The struggles of small retailers

LAHORE: The rapid rise of shopping malls in Pakistan presents a major challenge to small grocers, fabric shops and electronics retailers. Malls attract consumers with their one-stop convenience, offering a wide range of products, entertainment and dining options, drawing customers away from smaller stores.

Small retailers struggle to compete on the same level. As malls expand, small grocers and retailers face declining foot traffic, as customers increasingly prefer the convenience of malls, where they can purchase everything from groceries to electronics while enjoying family-friendly amenities.

To survive, some small retailers have adapted by offering personalized service, specializing in local products, or catering to niche markets that big malls cannot replicate. A few have also embraced modern retail strategies, such as online sales or click-and-collect services. However, those slow to adapt are experiencing shrinking sales.

Large malls, particularly their anchor stores -- supermarkets, electronics chains and clothing outlets -- benefit from bulk purchasing, allowing them to negotiate better deals with suppliers and offer lower prices to consumers. Malls can afford to use certain items as “loss leaders”, selling them at or below cost to attract shoppers, who then spend more on other, higher-margin products. Their more efficient supply chains and logistics networks further reduce costs, allowing them to pass on savings to customers.

Government-run utility stores, which make up the largest grocery network in Pakistan, rely heavily on subsidies to offer discounted prices. However, inefficiencies in their operations -- from procurement to bureaucratic mismanagement -- prevent them from capitalizing on their vast purchasing power.

If these stores adopted efficient procurement practices like those used by private retailers, they could reduce their dependence on subsidies. By negotiating directly with manufacturers, centralizing supply chains, and improving inventory management, they could cut operational costs and pass those savings on to consumers as lower prices.

Privatising government utility stores and operating them under a Walmart-like model could improve efficiency and competitiveness. Private management could bring in better technology, supply chain expertise and customer service, turning the stores into profitable ventures while maintaining competitive prices.

However, privatisation risks higher prices, especially in rural areas where profit margins are lower, potentially leading to the closure of unprofitable outlets. The government would need to regulate the system carefully to ensure affordability for low-income families. Introducing food cards for the poor, redeemable at these stores, could offer a more targeted and cost-effective subsidy, similar to systems used in the United States.

While privatising and restructuring these stores could address inefficiencies, the impact on accessibility to affordable goods for the poorest consumers must be carefully weighed. The Utility Stores Corporation is currently on the government’s privatisation agenda, and several interested parties are keen to take over, provided they are not required to retain the current workforce. The government should advertise the corporation’s assets and sell them through a transparent process.