin, low-price operators and then if they are successful-- evolve into more conventional retailers offering more services with higher operating cost and higher prices. Then they are threatened by new low–status, low-margin, low–price retailers -- and the wheel turns again.
E.Jerme McCarthy, William D.perreault, JR.
The wheel of retailing is the name Professor Malcolm P. McNair has suggested for a major hypothesis concerning patterns of retail development. This hypothesis holds that new types of retailers usually enter the market as low–status, low-margin, low-price operators. Gradually they acquire more elaborate establishments and facilities, with both increased investments and higher operating costs. Finally, they mature as high–cost, high–price merchants, vulnerable to newer types who in turn go through the same pattern.
Rom j.Markin, JrThe wheel of retailing theory however does not explain all major retailing development. Vending machine entered as high cost, high-margin operation. Convenience food stores are high priced. Suburban shopping centers have not had low- price emphases.
Example:
In last few years the new News Agency such as Roznama Din enter the market as low–status, low-margin, and low-price operators. Gradually they acquire more elaborate establishments and facilities, with both increased investments and higher operating costs. Finally, they mature as high–cost, high–price operators like Naw-E-Waqat.
The Wheel of Retailing
6. Retailer Classified by Form of Ownership
The major forms of ownership in retailing are corporate chain, independent, and contractual marketing system.Corporate Chains Retailing
Independent Store Retailing
Contractual Vertical Marketing System
In contractual marketing system, independently owned firms join together under a contract specifying how they will operate. There are three types of vertical marketing system.
Retailer cooperatives ii) and voluntary chains
iii) Franchise system
Retailer cooperatives ii) and voluntary chains
The main difference between these two types of systems is who organize them .A retailer cooperative formed by a group of small retailers that agree to establish and operate a wholesale warehouse. In contrast, a wholesaler that enters into a contract with interested retailers sponsors a voluntary chain.
Historically these two forms of contractual VMS have been organized for defensive reasons-to enable independent retailers to complete effectively with large strong chain. They do this by providing their retail members with volumes buying power and management assistance in store layout, employee and management training programs, position, accounting, and inventory control systems.
Franchise System
There are two types of Franchising;
Product and Trade Name Franchising
Historically the dominant kind, product and trade name franchising is prevalent in the automobile (Honda) and petroleum, (Chevron) industry. It is a distribution agreement under which a supplier (the franchiser) authorizes a dealer (the franchisee) to sell a product line, using the parent company’s trade name for promotional purposes. The franchisee agrees to buy from the franchiser and also abide by specified policies. The focus in product and trade name franchising is on what sold.
Business Format Franchising
Much of franchising’s growth and publicity over the past three decades has involved the business format kind (used by firms such as Kentucky Fried Chicken). This kind of is franchising covers and entire method (or format) for operating a business. A successful retail business sells the right to operate the same business in an other geographic area.
Franchising is new phenomenon in Pakistan. But this concept has gained tremendous acceptance in this market as can be seen from recent growth trends in the market. Most of the business, where the present market size for internationally
Franchised outlets is estimated in excess of Pak Rupees 1.2 billion (USD approximately 24 million) in terms of annual sales.
U.S. food outlets such as Pizza Hut, Kentucky Fried Chicken (KFC), McDonald's, TGI Friday's, Subway, Taco Maker, and Nacho Nana’s are already present in Karachi. Pizza Hut, McDonald's and KFC are also present in Lahore.
The non-food sectors such as retailing, convenience stores, hotels & motels, courier service, security services, and educational training centers are going to be the growth areas of the future.
U.S. companies dominate the franchise market in Pakistan in large part due to the fact that U.S. firms were the pioneers in this sector and the first to set up their outlets in Pakistan. In addition, the U.S. firms entered the market with a long-term commitment and provided full support to their local partners. Also, U.S. firms and their products are internationally known for their quality products and superior service. Many U.S. products such as McDonald's and Kentucky Fried Chicken were well-known and recognized in the urban areas of Pakistan even before starting their operations in the country.
