The fast-track growth of foreign retail franchises in Pakistan

If consumers shop at home instead of going abroad, foreign exchange stays here too.

KARACHI:

When Pizza Hut opened its first franchise in Pakistan in 1993, few were familiar with the concept of franchising. Soon it became a household name, and was followed by other fast food franchises. Many observers viewed these import-oriented luxuries in an underdeveloped country like Pakistan, with scepticism and considered it a waste of our precious foreign exchange. However, the trend of foreign retail outlets continues to expand into other products, services, and brands.

The press launching of the 200 years old British department store, Debenhams’ branch in Karachi earlier this month on 27,000 square feet space, at the upbeat Dolmen City Mall, was attended by important personalities, like, UK Minister of State for Trade and Investment, Lord Stephen Green and UK Cabinet Minister Baroness Sayeeda Warsi. It appears to have pushed the retail franchising business to another level. The skeptics are turning into fans.

This will be the first international department store in Pakistan offering a complete range of product categories synonymous with Debenhams, including a full range of women’s, men’s and children’s clothing, as well as, home, beauty and accessories. It is promised to be a truly world class shopping experience.

“I am very bullish on retail, not just for local but also foreign brands,” said Yasin Paracha, Managing Director, Team-A Ventures (Pvt) Ltd, which is the franchisee in Pakistan for Debenhams. “Foreign brands will perhaps give Pakistan that softer image we need; that we are normal people, with normal tastes and preferences and actually do drive in cars and wear western clothes! Furthermore, foreign brands will give the local brands the required positioning on the brand scene and will give customers the choice to decide where they want to spend their money.”

It is worth noting that before the fast food franchises, auxiliary industries like the home-delivery service and suppliers of quality poultry, meat etc, according to modern quality standards, hardly existed.

Paracha is very upbeat about the employment possibilities this presents. “This creates immense number of jobs; the average requirement per 1,000 square foot, of retail space is around six, which means Dolmen City, with a leasable area of 650,000 square feet will provide jobs to around 4,000 people! These will be mostly undergrads who might struggle to find good jobs in offices. Here they have the chance to work in a comfortable environment, look nice, and develop the discipline to deal professionally with customers. It also provides students the opportunity to work. Almost every teenager in the UK has worked in a retail environment.”

About government revenue and taxation, Mr. Paracha says, “This adds immense revenue, as most brands will progress towards declaring and paying taxes, they are too much ‘in your face’ to avoid it. Furthermore, instead of considering this as an outflow of foreign exchange, it actually saves it, as most people spend on shopping when they travel, they will convert to shopping within the country if they have the option and the right environment.”

Paracha does admit that there are still many challenges to changing perception about the high-end international retail outlets operating in Pakistan. “The challenges are lack of good quality retail space. Lack of expertise and training is probably our biggest challenge. People with good backgrounds do not consider retail a reputable or worthy profession, this too should change once students start to get involved, hence experiencing true retail at an early age. And of course lack of recognition of organised retail (which basically means good quality shops and products, and registered retailers who pay taxes) on a government level.” Paracha believes that taxation will increase once the process is made simpler. “We will pay for sure, but we need to know; how much, and how to pay. Last year alone, the Sales Tax policy changed so many times that we lost track!”

In the evolving world, if the rich who used to shop abroad start spending more within the country through these international franchises, it would not only retain foreign exchange but will also generate jobs and world class professional knowhow, besides enhancing our soft image in the world.

The contributor writes on socioeconomics and has a background in trading and exports in the private sector.

Published in The Express Tribune, January 23^rd,  2012.