Retail chains: Lack of trained hands stops supermarket’s forward march

Dearth of skilled managers holds Naheed Supermarket back, despite locally recognisable brand.

KARACHI:

Abraruddin, the owner of Naheed Supermarket in Karachi, faces a dilemma: his tiny corner store has grown rapidly over the past few years into one of the largest retail outlets in the city, but he cannot leverage his brand into a supermarket chain because of a lack of qualified retail managers.

“There aren’t many people who have expertise in the retail business at a macro level,” Abraruddin said. “You need to understand your customer’s expectations and deliver accordingly.”

Starting from a small grocery store in Bahadurabad, a neighbourhood in Karachi, in 1973, the 60-year old made fortunes out of a strategy that has now become standard in the retail business – reduce prices (and margins) to increase volumes and profits.

Once a small business, this supermarket is now one of city’s largest retail stores and attracts between 3,000 to 4,000 customers daily – most of whom belong to middle and upper-middle class. While Abrar does not disclose revenue numbers, he says that growth has been around 10%.

As number of customers multiplied, he had to move his store to its present location – The Square, Sirajuddaula Road – in the early 1980s but he preferred remaining close to Bahadurabad where he has his old customers. “We had limited space for storage and display and I was afraid of losing my customers,” he said, adding, “so I had to relocate.”

Despite competitors like Imtiaz Supermarket – another retail giant targeting middle and lower-middle class mainly – Naheed has been able to expand significantly. The store purchased more space within the same building and merged three floors to display more goods. They are now planning to add two more floors within two to three months – a strong indicator of increasing clientele.

According to the latest available statistics from the ministry of finance, the retail sector in Pakistan is worth about $42 billion a year. Most of it, however, is dominated by small corner stores, of which there are more than 50,000 all across the country.

There are some larger chains, notably the Germany-based Metro Cash and Carry, a wholesaler with five stores that recently bought out its local competitor Makro. The two combined had revenues exceeding Rs30 billion ($340 million) during the most recent financial year, according to sources familiar with the matter. But these are exceptions.

The lack of investment in the supermarket segment of retailers in Pakistan is surprising, considering the high returns. “The supermarket business is a cash cow. You can recover your money within a month,” said Abraruddin.

Naheed Supermarket, however, has been unable to capitalise on that opportunity, despite having received offers from people seeking franchises from Abraruddin as well as consumer goods companies seeking more outlets for their products. “Proctor & Gamble, for example, offered me a partnership in what would have become a nationwide chain of Naheed Supermarket,” he said, adding that he declined the offer. (A spokesperson for Proctor & Gamble Pakistan confirmed the offer to The Express Tribune, but did not elaborate on its details.)

“If a company like Walmart opens a franchise here, they will find a huge market,” he said, “They have expertise, technology, survey reports on consumer needs and research papers; they just need to find experienced managers who understand the local market and customers’ expectations.”

The owner of the store is particularly cognisant of the fact that increased scale will allow him to even further cut his prices and increase his volumes, yet he has not been able to do so.

One of the primary challenges for retailers in Karachi especially has been dealing with the law and order situation. Transport in the city can shut down suddenly when the violence picks up, causing many retailers, including Naheed Supermarket, to keep high levels of inventory. “I try to maintain stocks for at least two weeks,” said Abrar.

Published in The Express Tribune, October 24^th, 2011.