There are no local firms offering indigenous franchise opportunities, although several Pakistani entrepreneurs have acquired master franchise for this region with the objective to re-sell the franchise to interested parties in the country.
The Government of Pakistan does not impose any restrictions on investors, who wish to establish a franchise in the country, but foreign investors are required to inform the Board of Investment and the State Bank of Pakistan, primarily for the purpose of repatriation of franchise fee or any profits accrued.
STATISTICAL DATA:
This report attempts to briefly describe the franchising industry in Pakistan, which is still in a nascent stage. Few statistics are available for this market so an outline of franchise operations in Pakistan is given as follows:
U.S. FRANCHISE OPERATIONS IN PAKISTAN
:1. Restaurant: McDonald's, Kentucky Fried Chicken, Pizza Hut, TGI
Taco Maker, Nacho Nana's, Sno Biz Friday's, Subway,
2. Hotel/Motel: Sheraton, Marriott, Best Western, Ramada Renaissance
3. Security: Brinks, Wackenhut
4. Car Rental: Avis
5. Printing: Alpha graphics
6. Mineral Water: Culligan
7. Soft Drinks: Pepsi-Cola, Coca-Cola, Seven-up, RC Cola
8. CourierService: DHL, TNT Skypak, United Parcel, Federal Express
9. Apparel: Walt Disney, Jockey, Hang Ten
10. Footwear: Hush Puppies, Caterpillar
11. Entertainment: Time Warner
12. Consulting Services: Dunn & Bradstreet
NON-U.S. FRANCHISE OPERATIONS IN PAKISTAN:
1. Apparel: Benetton (Italy), Schieser (Germany)
2. Hotels/Motels: Serena Group
3. Restaurant: Pizza Express (U.K.)
4. Education: Asia Pacific Institute of Information
Retailer Classified by Marketing Strategies
Store Retailing
Retail stores come in a variety of shapes and sizes, and new retail types keep emerging. One or more of several characteristics can classify them:i) Departmental Store
Carry several products lines-typically clothing, home furnishing, and house hold goods –with each line operated as separate department managed by specialist buyers or merchandisers.
Examples: prince departmental store, pace etc.
Discount stores
Sell standard merchandise at lower price by accepting lower margins and selling higher volumes. A true discount store regularly sells its merchandise at lower prices offering mostly national brands, not inferior goods. Discount retailers include both general merchandise and specialty merchandise stores.Examples: utility stores.
iii) Independent off Price Retailer
Owned and run either by manufactures or by division of larger retailer corporations.
Example: Tony shoes
iv) Specialty Stores
Carry a narrow product line with a deep assortment within that line: apparel stores, sporting goods stores, furniture stores, florists and bookstore. Specialty store can be sub classified by the degree of narrowness in their product line .A clothing store a single line store; a men ‘s clothing store would be a limited line store; and a men’s custom-shirts store would be a superspecialty store.Example: Cotton & Cotton.
v) Off-Price Retailers
Sell a changing and unstable collection of higher –quality merchandise, overruns, and irregulars obtained at reduced prices from manufacturers or other retailers. They buy at less than regular wholesale prices and charge consumers less than retail. They include three main types:
Example: Spencer, Maxell
vi) Supermarket
Relatively large low-cost, low-margin, high-volume, self-service operations designed to serve the consumer’s total needs for food, laundry, and household maintenance products.Example: Awami Markaz
vii) Convenience Stores
Relatively small stores that are located near residential areas, open long hours seven days a week, and carry a limited line of high –turnover convenience products. Their long hours and their use by consumers mainly for “fill-in “purchases make them relatively high–price operations.Example: General Stores
viii) Warehouse Clubs
Sell a limited selection of brand name grocery items, appliances, clothing, and hodgepodge of other goods at deep discounts to members who pay Rs.250 to 500 annual membership fees. They serve small businesses another club member out of huge, low overhead warehouse like facilities and offer few frills or services. Example: Service cut price shopsNon store retailing
Although most goods and services are sold through stores .Non store retailing has been growing much faster than store retailing. Traditional store retailers are facing increasing sales competition from catalogs, direct mail, telephone, home TV shopping shows, on-line computer shopping services, home and office parties, and other direct retailing approaches. Non-store retailing includes direct marketing, direct selling, and automatic vending
1. Direct selling
This method is started centuries ago with roving Peddlers, has grown into a huge industry. Direct selling and door to door selling, office to office, or at home sales parity’s selling are consumers’ convenience and personal attention. But the cost of hiring, training, paying and motivating is usually high.
