FMCG Growth in Pakistan – Bridging the Formal and Informal Retail Divide

Written By Salman Sayyid

Pakistan’s retail sector is a tale of two markets:

  • Formal retail (supermarkets, chain stores) growing at 15% annually.

  • Yet, traditional trade still controls 95% of the market, from Lahore’s mohalla shops to Karachi’s roadside kiosks.

For FMCG leaders, this duality means growth requires two playbooks. Here’s how the seven key sales drivers apply across Pakistan’s retail spectrum.

Outlet Coverage: The Chain Store Boom vs. Traditional Trade’s Reach

  • Formal retail (Karachi, Lahore, Islamabad): Chains like Alfatah, Metro, Imtiaz, Naheed, Springs, Chase are expanding, a study from PIDE “Pakistan Institute of Development Economics“ notes they now account for 5% of retail, but influence urban purchasing habits.

  • Traditional trade (Hyderabad, Quetta): Unorganized retailers dominate. Coverage here requires high-touch, distributor-led models.

Key Insight: Hybrid strategies win—penetrate modern trade for branding, but drive volume through general trade.

Productivity (ECO): Modern Efficiency vs. Traditional Relationships

  • Supermarkets (Karachi i.e. Naheed): Higher throughput per visit, but require strict compliance (e.g., shelf fees, promotions,Shelf Merchandising).

  • Kiryanas (Peshawar): Fewer items per call, but loyalty drives repeat orders.

Chain stores enforce standardized processes, but traditional retailers rely on personal rapport.

Range Selling: Supermarket Assortment vs. Kiryana Constraints

  • Modern Trade (Islamabad): Consumers expect variety (e.g., international brands, organic options).

  • General Trade (Sialkot): Retailers stock only what sells fast—often unbranded staples.

In Faisalabad, introduce smaller packs for kiryanas, while pushing premium SKUs in Lahore’s supermarkets.

Bill Cut: Upselling in Two Worlds

  • Supermarkets: Focus on cross-category promotions (e.g., chips with soft drinks).

  • Traditional Stores: Retailers resist overstocking - credit sales influence order sizes.

Throughput: Volume vs. Frequency

  • Chain Stores (Lahore): Higher average bills, but lower visit frequency.

  • General Trade (Multan): Smaller transactions, but daily footfall.

6. Must-Sell Products (MSPs): Branded vs. Unbranded Battlegrounds

  • Supermarkets: National brands dominate shelf space.

  • Rural Punjab/Sindh: Unbranded atta, ghee, and loose tea still lead.

Chain stores accelerate branded adoption, but local preferences remain entrenched. - A Study from PIDE

On-Shelf Displays (OSD): Planograms vs. Haggling

  • Modern Trade (Islamabad): Shelf placement is data-driven.

  • General Trade (Rawalpindi): Retailers prioritize what moves fastest, often ignoring brand guidelines.

Hack: In Gujranwala, use of low-cost wire stands for impulse displays.

Conclusion: The Future is Hybrid

As research shows, Pakistan’s retail is evolving, but traditional trade isn’t disappearing.

Winning brands will:
✔ Leverage chain stores for branding.
✔ Dominate general trade with hyper-local execution.
✔ Measure performance differently across segments.

What’s your strategy for Pakistan’s retail divide? Share your thoughts.

Salman Sayyid
Next

Trade vs. Brand: Why Price Alone Doesn’t Tell the Whole Story