Fabric is the basic requirement of our life as we need new outfits on regular basis. The demand of fabric has also increased with the rising population making it a never ending and a profitable business. Fabric industry is a lucrative trade in Pakistan in fact the largest industry of Pakistanis the textile industry. A number of companies are manufacturing various qualities of fabrics for both men and women. There are numerous categories and qualities in textile for different classes of people and income groups. Apart from the local fabric industry, there is also a huge presence of imported fabric in the market. Most of the imported fabric is being smuggled via Afghanistan.
The importers or distributors actually import fabric from other countries for the purpose of sending it to Afghanistan as less duty is imposed in that region. Once they send the container to Afghanistan, they smuggle it back to Pakistan without paying any duty and sell it in the local market. If they pay taxes on the imported fabric, it will become unaffordable for the dealers and the end consumers and also poses as a loss for the international brands. The international fabric brands/companies are in favor of this smuggling and send their containers to Afghanistan willingly so that they could be smuggled to Pakistan.
The main hub of the fabric industry is Punjab as the demand is the highest in this province because of the population. All the major cities of Punjab like Lahore,Faisalabad, Gujrat, Gujranwala and Sialkot have huge demand for fabric. Most of the dealers have their offices and warehouses in these cities as well. There is also a big market in Peshawar and Hayatabad but the dealers prefer going to Punjab for business.Karachi, the largest city also has a booming market and a large number of consumers when compared to Lahore.
There are shalwar kameez fabrics for men and women, men’s suiting fabrics and other textiles with a number of variations in the quality and price available. In Pakistan, almost 80% to 90% of the fabric being sold is for Shalwar Kameez suiting for men and women and the rest is for suiting fabrics. However, the profit margins in shalwar kameez fabrics are less as compared to the men’s suiting fabrics. For example, most of the dealers sell fabric to the shopkeepers at the rate of Rs. 500 per meter and the retailer sells it for around Rs. 1000 per meter. The upper class society mostly located in the big cities can easily pay Rs. 10,000 to 20,000 for each suit giving the shopkeeper more than a 75% profit margin.
The profit margins in retailing and distributing business are similar to any other business. Retailers earn more than distributors if they opt for per unit profit margin and the shopkeepers make more money than the distributors on per meter prices. Moreover, the sales of a shop solely depend on its location. If a person has to open a retail fabric shop in any of the big cities, he must do a survey first which should asses the areas which are centers for fabric business and situated in or near the posh districts of the city. If the shop is close to an upper class locality, the profit margins will be on the rise.
The retailer should have a stock of good quality fabric to sell. The rent and goodwill of the shop vary from place to place. In Islamabad, a small shop in a good location of 10/10 feet has a good-will of Rs. 3 to 5 million on average with a monthly rent of almost Rs. 30,000. In other major cities the prices are normally same with little variations. With this particular size of the shop, the investor needs at least 2 or 3 salesmen with salaries of almost Rs. 10,000 each. If the retailer wishes to have a normal quality local fabric, he must invest approximately Rs. 1 million on the fabric stock. For imported fabrics an investment of Rs. 2 to 3 million is required. It is advised that both local and imported fabric should be available in the shop to target all kinds of customers.
Once the retailer buys a stock of fabric for the shop, the ideal time to sell the entire stock is 6 months but only on the condition that if the shop is located in an ideal location. If a shopkeeper invests around Rs. 1.5 million on both local and imported fabric and sells the stock in 6 months, he can easily earn more than Rs. 3 million in this time period. This amount does not include the high rents, utility bills and employees pay. Still, the margins are high enough to get a gainful share of the monthly income.