Pakistan

How to Start a Departmental Store Business in Pakistan

Departmental Stores are emerging as one of the good business ventures in Pakistan as it provides all the basic merchandise under one roof. The structure of Pakistan’s economy has changed from agricultural to service base. Agriculture and industry sector now account for about 22% and 24% of GDP, respectively, while the services sector accounts for 54% of the GDP.

Departmental Store is a retail establishment which specializes in satisfying wide range of consumer’s personal and residential durable product needs and at the same time offering the consumer a multiple choice of merchandise lines, at variable prices, in all product categories. The Departmental Store is organized into departments offering a variety of retail merchandise under one roof. In Pakistan the concept of Departmental Store has gained popularity in late eighties after the emergence of Utility Stores by the government. The same concept has been used by Canteen Department Store (CSD). Keeping in view the consumer’s needs and requirements, large investment has been made in these stores by few multinational companies. i.e. Hyper Star, Metro, Macro, Al-Fateh, HKB, Cosmo Cash & Carry, etc, and thousands of shopping stores in almost all cities of Pakistan.

The proposed “Departmental Store” requires an area of approx 3,120 sq. ft. and is recommended to be started at a rented premise. Location of the store is an important factor with any retail organization. Spending time and money wisely in the process of site selection is of primary importance. In this pre-feasibility study, it has been assumed that the proposed “Departmental Store” is opened in an area where there are approximately 3,000 households.

The total cost of establishing a departmental store in developing areas is estimated at Rs. 12.06 million including Rs. 4.83 Million capital cost and Rs. 7.24 million as working capital. Projected IRR, Net Present Value and Payback Period for proposed Departmental Store are 32%, Rs. 12,300,024 and 5.22 years, respectively

Categories of Items for Departmental Store in Pakistan

The proposed departmental Store will provide a variety of goods ranging from grocery items to garments under one roof. The proposed project is a single floor departmental Store on an area of approximately 3,120 sq. ft. The project will offer following broad categories of goods to its customers:

  • Groceries and food items
  • Baby garments and baby products
  • Crockery and plastic items
  • Soaps, detergents and chemicals
  • Cosmetics and artificial jewelry
  • Ice-cream and beverages
  • Stationery, greeting cards and gifts items
  • Watches and clocks
  • Electronics / electrical products
  • General items
  • Bakery Items

Legal status is recommended to be a sole proprietorship / partnership. Although in Pakistan retail business is not providing employment at a large scale directly, but indirectly it is contributing in the employment growth. As more and more retail outlets are opening and consumer buying has shifted towards packaged / branded products, companies are coming up with top quality products and with the increase in production level the employment also increases. The proposed project will provide direct employment resources to 24 employees.

Location of Departmental Store is of primary concern with any retail organization. The Store should be centrally and conveniently located within a developing or a newly developed residential town in any of the big cities like Lahore, Islamabad, Rawalpindi, Faisalabad, Sargodha, etc. The proposed Departmental Store is feasible in any area where there are approximately 3,000 houses / family units.

Critical Factors for a Successful Departmental Store

In Pakistan, the concept of Departmental Store has gained popularity in the late eighties after the emergence of Utility Stores by the government. The same concept has been used by Canteen Department Store (CSD). Currently there is a new trend and large investment has been made in super stores by few multinational companies i.e. Hyper star, Metro, Macro, Cosmo Cash & Carry, etc. This concept was successful due to the availability of all basic utilities under one roof which saves time. The factors that make this project viable in Pakistan are:

  • Easy access to wholesale markets
  • Plentiful availability of resources / salesman
  • No process / transformation involved
  • Variety of goods under one roof
  • Margin for innovation
  • Easy diversification towards new product mix
  • Customer card system can be one of the best strategies for the retention of existing customers and for developing new customers. Card System maintains data base of customers which can be later on used for permanent promotional and marketing activities. Customer Card System is one of the best CRM practices used globally.
  • To obtain a good average of profits it is necessary to provide state of art facilities to customers.
  • There should be regular and sustained marketing through fliers distribution and Cable TV.
  • The store should have an ample space for car parking. It is advisable to maintain a parking space whereby around 15-20 cars can be parked
  • The hired staff should be well mannered and well trained in dealing with the customers.
  • Free gift schemes and valuable customer dinner can be additional success factors.

Departmental store business is emerging as one of the good business ventures in Pakistan as it provides all the basic merchandise under one roof. In the late eighties a paradigm shift in grocery store science occurred. The concept of “Self-Serving Store” was started. Customers entered the revolutionary store and walked through a narrow maze of shelves containing groceries. They selected their goods as they continued through the maze to a cashier.

This phenomenon grew rapidly; and today thousands of stores exist in the big cities. These stores also began to offer products beyond the normal scope of the dry-good grocery store. They added meat, dairy, fruit and vegetables, and breads to their offerings (which had formerly been offered by individual stores such as butchers, bakeries, and the milk man). Over the decades, Departmental stores have evolved even further. Now, one sees that they offer greeting cards, flowers, video rental, fast food, childcare, and much more.

There are thousands of Departmental stores in Lahore, Rawalpindi, Faisalabad, Multan, Gujranwala and this number is increasing day by day.

The target customer for Departmental stores is the population / family units of big cities. The market for Departmental stores in Pakistan has been developing steadily over the last decade and a mushroom growth of large stores is observed in all big cities. Still a good potential is available for new stores, as population of big cities is increasing day by day and new societies and residential towns are being developed. Location and amenities are some of the most vital factors in the success of a store.

Investment Required For Departmental Store Business in Pakistan

A detailed financial model has been developed to analyse the commercial viability of Departmental Store. Various costs and revenues related assumptions along with results of the analysis are outlined in this section. An approximate investment of PKR 12 million are required to open up a departmental store. The projected Income Statement, Cash Flow Statement and Balance Sheet can be studied by downloading the pre-feasibility study of a departmental store by SMEDA.

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