‘Colonising’ our markets: Global brands and their impact on Pakistan
Our economy is growing at a mere 3.5% on average, yet our nation continues to spend beyond its means, mostly through credit cards – accumulating more debt than ever before in times of financial distress.
Meanwhile, a globalising media continuously influences how we think about and manage our buying and spending. Mainstream brands with a worldwide presence are making tons of money in the third world, due to an ever-growing demand for expensive western jewellery, consumer goods and fancy fashion brands.
Some of these brands have done what others have not: successfully used social media like Twitter and Facebook to woo buyers from across the world. This speaks volumes of their sales and revenues in countries like Pakistan, where unaccounted for wealth and excessive spending results in higher profits for these companies than ever before.
If you do a simple price survey at a local shopping mall, second tier brands – which are not exactly ranked very highly in global indices – are being sold in our markets at first tier prices. Debenhams, Nine West and Mango have recently opened their outlets in Karachi and Lahore. The shops sell nothing priced at less than Rs5,000 rupees, having targeted a clear niche in which only high-powered buyers with tons of cash and credit can indulge in impulsive shopping.
Fewer than 2% of all Pakistanis today can afford such luxury brands. Local brands like Amir Adnan, Aijazz, Maria B and others have repeatedly slashed prices in order to ensure that their products reach a larger market, as rational consumers do not spend a disproportionate amount of their income on clothing.
Merchant outlets of foreign brands, however, do not cut prices as easily. They have to meet higher retail costs and operating expenses, and all expenses have to be paid for in local currency. They have entered our markets to make profits, not distribute charity: therefore, they continue charging staggering premiums from their buyers.
A significant factor helps these brands: Pakistanis love to emulate the west by buying and importing western brands. We do not wear products made in our own country, as they are widely – often unjustifiably – perceived to be inferior in quality. This is a mental state the Pakistani consumer finds difficult to shrug off: we think a global brand is far superior to one of our own.
Western brands love to exploit this trend to their advantage. They skip the effects of a recession, as their sales in our markets rely on niches not affected by it. They are lured into our markets with promises of higher tax benefits, rely on the locals accumulating debt to pay for their products, and then repatriate profits out of the country.
This needs to change. Marketing and branding should be about pricing and convenience. It should be stylish to be smart about savings, and stupid to be reckless and exhibitionist. Consider the case of McDonalds in Pakistan. The brand has created its place in our society by introducing a simple Rs100 value meal, which includes a burger and a soft drink. This price makes a lot more sense for the average Pakistani buyer than, let’s say, if the brand had insisted sticking with a Rs500 meal with extra fries.
We need to break with our affinity for artificial lifestyles and understand our economic constraints. We need to be real about buying power and spending habits during these economically turbulent times. Benefits must go to the buyer, rather than to the company. In this regard, the media must play the important role of educator and informer.
Perceptions rule reality. Our media must now move forward and project local brands as desirable and equal in quality to their international counterparts. We have to learn to see beyond negatives: well-priced can also be stylish!
THE WRITER IS A BANKER AND RADIO BROADCASTER WHO COMMENTS ON INTERNATIONAL RELATIONS AND POLICY
Published in The Express Tribune, August 13th, 2012.
COMMENTS (19)
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Flawed, silly and simply covered with an aura of perceived self-importance
@Z: Somehow 'relax' doesn't really rectify or cover up the factual inaccuracies, and flawed logic of the article.
And I'm too scared to argue with a banker who knows IR!!!! shivers
Ammar - relax.
Madiha , thank you for summing up my point of view.
I thank each of you . Summing up , the article is made to give you guys a view over what has happened over the last decade and where we stand because of spending beyond our means ... People who make off people obviosly dont like this article as it affects thier business .
Retailers here are thriving , yes but at a huge cost to the nation where the average pakistani gets fascinated , borrows credit this way of that , shows off something he or she cannot afford. Most of the people who throng outlets hardly buy unless there is a discount , whether eid or otherwise.
As for the banker part and the IR policy , morons here are too busy in thier own shells to look over their shoulders - busy mining money off people who have no real cash savings. Out of every 100 people here , only 13 save money.
What are these people doping for the community at large except criticise.
Well , common sense has flown away along with liquidity in this country. Never argue with a banker who knows IR - go sell someplace else if you dont write this article. Its for people who strive to survive honestly and not for greedy...
Keep the comments coming all ya people ! Take care- stay positive!
I am disappointed to read the negative comments made by The " Muslim Pakistanis" . The article in short is to make the nation aware of the "affects" on the economy. These brands are being brought by Pakistanis, but, we are actually pooling in to foreign economy. Yes it's a small percentage of our market which can afford these brands in Pakistan but the article is arising questions as 1. These branded stores are being supplied by our proud local export industry. Can the industry bring in the same quality to our local stores? 2. Being a patriotic should we contribute to foreign industry? 3. The % age of Pakistanis buying through credit card if not now but will contribute to staggering economy 4. What as Pakistanis we should do ? The reason for our nations downfall is because the Attitude we all carry. The rising nations have to work together, you can't deny the fact that boosting and contributing to our local economy won't bring in the results example of India and China is there. The article was Not a financial report but a simple mind awarding Fact. All of you need to be ashamed on your approach, this the reason we have men out with guns on our streets.
