How is tech reshaping Pakistan’s consumer landscape?

Rising access to critical market information, including product choices, prices and quality, driven by the growing penetration of the tech sector especially mobile phones with broadband connections, is quietly transforming Pakistan’s layered consumer market.

A layered consumer market segments consumers into distinct groups based on factors such as income level, lifestyle and region, creating multiple “layers” within the market, each with unique needs and buying behaviours.

Urban markets in Pakistan offer considerable depth, providing a wide range of choices to consumers across different layers based on budget, age, gender, ethnic background and preferences. Although a huge segment lives below the poverty line and spends a significant portion of their income on basic necessities like food, they still hold substantial market influence due to their sheer numbers. This consumer group primarily engages in physical shopping, relying on cash or informal credit transactions at local brick-and-mortar community stores.

Spending behaviour among households with a monthly income above Rs200,000 is shaped by multiple factors, but they tend to be more aspirational, adaptive and drawn to trendy lifestyles.   

Mobile phone usage is playing a pivotal role in transforming Pakistan’s market. In 2023, the country had 76 mobile subscriptions per 100 people, reflecting steady growth over the years. According to a recent report by the Pakistan Advertisers Society, 68 per cent of smartphone users are on Android, 77 per cent are aged between 21 to 30 years, and 60 per cent own more than one mobile phone. Additionally, a digital data research platform ranked Pakistan 10th globally in 2023 for the most hours spent by users on mobile devices.  

In the absence of systematic, fact-based research and analysis on defined consumer layers and their behaviours, societal insight on the subject remains limited. However, businesses targeting different consumer segments have a vested interest in understanding shifting preferences to compete effectively and expand market share. Although comprehensive data is lacking, informal interviews with marketers and observations from experts reveal some broad trends.

“In Karachi, one can get a filling meal for anywhere between Rs200 to Rs6000. The same wide price range applies to most everyday products and services, including shoes, clothing, and grooming,” an observer noted.

Pakistan is witnessing a gradual yet consistent shift towards a digital economy. E-commerce and online payments are gaining traction, particularly among the youth, while digital banking is reshaping retail and financial services. More people are using digital platforms for utility bill payments and services like Foodpanda and Daraz are growing in popularity, posing a challenge to traditional neighbourhood stores.

The expanding demand for convenience, fast fashion and global brands is disrupting traditional business models. “Local brands face constant pressure to innovate and modernize to stay competitive,” noted a marketing advisor working with multiple high-end local clothing brands.

Greater exposure to western trends has fueled a growing demand for health and fitness products, including organic items, fitness gear and healthcare services. However, the majority still rely on inexpensive over-the-counter medicines for common ailments. Those who cannot afford medical consultations often turn to unqualified health practitioners or soothsayers as a low-cost alternative.

A small segment at the upper end of the social ladder is embracing the global trend of prioritizing experiences, such as dining out, travel, entertainment, over material possessions. Many young professionals, eager to be part of this lifestyle, often stretch their budgets to participate in exclusive social activities, sometimes discreetly. “In all major cities, underground venues and platforms host gatherings with live music and entertainment, where entry can cost as much as Rs50000 per person”, shared a young executive.   

The government’s stabilisation policies, marked by higher income tax rates on salaried classes and corporates, along with higher interest rates, have led to a contraction in both demand and supply. The investment-to-GDP ratio has reportedly hit a record low, while the manufacturing sector recorded negative growth in the first half of the current fiscal year.

In January the State Bank of Pakistan, while announcing a 100-basis-point cut in the policy rate to 12 per cent stated: “The Monetary Policy Committee (MPC) noted that inflation continued to trend downward in line with expectations, reaching 4.1 per cent year-on-year in December. This trend is driven by moderate domestic demand conditions and supportive supply-side dynamics, amidst favourable base effect. Inflation is expected to come down further in January before inching up in the subsequent months. The Committee also noted that core inflation, while continuing to ease, is still at an elevated level. At the same time, high-frequency indicators continued to show a gradual improvement in economic activity”.

Experts believe that while overall consumer demand has remained relatively flat in recent months, its composition, especially in the high-end market, maybe undergoing notable shifts.

“No serious market player can afford to overlook the growing influence of social media in shaping consumer demand, particularly among digitally savvy youth,” remarked a marketing guru anonymously.