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What the Modern Market in Pakistan Means for Sourcing There

It’s no secret that retail is over-saturated in developed countries, and turning to developing nations could be the way forward for gaining greater market share.

Countries like Pakistan—already well established in textile manufacturing—pose prime opportunities for market expansion.

Pakistan’s apparel industry has evolved in recent years, shifting from locals more often donning traditional clothing to an increasing desire for Western wear—which has made for greater demand.

“What I’ve observed in the last five years is that the European style of garments and dressing is penetrating more and more into Pakistan and the youth, mostly the women,” said Qaseem Jaffri, managing director of DS-Concept Pakistan, a trade finance provider for the world’s small and mid-size markets.

Western wear has increasingly subbed for the traditional shalwar kameez, according to Jaffri, and because the Internet has fueled a sort of global village, brands are becoming more known and more desired.

What’s more, since an overwhelming percentage of people in Pakistan live in a joint family system, where extended family may live in one home, disposable income is high for many in the country.

With demand on the rise, brands are doing more in Pakistan.

Global brands that have retail outlets in Pakistan are also being sourced and manufactured there, which means prices at retail can, at times, be cheaper, which has drawn more buyers.

“The consumer market is changing due to global sourcing because they are doing the buying and selling globally. Basically, the sourcing is playing a very effective part,” Jaffri said.

The ramp up of sourcing in Pakistan, and the resulting availability of different clothing and footwear brands, has drawn more retailers looking to capitalize on the local demand.

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As Jaffri explained, “The people who are experts in sourcing and the sourcing agents who understand the different dynamic of the market, they create success here.”

And part of creating that success is having the available capital to do so.

Factoring, as what DS-Concept does, is the modern way of financing that’s helping small and mid-size brands do more business in countries like Pakistan.

Factoring is essentially a transaction where a brand, for example, sells its invoices to a third party, the factor, in exchange for immediate cash and the factor then follows up on collecting those receivables.

Put more plainly: a small or medium-size business gets an order from a brand or retailer, DS-Concepts determines the creditworthiness of that brand or retailer, then buys the accounts receivable (meaning they’ll give the business the money the brand owes for the order) and then handles collecting that money back from the brand.

The difference between factoring and traditional bank financing, according to Jaffri, is that banks don’t take responsibility whether the money comes in or not.

“In factoring, we don’t take any collateral because we insure the risk,” he explained. “In the case of factoring, the buyer [brand] does not have to go to the bank because factoring arranges delivery of original banking documents delivered to his door by courier. In factoring there is a security on the receivables of the invoice.”

Factoring has evolved to accommodate the demands of modern trade, providing more instant cash flow for business needs that are challenging to handle when brands and retailers don’t pay up on invoices for as much as 60 days (and often more).

For DS-Concept, business booked is increasing every year, and in 2015 jumped 25 percent over the prior year.

“In the last 10 years everybody has become aware of real factoring and the factoring has taken its place among exporters and importers in the country,” Jaffri said. “There are many avenues which are to be tapped in Pakistan and developing countries.”