August Issue 2013

In recent years, Karachi has seen its skyline being dotted by Dolmen City Mall, Ocean Tower and the Emerald Tower. These are the three latest malls to open up in Pakistan’s largest city in close proximity to each other. Also in the neighborhood are two older malls — Park Towers and The Forum — while Com3, opposite BBQ Tonight, and the Bahria Town Icon, next to Abdullah Shah Ghazi’s shrine, as well as a project in Defence, are in the pipeline. On the other side of town in Gulshan-e-Iqbal, Lucky One is coming up which is going to dwarf Clifton’s Dolmen City Mall in size.

Many would be surprised that in a country that normally makes headlines for terrorism, social conservatism, state corruption and the like, there can be a boom in state-of-the-art shopping malls with well known foreign and local brands. Notwithstanding the volatile situation in the country, Pakistani society has stable, underlying social and cultural currents that are amenable to consumerism, the development of malls and the entrance of foreign brands into the country. Despite dismal economic indicators overall, Pakistan still has economic stability in certain sections of the society.

Citing a report from the HSBC, Danish Dinshaw, who initially helped bring Makro to Karachi, told Newsline that within the next few decades, Pakistan would be one of the top countries for investment in the retail sector. According to Dinshaw, the main reason behind this prediction is the population boom in the country, which is also the decisive factor why foreign retailers are looking towards not just Pakistan, but the entire Asian continent. Afnan Shah Khan, the General Manager Business Development of Hyperstar, reiterates the importance of the high population factor and added that the youth bulge of Pakistan makes the country an attractive place for foreign investors. And more so since the Pakistani youth are well educated, open to modernity and expect modern retail stores and hypermarkets in the country. Omar Tariq, the retail head of Gul Ahmed, adds: “The media, especially, has helped create awareness among Pakistanis about fashion and modern retail.”

Madiha Gohar, the Executive Marketing Manager of Ocean Mall and Tower, pointed out to Newsline the “high concentration of middle and upper-class consumers in Karachi,” which attracts retailers. Even if malls can tap into 20% of the population, it represents a massive amount, especially for foreign retailers, since the figure of around 40 million people is bigger than the population of Canada and most European countries, whereas the total population of the Gulf States is only just above 40 million.

At present, Pakistan has a population of around 180 million people, of which 50 million are qualified as youth between 19-29 years of age, making Pakistan one of the youngest countries in the world. Of this 180 million, the overwhelming majority might be poor but there still are a large number of people who have money to spend. Madiha Gohar, the Executive Marketing Manager of Ocean Mall and Tower, points out to Newsline the “high concentration of middle and upper-class consumers in Karachi,” which attracts retailers. Even if malls can tap into 20% of the population, it still represents a massive amount, especially for foreign retailers, since the figure of around 40 million people is bigger than the population of Canada and most European countries, whereas the total population of the Gulf States is only just above 40 million.

And retail giant Hyperstar is trying to tap into that coveted market by selling items that everyone needs for daily use. A manager of Hyperstar in Karachi told Newsline that grocery items sell the most in their store and that they get 5,000 customers every day on average. While Hyperstar refused to disclose their daily turnover, Danish Dinshaw calculated that Hyperstar must be earning at least Rs 2.5 crore daily on average. Another reason for the success of Hyperstar is that it has practically zero competition in Pakistan, which is not the case in Europe and North America, where there are several hypermarkets competing with one another. Karachi has other well-stocked supermakets like Makro, Agha’s and even EBCO that are doing exceedingly well, but they are still not in the same league as Hyperstar. The latter provides a totally different experience of shopping given the range of its products.

After food, clothes are the next big obsession of all Pakistanis, especially women. Hence the surfeit of fabric stores and designer outlets in shopping malls. Interestingly, while Gul Ahmed, Khaadi, Nishat Linen and Generation are drawing massive traffic at Dolmen City, international brands like Mango, Nine West and Monsoon have relatively thin crowds. And understandably so. Brands like Monsoon and Mango are for a niche market and will never have a mass share of the market, just as the designer outlets at the malls such as the Pakistan Fashion Designers Council Boulevard at Dolmen City, which features all the top designers of the country. One of the main reasons for Gul Ahmed’s success, says Omar Tariq, is that “[their] products are affordable for the middle classes and, thanks to the annual sales with products selling up to 50% off, members of the lower-middle classes can also purchase these products.” Malls and brands also cater to classes other than the rich. Tariq states that “People have a misconception that just because a shop is branded and is in a mall, it is going to be expensive and the less well off should stay away from it.” However, he admits that only 5% of Karachi’s market is tapped by brands and malls, and that the retail market goes beyond the elite areas of Clifton and Defence.

It is not surprising that Yunus Brothers, one of Pakistan’s largest business groups, is spearheading a mega-mall named Lucky One in Gulshan-e-Iqbal, projected to be the biggest of its kind in the country. Lucky One will be built on 2.2 million square feet; it will have an 8-screen cinema, a fun planet, a bowling alley, a food court and fine-dining restaurants, ramps for fashion shows and space for musical concerts. Nasir Aziz, the technical director at Lucky One, believes that his mall will have more traffic than Dolmen City since it is situated at the junction of Gulshan-e-Iqbal, North Nazimabad, Federal B Area and Rashid Minhas Road. He was quoted in The News as saying, “The malls in Clifton and Defence cater to barely one million people, who live within a 20-minute drive. We’ll get 7.5 million people within a 20-minute drive, so the footfall will be much higher than that for the malls in the upmarket areas.”