Trends working against this form of selling include
1. Increase in single-person and working-couple households decrease the chances of finding someone at home;
2. Home-party companies are having difficulty finding non-working women who want to sell product part-time;
3. Increases in crimes against individuals have made consumers reluctant to invite strangers into their homes; and
4. Recent advances in interactive direct-marketing technology mean that the telephone, the television, and the home computer may replace the door-to-door salesperson.
2. Telemarketing
It is an other direct marketing method. Through telephone people are influenced about particular brands or products. Insurance, credit card, and books are sold in that way.
Automatic vending
It means selling through vending machines use space age and computer technology to sell a wide variety of convenience and impulse goods. Such as Books, Hosiery, Newspaper, Audiotapes etc.
Direct Marketing
Marketing through various advertising media that interact directly with customers, generally calling for the consumers to make direct response.vehicles are used to obtain immediate orders directly from targeted consumers. Although direct marketing initially consisted mostly of direct mail and mail-order catalogs, it has taken on several additional forms, including telemarketing, direct radio and TV, and on-line computer shopping. Its growing use in consumer marketing is largely a response to the "demassification" of mass markets, which has resulted in an increasing number of fragmented market segments with highly individualized needs.
Trends that have increased the use of direct marketing include
1. Number of women in the workforce;
2. Higher costs of driving, including traffic congestion and parking problems;
3. Shortage of retail helps;
4. Longer checkout lines;
5. Toll-free telephone numbers;
6. Availability of credit through proliferation of credit cards;
7. Growth of computer power & communication technology; and
increasing time pressures on consumers.
The retail mix
To be successful, a retailer must distinguish itself from other retailers and develop a strategy for satisfying the needs and preferences of a specific consumer group. This strategy, called a retail mix, involves careful consideration of (1) the product to sell, (2) the quantity at which to make the product available, (3) the location at which to sell the product, (4) the time to make the product available, (5) the pricing of the product, and (6) the appeal that can be generated to attract the consumer’s interest. 1. The ProductRetailers strive to offer products that appeal to the tastes of the consumer, are of good quality, and function properly. Sometimes the product must also provide psychological and emotional benefits, such as prestige or convenience. For example, an expensive watch with a well-known, visible brand name may give its owner a sense of prestige. 2. Quantity
Unlike wholesalers, who sell goods in quantities that often are too large to be useful for individuals or families, retailers sell products in small quantities that are more convenient for consumers. For example, wholesalers may sell jeans to retail stores in lots (units) of a dozen pairs each. Retailers then sell consumers jeans by the individual pair. 3. Location
A retailer’s location must be convenient. In locating retail stores, retailers consider the market or town in which they want to establish themselves, the part of town to be in, and the actual site of their store. In some cases, no store is involved because the right location for shopping for a product is the consumer’s home or place of business. These retailers without stores, known as nonstore retailers, act as direct marketers by contacting customers directly through mail, the Internet, television, telephone, or other means. 4. Timing
Retailers must make their products available at times when consumers are willing and able to buy them. Retailers identify consumer buying patterns and adjust such things as store hours, inventory levels, and promotional programs to accommodate consumers. Retailers also identify special times that generate opportunities to sell merchandise, such as holidays, changing seasons, and special occasions, such as weddings and school graduations.
5. PricingRetailers use different pricing strategies to attract different consumers. For example, some stores use low or discount prices to attract economy-minded consumers, while some stores set higher prices to convey an upscale image.
