Discusses the distribution network within the country from how products enter to final destination, including reliability and condition of distribution mechanisms, major distribution centers, ports, etc.
Pakistan’s retail industry is still developing with most of this segment fragmented and underdeveloped. There are in excess of 2.5 million shops in Pakistan, most of which offer only basic products. Consequently, food, beverages and tobacco account for as much as 75 percent of retail sales. There are fewer than one dozen shopping malls in operation and they are generally limited to the larger cities like Karachi, Lahore, and Islamabad.
Large supermarkets or chain stores for general consumer items are not widely available in Pakistan, though a few multinational chains have started operations. The European cash and carry retailer Metro, in joint collaboration with Pakistan’s Habib Group, has opened several self-service wholesale outlets in Karachi, Lahore, and Islamabad. Carrefour Hypermarkets (Pakistan) with outlets in Karachi, Lahore, and Islamabad is the latest player in the hyper-market segment, along with the UK’s Greenvalley. The concept of chain stores for fashion apparel has also lately begun to emerge in the larger cities, where several such chains, stocking predominantly locally-manufactured merchandise, are currently operating. In addition, hundreds of government-owned Utility Stores sell food and household items and serve as a mechanism for restraining inflationary prices by following the government line on pricing. The military-owned Canteen Stores Department (CSD), a discount retail network, has also expanded to all major cities.
The general perception among Pakistani consumers is that the prices in the larger and more upscale stores must be higher due to higher overhead and investment costs.
Many consumer retail stores stock general merchandise for everyday use. Also, many stores sell a single commodity, for example, tires, cooking utensils, textiles or jewelry. Such stores are generally located in bazaar areas and tend to be located near other shops carrying similar goods.
Foreign companies considering marketing their products in Pakistan may choose to use the services of local distributors or may develop their own distribution chain. Distributors in the urban areas generally deal on an exclusive basis.
As a matter of policy, most companies do not provide credit to distributors, and they in turn generally sell on a cash basis to small retailers, but do supply on short-term credit to large retailers that offer a heavy turnover.
Pakistan’s wholesale market is fairly well developed, with about 1,000-1,500 wholesalers. Karachi is the major distribution center for wholesale goods. Approximately one-fifth of the wholesalers in Karachi sell on a consignment basis. Less than one-third of wholesalers allow discounts to their customers, but the granting of 30- to 90-day credit is common. Because of limited financial resources, retailers generally sell on a cash-only basis. Consumer credit in Pakistan remains an insignificant portion of the total commercial credit. Foreign companies selling industrial or capital goods often sell directly to the end-user or, if the market is fairly large, they appoint one major distributor who then sells either to sub-distributors or directly to end-users.