New research underscores the enduring strength and intricate dynamics of South Africa’s independent grocery trade, from big wholesalers to spazas, thriving amid two decades of retail shifts.
When retail research business Trade Intelligence was founded in 2004, the formal grocery retail space was dominated by the ‘Big Six’ – Pick n Pay, Shoprite, SPAR, Woolworths, Massmart and Clicks – while the independent wholesale and informal sectors served those with no access to modern retail close to home.
A shift started in the early 2000s when the corporates began to target townships previously off-limits due to zoning laws. It was assumed that the informal trade (and thus the independents supplying it) would decline. “In fact, the independent sector has proven surprisingly resilient,” says Kerry Elliot, Sales Lead at Trade Intelligence. “And both the formal independent wholesale and the informal sectors are tremendously important channels for consumer goods brands to reach the township shopper.”
Scale of the Sector
Trade Intelligence estimates the size of the informal FMCG retail market (i.e. spaza-type stores) in 2023 at R197bn (+6.9% versus 2022), with at least 11.1 million people regularly shopping in its roughly 150,000 stores. In turn, this market is largely supplied by the formal independent trade (i.e. unlisted retailers and wholesalers), some corporate chains and, to a smaller but growing degree, directly from suppliers.
Valued at R259bn, formal independents made up 33% of the total South African FMCG market in 2023, a significant slice of the overall grocery market pie. Hence, it should be a critical focus for FMCG manufacturers and suppliers. However, this is a complex and changing market to do business in due to blurred routes to market and continuous shifts, some of which are outlined below.
Technology as a catalyst
Technology has been one of the most significant drivers of positive change in the informal retail sector. Digital adoption is permeating all areas of informal trade from supplying and sourcing of stock to marketing, e-commerce and payment systems.
Younger shoppers are driving the rise of township e-commerce. 26% of spaza shoppers order from spazas via online platforms. WhatsApp is the dominant online platform, followed by Uber Eats, with smaller regional players making up the rest of the ranking.
Then there is the proliferation of fintech companies offering cheaper merchant services with often free point-of-sale devices. This has coincided with growing demand for digital payment methods in the more formalised portions of the township economy including larger cash and carries, independent wholesalers and superettes.
Routes to Market
One of the major changes in the informal sector over the past twenty years has been how informal traders source products – and how suppliers can access this market.
Independent Cash and Carry / Wholesalers
Independent cash-and-carry stores and wholesalers were the first formal businesses to recognise the value and potential of the informal trade and were serving these customers for decades before the end of Apartheid. Today, they remain the main channel to the informal trader, with 95% of the 118 traders interviewed in June reporting that they buy their stock from wholesalers.
Suppliers
Suppliers like Unilever, SAB, and Coca-Cola have long recognised the importance of the informal and independent trade to their businesses, with various initiatives from point-of sale giveaways to store upgrades, to business training.
In 2023, Tiger Brands announced a route-to-market strategy to increase the presence of its products in informal and independent township stores. Since the start of the programme, it has increased the distribution and availability of Tiger Brands products.
Supermarkets
Supermarkets have begun to recognise the informal trade as an important route to market, providing last-mile access to shoppers – and shopper occasions – which their infrastructure is otherwise not geared to service.
As early as 2016, Pick n Pay broadsheets sported “Traders welcome”, offering bulk deals to informal retailers. Fast-forward to 2024, bulk-buying customers of Shoprite Cash & Carry stores can now browse and purchase a wide range of goods at highly competitive prices through a fully automated online shopping system, with free delivery within a 50km radius – effectively, e-commerce for spazas.
As South Africa’s corporate supermarket chains have started rolling out brands and formats more geared toward township retail proper, they are not only a route to market but also competition to the independent trade, offering convenience through close-to-home shopping. SPAR, for example, outsources some township deliveries for its SPAR2U delivery service to businesses like Delivery KA Speed SA and KasiD.
The Future of Independent Trade
The importance of the independent trade in South Africa remains undeniable. For millions of South Africans, spazas and informal retailers are not just convenient – they are essential.
To help brands and service providers meet the challenges and unlock the opportunities in this dynamic sector, Trade Intelligence has put together its Kasi Kit solution, a comprehensive toolkit of research, a workshop and a facilitated trade visit to help bridge the gap between boardroom and spaza.
“It’s the culmination of two decades of expertise and on-the-ground experience, tailored to meet the needs of today’s FMCG suppliers.” says Kerry Elliot, Head of Sales at Trade Intelligence.
For more information on Tade Intelligence’s independent trade solution for the FMCG industry, click here.
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