6. AppealRetailers work hard at creating an image of their store or product that customers find appealing. Retailers use such promotional techniques as advertising and public relations to create awareness and build interest in their products. These techniques also attract customers to the retailer’s store, provide valuable information about the retailer, and persuade customers to buy.
Functions of Retailing
The retailer’s primary job in our society is to satisfy the wants of consumers by exchange .The retailer lets the wants of his customers guide his decisions. His long-run profit-making is determined by his ability to continue satisfying his customers’ .The retailer uses the four things to satisfy his customers:Inventory or stock to be sold ;
Capital, which in addition to money includes physical assets, such as a building, supplies and handling equipment ;
The time, energy, talent, and ability of his employees; and
Information
The retailer’s desire to make a profit by satisfying customers is called the retailing concept.
Formats of Retailing
The following are the formats of retailing:
Merchandizing
The merchandising area deal with the buying and selling of goods and service. It means that providing the customer with the right goods and service at right place, at the right time, at right price, and in the right quantities. Merchandising is highly people oriented area that includes occupations such as those of the salesperson, buyer, fashion coordinator, interior decorator, and merchandise manager. Merchandisers are businesses that help move goods through a channel of distribution—that is, the route goods take in reaching the consumer. Merchandisers may be involved in wholesaling or retailing, or sometimes both.A wholesaler is a merchandiser who purchases goods and then sells them to buyers, typically retailers, for the purpose of resale. A retailer is a merchandiser who sells goods to consumers. A wholesaler often purchases products in large quantities and then sells smaller quantities of each product to retailers who are unable to either buy or stock large amounts of the product. Wholesalers operate somewhat like large, end-product manufacturing firms, benefiting from economies of scale. For example, a wholesaler might purchase 5000 pairs of work gloves and then sell 100 pairs to 50 different retailers.
Location
Transportation
Customer service
Findings
1. The slowdown in population and economic growth.
2. Retailers can no longer enjoy sales and profit growth through natural expansion in current and new markets;
3. Greater competition and new types of retailers make it harder to improve market shares in existing markets;
4. The retailing industry suffers from severe over-capacity. There is more than 18 square feet of retail space for every man, woman, and child, more than double that of 1972;
5. Consumer demographics, lifestyles, and shopping patterns are changing rapidly;
6. Quickly rising costs make more efficient operation and smarter buying essential to successful retailing;
7. Retail technologies are growing in importance as competitive tools to produce better forecasts, control inventory costs, order electronically from suppliers, communicate between stores, and sell to consumers within stores. These technologies include advanced checkout scanning systems that can deliver individualized couponing and incentive programs, in-store television, "smart" shopping carts that direct consumers to in-store specials, on-line transaction processing for better inventory management, and electronic funds transfer.
12. Conclusion
Modern retailing is scrambled and we will probably see more changes in the future. In such a dynamic environment, a producer’s marketing manager must choose very carefully among the available kinds of retailers. And retailer must plan their marketing mixes with their targets customers’ needs in mind while at the same time becoming the part of an effective channel system.We described the many types of retailer and we saw that each has its advantages and disadvantages. We also saw that modern retailers have discarded conventional practice. The old “buy low and sell high” philosophy is no longer a safe guide. Lower margins with faster turn over are the modern philosophy as more retailers move in to mass-merchandising. But even this is no guarantee of success as retailers’ product life cycles move on.
Scrambled merchandising will continue as retailing evolves to meet changing consumers’ demands. But important breakthroughs are still possible because conventional retailers. Convenience products, for example may be made more easily available by some combination of electronic ordering and home delivery or vending. The big, all propose department store may not be able to satisfy anyone’s needs exactly. Some combination of mail-order and electronic ordering might make a larger assortment of products available to more people to better meet their particular needs. Our society needs a retailing function but all the present retailers may not be needed. It is safe to say that the future retail scene will offer the marketing manager new challenges and opportunities.
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