A LEADING financial consulting firm has included Pakistan amongst ten ‘hidden heroes’ of the next generation of retail markets, following a new wave of consumerism that is currently sweeping across the country’s shopping malls despite shrinking buying power of its urban population.

According to the latest report of Deloitte, what is significant to note is that local Pakistani retailers do not see foreigners as mere rivals but also the ones offering them opportunities to learn about latest trends which helps them improve the quality of their business. The foreign chains, it has been observed, have influenced Pakistani consumer behaviour and the principal beneficiaries are local retail chains.

This is how China opened up its retail sector. Initially, it allowed foreigners to open their stores in select cities such as Beijing, Shanghai and Shenzhen, and also in certain localities within those cities. Through these ‘invisible barriers’, according to the report, China succeeded in giving protection to local retailers, while, at the same time, the latter learnt from the more efficient business models of foreign companies.

The world’s largest retailer Wal-Mart has opened some 340 stores in China since it entered the country 16 years ago, but it still remains smaller in revenue terms, when compared with local retailers such as Suning and Shanghai Bailian Group.

To be precise, the era of retail shopping has already arrived in Pakistan. Some 30,000 stores serve about 55 per cent of the population. According to a study conducted by Standard Chartered Bank in 2007, nearly 30 million Pakistanis live in households with an annual income of $10,000. So, Pakistan does have a large middle class but it is not growing as fast as that of China and India. Among the foreign retailers which recently entered the country include Carrefour of France which operates two hypermarkets and is planning to open seven more. Germany’s Metro operates 10 hypermarkets.

On July 15, President Obama noted with great concern that India has prohibited foreign investment in too many sectors and asked it to liberalise its economy. One such sector is the retail sector which despite great potential and FDI appeal is struggling hard to grow. An attempt to allow FDI in this sector was put in cold storage last December after a stiff resistance by the opposition parties. Manmohan Singh, the PM, is personally in favour of opening up the retail sector to foreigners. The foreign companies owning more than 51 per cent of their shops in India must source a minimum of 30 per cent of their products from small-scale local ‘cottage industry’ suppliers. The ‘sourcing clause’ was included to provide a direct benefit to the small-scale business sector.

In Pakistan, there is no restriction on foreign direct investment in retail sector, wholly or partially. Apart from that, almost all sectors are open to foreigners. In fact, any FDI proposal is to be warmly welcomed because none is coming forward. The problem is that foreign investors are reluctant even to enter Pakistan due to poor security situation and prefer to meet their hosts in Dubai even for trade deals.

At present, there are five in the world’s 25 largest countries by population, which still do not permit foreign direct investment in multi-brand retail trade. They are India, Bangladesh, Ethiopia, Congo and Myanmar. However, it is not true that the foreign retail giants will, once having entered, devour the small fish. On the contrary, allowing them in does not guarantee their success. The exits of Best Buy from China, Wal-Mart from Germany and Carrefour from Korea demonstrate their failure to face local competition due to lack of understanding of local consumer tastes, preferences and culture.

According to some reports, the retail sector in Pakistan has been growing at 5.3 per cent in real terms for the past five years, much faster than overall economic growth during this period. And the benefits of this growth have been visible throughout the country.

While opening of large shopping malls is quite frequent in Lahore and Karachi, it is no more uncommon now in smaller cities like Sukkur or Sargodha. The fact remains that a middle-class Pakistani family is now able to shop at these retail stores quite often.

This has become possible because of a rise in their annual incomes by 1.5 per cent between 2006 and 2011. Besides, women’s visits to retail markets have got a tremendous boost in the wake of a boom in lawn suits business.

In January, two British ministers came to Karachi to inaugurate the opening of a branch of 200-year old British store, Debenhams. According to the Small and Medium Enterprise Development Authority, there are over 125,000 retail outlets in the country and 94 per cent of them are small corner shops. Pakistan’s retail market estimated at $42 billion and rapidly growing is stated to be quite attractive for foreign investors. Karachi alone accounts for 40 per cent of consumer business.

According to US commerce department, total retail sales in the US in 2011 were $4.7 trillion, which represents an eight per cent increase over 2010 total retail sales. Wal-Mart is also one of the largest companies of any kind in the world. Not only does the retail industry dominate other industries in the US, it also dominate on the global retailing stage.

Many of the world’s largest hypermarkets are also discount stores. But not all of the world’s largest discount store chains are hypermarkets. Discount stores are defined by their pricing model, which is substantially lower than their competitors. The prices of most of the merchandise in a discount store are below manufacturer’s suggested retail prices. Six of the fourteen discount store chains that are the largest in the world are located in Europe. The US has only three retail chains that are strictly discount chains on the current world’s largest list. Most of the largest discount chains in the US are classified as hypermarkets.