I am unable to understand ,,,,,,from where this disposable money is coming that at one side we are hauling on unbeatable inflation and on other side such international brands are opening in our vulnerable market........
Having said that, NEXT, Debanhams or Marks and Spencer are not top brands but are made for larger middle class in the west, while they stays "designer" brand in Pakistan and rest of the emerging economies.
there always be people who love the brands regardless if they are rich or poor, I have seen people saving for months to buy branded goods. But I guess Pakistan rich class go over the top to buy anything that make them apart from rest of the lot! No problem for rich class anywhere in the world, west has large middle class who occasionally can afford and like to buy such stuff in addition to lower half of the society living on even state benefits would like to show off a bit more than the rest!
@MEMBOOB: you probably dont have any RICH European friends as the west too is crazy about brands. There rich class is a step up from ours as they spend like 100k on a suite which a very very small minority spend in Pakistan
very poor and infactual article. im surprised how ET let it publish!!
When I was living in Karachi I use to think why urban population is after brands, I went to study in Scotland and lived in London for 1.5 yrs, I realized people in Europe aren't crazy after brands. My European friend use to buy Gucci products (high end brand) and at the same time buy H&M clothes (low end brand), they never felt bad of buying cheap products. When I came to Singapore I came to know that its not only Pakistanis who are crazy after brands but most of the Asians are.
I guess the reason is the wide gap between poor and rich, in London even the CEO travels in same tubes and buses as any common man and Asian we have huge gap between poor and rich. But I find many good example in Asia too, if you switch to any Indian channel you will find most of the ads are related to saving or investing money but in Pakistan most of the ads are related to consuming good. We should adopt the culture of saving money and investing in assets rather than buying branded products.
Im sorry, but what a flawed argument by a banker (are you seriously a banker?!). At the moment our country is heavily reliant on exports with little or no alternatives to drive growth. In this scenario driving our domestic consumption is still a key area to drive growth. There is a trickle down effect of spending through employment it helps create as well as tax benefits.
Also it seems like you have little or no concept of marketing whatsoever. No brand has the objective to give the cheapest priced product. The only reason Mcdonalds has the value meal is probably cause its profitable or it makes people come in and spend of other products like Ice cream etc in the process. The brand image is all around pricing and perception the consumer feels from wearing the products. As you have said, the expected volume in pakistan is small, which can only be fixed by pricing higher. People who buy these products, would eventually have gone abroad and bought them anyway.
The writer seriously needs to get his facts straight - its disappointing that such stuff actually gets published. The article is full of sweeping statements, which are not underpinned by any factual data whatsoever.
The writer stipulates that nation continues to spend via credit cards while accumulating debt - well, the penetration of credit cards in the country has been consistently declining, and credit card debt is negligible relative to size of economy. The spending is certainly NOT supported by accumulation of debt, or credit cards - such a statement is outrageous at best.
Higher profit for these companies than ever before?? Waht is the source of the writer, has he reviewed financial statements? Just how can the writer pass a statement regarding excessive profits on the basis of activity on social media?
Staggering premium from buyers? Well, the target market can already buy the same stuff from international markets, so they're not being duped by staggering premiums. The higher prices is largely due to the exchange differential, and the variation in purchasing power parity - and NOT COLONIZATION.
Lured by higher tax benefits and consumers accumulating debt?? The corporate tax rate in the country is a staggering 35%, and all of these stores are enlisted as corporate entities - so they are certainly not lured by tax benefits. Furthermore, consumers are NOT accumulating debt in this economy - luckily, the country's private debt-GDP ratio is one of the lowest in the region/world.
In a nutshell, the article is full of factual inaccuracies, and sheds a negative light on the editorial board (if ever there was any present). A course in Economics 101 ought to do wonders for the writer, and the editorial board.
All these international brands are franchises with Pakistani operators. None of this profit is expatriated abroad. Local brand sales have grown on average of 20% per year and with new brands being established almost every week. Pakistani organized retail is actually thriving. Research for this article is indeed very poor.
as a pakistani who left his country for the US, i can not understand the fascination people have with burgers etc in pakistan. they do not taste good at all. i came from a middle class family and we didnt have the money to buy 100 rs burgers. personally, i would prefer a plate of biryani or nahari from the 'restaurant' down the street over any burger in a heatbeat. when i was back home, this plate was 15 rs (a decade ago). im sure its 40 now or something which is still half as much as the value meal and much better tasting and more filling than a measly burger. pakistanis need to stop adopting western trends for the sake of them looking cooler. while the us moves towards salads and stuff, we are moving from great food to worse food without realizing how good our food already is.
Banker and RJ commenting on IR and policy. Only in Pakistan. Like a MBA running the foreign affairs and a non graduate running the science ministry
the local designers u mentioned put a mark up of over 10 times. we need to bring forward the talent, not the so called designers.
show me reliable quality at an affordable price in local goods and ill never buy imported goods again!