On the 6th of October this year, the high towering, glitzy Centaurus Mall in Islamabad was ablaze with fire and fumes. For the next few days, leading fashion brands at the mall were scrambling to figure out how lost sales due to the consequent closure of outlets would impact their business, and how everyone would recoup the immense losses. Big malls such as Centaurus and Packages attract great footfall and, therefore, bring more profits because of which they are the most sought after spaces to set up shop.
The fire is particularly concerning in an already troubled economy; retailers are under increasing cost pressures because of double digit inflation, increasing dollar prices, import bans and pervasive uncertainty.
Only about two months later, brands at Centaurus had to face another challenge not created by them or any other accident such as a short circuit. This time around, the federal government sealed the mall because of a spat between the premier of the country, Muhammad Shahbaz Sharif, and the owner of the mall, Sardar Tanveer Ilyas, who also happens to be the prime minister of Azad Jammu and Kashmir.
These two disconnected events highlight two important aspects of retail in Pakistan: One that running a retail business in Pakistan comes with varied challenges, and secondly, the government does not make things easy for these businesses.
Let’s also not forget that global recession is rearing its head, creating supply chain disruptions across the globe. Pakistan, being a third world country, like always is on the receiving end of the situation. It is in this backdrop that an upcoming meetup of retailers, connected businesses and leaders is going to discuss the future of retail in Pakistan.
At Profit, too, the question on our minds has been about the future of Pakistan’s retail. Will it be a happily-ever-after or will it be full of misery evermore? What are we in for? What are the major changes that will come in the next few years? These are difficult to answer, for sure, but there are trends that point towards the direction retail is headed in. A crucial aspect of this is the number of challenges that can hinder Pakistan’s retail from keeping up with its transformative phase. With these broad questions in mind, Profit touches upon some issues that are challenges to the prosperity of retail businesses in Pakistan, and provide us with a glimpse into the future.
In a series of articles, Profit looks at how Pakistan’s retail scene has evolved into a brand and mall-oriented culture, how Covid has impacted and transformed the retail industry, and what trends retail businesses anticipate in the years to come.
We also discuss how taxes affect the adoption of digital payments in retail, how bank charges affect digital payments in retail, with a concerted effort to discuss the particular case of merchant discount rate. The latter prompts retailers to avoid digital payments and consequently inhibit growth. This forces them to get stuck in a vicious circle of taxes leading to avoidance of digital payments which then creates obscurity leading to perhaps the biggest problem of them all; the lack of access to finance.
The transformation journey of retail brands requires access to financing because retail businesses could turn out to be rapid growth enterprises. But banks see them as very risky ventures because of the banks’ own risk averse nature, problems with access to data for credit scoring and issues with how retail businesses are run.
Then there’s the fast-moving fashion retail sector that has seems to have grown leaps and bounds over the years riding on the wave of pret wear. Brands have gone all-in with the bulk sale model, cashing in on the trend of fast fashion in the face of high demand for affordable products, even if it has come at the expense of other considerations such as sustainability. It has worked thus far, but at what cost. And, more importantly, will the high volume model survive the incoming economic headwinds.
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