Pakistan's fashion brands sell billions and keep about five percent

A Pakistani brand that could travel

Muzamil opens with a personal note. He is in the mood to change his look, and when he thinks about a new look he thinks about fashion. Pakistan is a textile country, he says, and lawn sales and clothing have long been part of its identity. Most brands in the market sell generic western wear, which means competing with the whole world. The one he wanted to talk to has built an identity that is plainly Pakistani but could still reach a wider audience.

That brand is Manto, and its founder and CEO, Salman Parekh, is back on Thought Behind Things for a second time. His early life and philosophy were covered in the first conversation. This one is about the business. The episode is part of the series with Endeavor Pakistan, which is looking for the 50 most exciting startups and businesses in the country, and it was shot at Kickstart in Karachi.

Muzamil’s frame comes from a trip to Turkey. He saw a Turkish chain called LC Waikiki on almost every corner and learned it now operates in 17 countries. Nobody there was wearing Turkish dress, he noticed. Western wear is the global standard. Pakistan’s problem, in his view, is that it makes eastern wear and gets stuck there. He compares it to the country’s right-hand-drive cars: the category where Pakistan has scale is one the rest of the world does not buy. Manto, he argues, is doing something different by starting eastern and slowly merging with western.

From a Lakhnavi kurta to 150 people

Salman gives the numbers first. Manto is about five and a half years old. He started thinking about it in 2019, spent eight or nine months on research, and was about to launch when COVID hit. The brand went live online in Ramzan, and it worked. It did not start with Urdu or calligraphy. The first product was a basic Lakhnavi kurta. It began with two people, and his wife soon joined as co-founder because of her strong eye for art and design.

Today Manto has around 150 people, including warehouse staff and the retail team, plus outsourced factories, stitching units and logistics partners. Salman admits he is not a numbers person, but he knows a few. Manto has served over 250,000 people, and 25 to 30 percent of customers come back. It ships globally except to Israel and a few countries with border or logistics problems. The first flagship store opened last year on Bukhari Commercial in Karachi, and a second opened in January at Dolmen Mall in Lahore. Retail is now 30 to 35 percent of sales, and he expects that share to grow.

The design process is where Manto differs most. For winter the brand plans about 130 new SKUs and for summer about 150, but many of those are colour or cut variations of one design. Most designs are drawn by hand first. Salman recently met someone who had worked at another large brand where each designer had to produce 60 designs a month. At Manto, some designers make two or three in a month, and the average is five to eight at most.

“We want each designer to have their own time to be able to understand what they want to make,” he says. He believes that time is what shows up in the final product. Manto also restocks what sells rather than dumping new designs and putting the failures on sale. Its basics and solids stay in stock all year.

Mass premium, and a line called Mehfil

Muzamil asks where Manto sits. Globally, he says, there is luxury like Louis Vuitton and Prada, premium like Ralph Lauren and Hugo Boss, fast fashion like Zara and H&M, and streetwear. Pakistan’s lines are blurry.

Salman’s map of Pakistan starts at the top with designer and wedding labels selling dresses for 10 to 15 lakh rupees, which shoppers from India and Bangladesh also come to buy. Below them he places daily-wear labels from designers such as Mahira and Sania Maskatiya, which he would call luxury on price. Then come the mass brands. J., he says, has its own large audience even at prices close to Khaadi and Sapphire.

He places Manto in mass premium: premium daily wear, a little above the mass brands. A stole starts at around 2,150 rupees. The highest price so far is about 50,000 rupees, on a separate line. Last year the team noticed people wearing Manto’s daily wear to weddings. That was flattering, but it was not what the clothes were made for, so they built Mehfil, a festive line for Eid and for attending weddings, with hand work and fabrics the daily range cannot use. Salman expects Mehfil to become its own label.

Muzamil challenges the idea of one brand serving many price points. Legacy stores sell bottom-of-the-pyramid items next to Egyptian cotton, and he thinks the two customers do not want to be seen together. Salman’s answer is that a niche is about the person you make for, more than the price. Manto is made for artists and for people who value the effort behind a design. A line can stretch inside that philosophy as long as its purpose is clear, the way he shops at both Zara and Zara Home.

Hoodies and the right to be confused

The hoodie line was Manto’s biggest bet on mixing east and west. Salman points out that Pakistani eastern wear already travels. Pakistanis who have lived in the US for decades, especially women, still keep half their wardrobe in Pakistani dress. Few other countries have a local fashion that strong.

