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Spaza shops growing strongly, study shows

The spaza shop is making a comeback despite moves by big retailers into townships and peri-urban areas in SA.

Colleen Goko | Business Live

According to a Nielsen study, South African "modern trade" shoppers who also use spaza shops grew from 45% in 2015 to 53% in 2016. Nielsen serves marketers keen to reach African consumers in niche and mass markets.

"Even though spend is still higher in modern trade, there is strong sales growth coming through in traditional trade outlets," says Nielsen consumer insights director Esti Prinsloo.

SA has 2,500 modern trade outlets, including supermarkets, and 140,000 traditional trade outlets, including spaza shops. This contributed to annual retail sales of R316.5bn to March 2017. Traditional trade in urban and rural areas accounted for 22.3% of this, or R70.5bn.

"People are reverting to local, as they’re not willing to travel to supermarkets due to the rising cost of transport. Spaza shops are ideally positioned for small, top-up occasions, being conveniently situated on commuting routes and close to shoppers’ homes," Prinsloo says.

Nielsen’s Shopper Trends study found that sales in traditional trade outlets that include small independent grocers, self-service walk-in outlets and counter-top formats, grew 13.4% over the year to March 2017. Rural outlets grew 2.3%.

Growth in sales at modern format hypermarkets was 4.8% in the period and at supermarkets, it was 8.6%.

Strained economic conditions in SA are changing consumer behaviour, she says.

"The biggest challenge for modern trade outlets is breaking the cycle of reliance on price and promotion to sustain growth. With squeezed margins, retailers will need to look for other ways to drive purchases, loyalty and the overall retail experience to ensure long-term growth."

The growth of spaza shops and independent grocery retailers is under the spotlight in the Competition Commission’s market inquiry.

Public hearings held in Cape Town and Johannesburg revealed that big retailers were perceived to be muscling in on territories that were previously served only by smaller players.

Trully Masinge, owner of Gross Corner Supermarket in Sebokeng, told the market inquiry panel earlier in June that business became tough when Checkers and Spar opened stores nearby. "Many people used to buy from my store and we used to work very well. But now people just walk past my store because these big retailers have lower prices — better prices than my shop can compete with," Masinge says.

Read more | Original article 

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