Financial Data
Updated 21 Nov 2017


The rise of the spaza shop: Why informal trading could be a great starting point

There are great springboards to kick off your retail business. Start small, but smart. 


Diana Albertyn, 10 September 2017  Share  0 comments  Print


Related stories


All the answers to your unique business lifestage questions

“People don’t have money to buy the pre-packed quantities provided by the suppliers so I make it easier and more affordable for them. I give them what they need,” says spaza shop owner Kharul Islam. He runs Comic Grocer in Delft, Western Cape, just one of 140 000 traditional trade outlets which contribute towards South Africa’s annual retail sales.

Consumers are shopping more frequently at small informal retailers like Islam’s, mainly because they are ideally located within the neighbourhood and along commuting routes, for small top-up occasions. 

Related: Pick n Pay launches pilot spaza store in Soweto


TAKE NOTE

Shoppers’ love for doing grocery shopping is declining, with 90% of consumers stating they enjoyed it in 2014 which dropped to 71% in 2016, reports Nielsen. As grocery prices increase, shopping is becoming less enjoyable. Budgets are tighter and impulse shopping has also decreased. 


So, what exactly is driving customers out of the grocery stores in favour of their local spaza? 

Convenience and cost-effectiveness 

Economic pressure impacts consumers’ pockets and it changes how – and where – they choose to spend their disposable income. In an effort to make ends meet, cost-saving has become the norm. 

“In 2015, we predicted that a decline in disposable income would have a significant impact on grocery shopping. This has now come to fruition, where in 2016, we saw consumers reducing spend on ‘nice to have’ items and buying them less frequently,” explains Nielsen Consumer Insights Director, Esti Prinsloo. 

Research has also shown that consumers are now opting for smaller pack sizes, as sold by Islam and other spaza shop owners, to get what they need at an affordable price. You can save by buying in bulk and splitting the items into convenient sizes for the cash-strapped consumer. 

Out with the old (habits)

Whereas it was common for shoppers to fill their baskets and trolleys in one store and go home, today’s consumer moves from one shop to the next in the name of preference or price comparison – whether they are grocery shopping or topping up.

A spaza shop is the ideal alternative as most stock everything from produce, makeup, condiments, household items and stationery. Since shoppers’ zeal for trips to the store have become less pleasurable, spaza – with everything under one roof at an affordable price – have become top preference over chain supermarkets.

“Often operating with low overheads and lean profit margins, these stores offer consumers a cheaper and more convenient alternative to supermarkets for top-up, daily or even weekly purchases,” notes Reena das Nair, senior researcher at the Centre for Competition, Regulation and Economic Development, University of Johannesburg.

Related: Test your concept: 3 Reasons why you need to pop-up somewhere

Get started – here’s how 

New to entrepreneurship? The allure of running your own business with an accessible customer-base and low overheads is appealing, but you’ll need funding and guidance to get it off the ground and keep it there.

The Gauteng Department of Economic Development has partnered with Pick n Pay to open up the local supermarket chain’s distribution channels directly to township spaza shops. “This will give small retailers access to stock at competitive pricing,” explains Das Nair. 

Awareness is your most powerful tool when it comes to business success, because while funding from sources such as government or development finance institutions can provide financial assistance to new players, you need to be aware where and how to get it.


CONSIDER THIS

Independent retailers, including spaza shops, are an important alternative to chain supermarkets, especially for low-income consumers in township, peri-urban and rural areas. 

Rate It12345rating

About the author


Diana Albertyn


Introducing the cash solutions for businesses in retail

As a retail business that handles cash you need cash solutions that minimises the risks involved. Leigh Livanos, Head of Payments, Collections & Cash for Business & Commercial Banking explains how Standard Bank can assist you in properly managing and protecting your day-to-day cash handling.

Login to comment