His reasons for hoodies were simple. Pakistan makes and exports hoodies for DKNY, Diesel and Boss, yet good quality was hard to find in local stores. A quality hoodie needs a run of at least 8,000 to 10,000 units, because the fabric is knitted and dyed to order. A premium manufacturer will not take an order of 300 or 500 pieces. Manto waited until it was big enough, then made one large fabric order and used it across hoodies, trousers, pullovers and zippers, each with smaller minimums.

The second reason was positioning. “We are not an Eastern brand, we are a lifestyle brand,” he says. At a stall early on, a well-known designer walked past and told him not to confuse his brand. “I was like, interesting perspective, but I would like to be confused,” Salman recalls.

The first year took pushing and some spending to get people to try the hoodies. He was unsure about a second run but decided he would not know until he had done it twice. In year two, the same buyers came back within days. Customers told him they took them abroad in place of brands like Hollister. In winter, though, shawls, stoles and scarves remain among Manto’s biggest categories.

Dead stock, B-grade and the one sale a year

Muzamil raises the aggregator model. In the US, Ross buys a brand’s unsold seasons and sells them cheaply. He has also spoken to LAAM, the Pakistani marketplace, which he says overseas Pakistanis now name without thinking because its delivery promise is so strong. Why is Manto not on platforms like that, and could it hand them unsold stock?

Salman does not answer the LAAM question directly. He says Manto’s scale is still small enough that unsold stock has never threatened the business. A larger brand’s fabric waste alone can be enormous, because it makes millions of units a season. He mentions hearing that Sapphire did around 300,000 online orders on the first day of a recent sale, while saying he cannot confirm the figure. His real problem is B-grade stock. Manto’s quality checks are so strict that a small line a customer would never see moves a piece out of category A, and those pieces have piled up for five years. An early fix was a 30 percent off section in the first store, which the team named wabi sabi, but new stores have no room for it.

The risk with selling seconds, he explains, is resale fraud. After a small team and family sale of B-grade items, some of those pieces appeared on other marketplaces two or three months later, sold as A-grade. Muzamil sees a startup idea in this: a separate platform for rejected and off-season branded goods, at a quarter of the price, so the brand’s own shop stays clean.

Manto now runs one sale a year, on Azadi, to clear stock that is four or five years old. This year it also remade a few discontinued best sellers one last time and sold them at reduced margins so new customers could try them. Salman credits a conversation with Shamoon, the founder of Khaadi, who told him that a sale run the right way lets people who were on the edge try the product.

Where the money goes

Muzamil asks about unit economics. Salman explains that global brands such as Zara and Bershka price at about three times cost. A 100-rupee product sells for 300 rupees, but salaries, logistics, operations, rent and marketing come out of the other 200. Manto’s early net profit looked good because the team worked from home with almost no overhead. That changed with scale.

An industry expert told him Pakistani fashion brands take home a net profit of 5 to 7 percent. In his own research he found some very large brands at 2 or 3 percent. Pakistan is price sensitive, and growing big without a clear difference means price wars. “It’s a race to the bottom and you might just end up winning,” he says. He also cannot hold the three-times markup on every product, because fabric prices keep rising faster than he can reprice. An industry leader told him gross margins shrink as a brand crosses 1 billion, 3 billion, 10 billion and 30 billion rupees in sales.

He sizes the market at around 10 billion dollars, with only about 25 percent organized. The rest is plazas, tailors and cloth sellers across the country. The biggest brands, as he understands it, earn 34 to 38 billion rupees a year each.

Manto’s own growth was around 800 percent from year one to year two, around 400 percent the next year, then double, and about 48 percent last year, which he calls very challenging. He does not want Manto in the 30 billion category, where survival depends on sales and 60 designs a month.

Muzamil adds numbers from listed companies. Gul Ahmed, he says, runs at roughly 15 percent EBITDA on about 160 billion rupees of sales, though Salman points out that includes exports. Sapphire’s retail arm has an operating margin of around 10 percent on about 32 billion rupees. His average for the market is an EBITDA of 10 to 12 percent. Most of that money, Muzamil says, is stuck in inventory that keeps turning.

Growing slowly on his own money

Salman has funded Manto from its first investment. Once, when the team ordered a whole year’s stock at once and got caught in cash flow, he borrowed 5 to 8 million rupees from friends and family and repaid it in six to eight months. He has avoided outside investors on purpose. “Once I bring in somebody else’s money, the problem becomes that I might not be able to make the same mistakes that I am able to make right now,” he says.

Last year tested that choice. Within one week, Manto’s Facebook ad account was shut while it was still mostly an online brand, the accounts team found a large internal fraud, and a national controversy broke. For the first time the business made losses for a couple of months. Offers came in to take a stake or buy the company, and he listened. He decided the answer was to reduce fear instead, by deciding what was enough: his monthly costs covered, a trip once a year, time for tennis and family. His father, he says, reminds him every week that a business closes when its accounts are not kept in full.

