Banking on history, British brands thrive in Pakistan
Karachi’s Dolmen City Mall is a large, plush building that would not be out of place in Dubai. Heavily fortified with security guards, the interior is impressive, with its cavernous corridors and gleaming marble floor – a far cry from the hustle and bustle of the city’s other shopping areas.
Newly arrived from London earlier this year, Karachi residents were insistent that I must see this wonderful new addition to the city. When I did, it was something of a home from home. In addition to high end local clothing brands were a whole plethora of foreign stores, from Mango, to Next, to the Body Shop. Many (though not all) of these are British imports.
The latest to open its doors was Debenhams, stalwart of the British high street, which this year became the first international department store in Pakistan with its branch in Dolmen. It joins other UK brands such as Next, Early Learning Centre, Accessorize and Monsoon.
So what is behind the influx of foreign stores to Karachi’s high streets? Internationally, Pakistan is not viewed as an obvious market for retail brands due to security concerns – both real and perceived – and the attendant difficulties of doing business.
However, the numbers tell a different story. The retail sector is one of the fastest-growing in Pakistan, and is expected to grow at a rate of 7 per cent per year until 2015. To give some indication of the growth it has already seen in recent years, compare the market value in 2006 – £19124.1 million – with 2010, when it had increased to £26541.2 million.
Yasin Paracha runs Team A Ventures, the company which holds the franchises for UK brands Debenhams, Next, Early Learning Centre, Accessorize, and Mothercare. He explains that the historic ties between the two countries means that British brands have instant recognition in Pakistan.
“People in our target market are used to travelling to London frequently,” he says – many people will have visited the UK as tourists, students, or on family or business visits.
Indeed, the growth of this target market – young, urban, and with significant disposable income – is crucial to increased retail operations in Pakistan. The urbanized middle classes are a steadily growing group.
Of Pakistan’s 180-million strong population, around 55 million live in cities such as Karachi, Lahore, and Faisalabad. Consumerism is on the up, fuelled by a recent boom in consumer banking and the media industry, and encouraged by ever-increasing investment from both local and foreign chains. Traditionally, many people in this target market have preferred to do much of their shopping abroad, meaning that they are already predisposed to foreign brands.
But what about the security risks for new businesses? Karachi, in particular, is home to outbreaks of sectarian and ethnic violence, terrorist attacks, and a high instance of crime including extortion rackets.
“Of course it’s a concern for new investors,” says Paracha. “On the surface of it, a lot of brands are hesitant, but when they first make the trip to Pakistan, they are reassured because they realise that the things on the ground are very different from what they see in the media.”
However, the situation cannot be ignored. “One has to be cautious,” Paracha continues. “You can’t go into a very aggressive expansion because you can’t deny the security issue, especially in some cities. But so far we have not had a major negative impact on our operations.”
The visible success of household names like Debenhams and Next in Pakistan is likely t encourage other British brands to see the country as a potentially viable market. In addition to this, there is a concerted drive from the UK government to encourage British investment in Pakistan, due to a bilateral trade agreement between the two countries.
The UK Trade and Investment Minister Lord Green visited Pakistan earlier this year and said that businesses had to shed their prejudices about the country, saying: “Pakistan is a good place for British business to invest”.
According to the British High Commission, there are already over 100 British companies operating in Pakistan in various sectors.
“Pakistan has the potential to be the primary target for all British brands who want to benefit from this relatively untapped market due to its historic and modern links,” says a spokeswoman for the British High Commission. “There is a huge potential for opportunities for UK retail sector companies in Pakistan due to increasing disposable incomes.”
Talks are underway with many more foreign brands, so it seems that the influx is only just beginning. As Paracha says: “Regionally, Pakistan is the only untapped market left.”
With companies worldwide – not just in Britain – wising up to the opportunity, it appears that it will not stay that way for long.December 5, 2012