Yusuf Brothers’ decision to move into the mall business is indicative of the shift towards retail in Pakistan. Nishat, another textile giant, is opening up a mall in Lahore.

Hyperstar is trying to tap into the coveted market by selling items that everyone needs for daily use. A manager of Hyperstar in Karachi told Newsline that grocery items sell the most in their store and that they get 5,000 customers every day on average. While he refused to disclose their daily turnover, Danish Dinshaw calculated that the store must be earning at least Rs 2.5 crore on average every day.

Apart from the economic potential, there are cultural reasons why malls and modern retailers are popular in a city like Karachi. While foreigners might be attracted to the crowded bazaars of Pakistan, people over here are beginning to get interested in the type of shopping centres that exist in Europe and North America. Places like Dolmen Mall and Ocean Mall are a universe apart from the markets of Saddar, Bori Bazar and Tariq Road, since they offer an unimaginably better experience of shopping to everyone. According to Hyperstar’s Afnan Shah Khan, fixed prices, quality and modern retail practices are three things that most Pakistani consumers desire. In malls, every shop sells products at a fixed price, and a customer does not have to haggle with the shopkeeper. A customer can also try clothes in the fitting room. Additionally, says Omar Tariq, the advantage of branded clothing is that “the product is standardised, of the right quality, and if there is any defect in the product, it can be exchanged.”

After food, clothes are the next big obsession of all Pakistanis, especially women. Hence the surfeit of fabric stores and designer outlets in shopping malls. Interestingly, while Gul Ahmed, Khaadi, Nishat and Generation are drawing massive traffic at Dolmen Mall, international brands like Mango, Nine West and Monsoon have relatively thin crowds.

Furthermore, malls are evidently clean, organised and safe unlike a bazaar where you shop in midst of pickpockets, beggars, suffocating crowds, heat, narrow alleys and open gutters, traffic, smoke and stray dogs. There are also proper parking spots at malls and people can bring their cars without the fear that they will get stolen or towed away. Malls strive to make shopping a safe, family experience. People can bring their children to the mall and there is space for kids’ entertainment as well. Also, women and young girls feel safer here compared to the traditional bazaars.
Security is a major issue in Karachi. And malls are safer not only in terms of ambience and proper organisation but also because of the security measures that malls have in place such as vigilant guards and 24/7 CCTVs.

The notion of standard customer service, respect for the customer and the general attitude of professionalism is yet another element that malls and foreign brands have to offer, which is often absent from traditional Pakistani markets. One of the managers of Hyperstar in Karachi told Newsline that it regularly trains its staff and holds international training workshops for many of its workers. Gul Ahmed’s Omar Tariq maintains that “international brands have raised the bar and given local brands competition as far as modern retail practices and store design are concerned. Pakistani stores have no choice but to raise standards, and this is a positive effect of international brands coming into the country.”

All of these factors combine to make shopping malls in Karachi an entirely different social experience. For many, malls provide relief from their daily troubles. In a city of disorder, people find order and calm in malls. It is estimated that more than 100,000 people come to Dolmen City on the weekends, whereas on regular days, it attracts around 18,000 visitors.

The construction of malls and proliferation of stores has also provided the population with increased job opportunities, be it in the construction industry, security, cleaning or customer service.

Hyperstar has a staff of 500 people and offers better remuneration and working conditions to its
workers than other stores, according to one of the managers. And the Lucky One mall is expected to generate employment for 10,000 to 15,000 people. Job-creation is a major benefit of mall culture.
Local suppliers have benefited from these stores as well. Majority of Hyperstar’s supplies come from the local market and its manager says that suppliers’ profits have increased hundredfold, thanks to the store’s scale of operations.

Despite all these positive aspects, one may wonder if the development of malls, branded stores and hypermarkets are going to have negative consequences on the traditional bazaars of the country?
For example, in neighbouring India, there has been uproar over the government’s decision to allow hypermarkets like Wal-Mart to come to the country, along with the general liberalisation of the Indian economy. In Pakistan, though, the bazaars and small shops will not be sidelined, which is good to hear since a diversified market prevents the creation of monopolies.

The issue of using foreign versus local products is contentious and it shows that the entrance of foreign businesses is not all rosy as it would appear. There is a lot of money which is recycled in Pakistan because of international retailers, but if the products they use are all from foreign suppliers, then the local economy will lose out.

Gul Ahmed’s Omar Tariq says that the country’s population is continuously increasing and there is no shortage of consumers, therefore the bazaars are not going anywhere and neither are malls taking their customers away. In Europe and North America, the main problem is the monopolising control that hypermarkets exert over suppliers which harms not only the suppliers, but also small and medium-sized shops. In Pakistan, such a situation seems unlikely to develop. Hyperstar’s management told Newsline that their store buys products from the local market at the moment but slowly, they will be moving towards foreign suppliers entirely.

The issue of using foreign versus local products is a contentious one and the entrance of foreign businesses is not all rosy as it would appear. There is a lot of money which is recycled in Pakistan because of international retailers, but if the products they use are all from foreign suppliers, then the local economy will lose out. Tariq repeatedly stresses that international brands should use products from the local market and that “the government should have rules that oblige them to do so.”

As more and more foreign brands come into Pakistan, the government should have well-defined laws and a mechanism to implement them so that foreign businesses stick to practices that also benefit the local economy instead of just these multinational companies. Working together with all the relative stakeholders, the state should make sure that a win-win situation is created for everyone. Pakistan’s retail market has huge potential and its wealth should be shared. It would be a pity if one party benefits more than the other, especially if local industries are on the losing side.