Muzamil pushes hard here. Salman says he wants Manto to become an institution, and also to run it his own way. “Institutions don’t run on vibes,” Muzamil replies. If a business does not grow 20 percent at 10 percent inflation, it is losing money. He blames 1970s socialism, low trust and family businesses split between heirs for keeping Pakistani companies small. He cites the founder of an engineering company that listed early, whose first investor, Engro, forced strict books and audits, and who now calls the listing the best decision of his life. His proposal for Manto is an eventual public listing where loyal customers can buy small stakes, which he sees as closer to the Islamic model of shared risk and reward.

Salman agrees with the principle of self-accountability. “When guests are coming to your home, you have to keep your home clean,” he says. He just does not think outside money fits Manto today, when it can finance its own retail growth. Muzamil’s sharpest point is about people: in his view, the hardest job is finding talent, and money does not solve it.

The week the brand was tested

Muzamil asks about Manto’s two Urdu stories. The first, Salman says, was never a controversy. Early on, a customer asked for a design with Faiz Ahmed Faiz’s line “bol ke lab azad hain”. Later, Faiz’s grandson, Adil Hashmi, called him for coffee and joked that he had used his grandfather’s words. He explained that the family had decided not to commercialize the poetry and asked Manto to send any leftover stock and not remake it. Salman did both.

The real controversy came last year in Lahore. A woman was harassed because her dress carried Arabic script. The first news post had 20 or 30 likes. Then people began tagging Salman, and it became national and international news. The dress was not a Manto product, and he notes that about 40 percent of what Manto sells has no Urdu at all. The team still put out a statement the next day: if a Manto piece put anyone at risk, keep it aside or return it, because their safety came first. BBC and local channels started calling.

He says the team already avoided religious verses and words with double meanings, such as “husn”, which could be read as a name. After the incident, he says, 99.9 percent of the country stood against what happened, and the conversation taught many people that not everything written is religious. Manto rebuilt by going back to how it first spoke to people, with a Teachers Day campaign and a second community campaign.

Muzamil asks whether the brand needs reinventing, citing Abercrombie and Fitch, which faded and then came back by rethinking its audience. Salman says no. Urdu helped Manto spread, but the store itself uses no Urdu, and he believes the brand would have existed without it. With around 500 brands in Pakistan, he says, “you have to become someone that someone would choose.”

What Bangladesh taught him

Salman had just returned from Dhaka. He expected it to be more developed than Karachi and found parts of Karachi ahead. What moved him was the people. His mother was born in Khulna, and he read a poem for her in Urdu at an open mic night in Dhaka. The welcome was so warm that people called him at 1:30 in the morning to take him out for tea.

The business lesson is a gap. Aarong is the dominant brand, and after it he could not name a second. Western local brands struggle because Bangladesh makes clothes for the world’s western brands, and leftovers are everywhere. An Adidas t-shirt sells for 7,000 taka, which he puts at about 14,500 to 15,000 Pakistani rupees, while leftover branded shirts sell for a fraction. Pakistani brands already sell through resale shops on many streets, and he saw more shoppers in those stores than in Levi’s or Puma. He sees room in food, skincare and fragrance too, and hopes for a direct flight.

Muzamil adds that Bangladesh’s GDP per capita is around 2,500 dollars against Pakistan’s 1,800. Salman ran a rough estimate with ChatGPT and says that if Manto has about 2 million potential customers in Pakistan, Bangladesh may have 1.6 to 1.7 million.

Pakistan in 2050

Asked about 2050, Salman says he stays in Pakistan mainly for family, and because he keeps meeting people who give him hope. He does not believe change requires living here. At Warwick, he saw how much Tata’s investment in the university did for Indian students. He sees migration as a positive: people leave, learn, send money home and open doors for others.

His stories from China and Japan are about trust. A 55-year-old translator at the Canton Fair walked four steps ahead of him all day, skipped lunch, and then protested when he paid her 100 dollars. In Japan, a tip offended someone. At an airport, a security officer with no link to the airline came running to find him 25 minutes after he asked a question, just to tell him his check-in counter had opened.

Muzamil shares a Chinese thread on Twitter in which people said their society was low-trust 30 years ago. If China changed in 30 years, he says, he could see the same in Pakistan in his lifetime. He believes the real estate cycle that defined the last 20 years is over, and points to a woman founder from the season’s first episode whose company, started in 2019, he estimates is worth 180 to 250 million dollars.

Salman closes with a story about two wolves inside every person, one good and one bad. The one that wins, he says, is the one you feed.