South Africa’s traditional trade sector offers growth and opportunity

According to findings published by Nielsen, the perception that South Africa’s traditional trade (TT) sector is shrinking couldn’t be more wrong. Based on the expansion of its retail universe, which has allowed for significantly greater measurement of TT channels, Nielsen reports that sales through the country’s TT outlets amount to a third of all consumer goods packages purchased.

One of the key areas of growth within the sector comes from the evolution of Spaza shops  – independent supermarkets that usually offer counter service to consumers. Not only have they become more organised, with a greater variety of brands and categories available, they’re also conveniently situated on commuter routes or close to shoppers’ homes and provide competitive pricing.

According to Nielsen South Africa MD Craig Henry, when consumers are faced with an over-the-counter system of purchasing, they generally make quicker decisions than they would if they were browsing through a self-service environment. “This means that branding is an important factor within the Spaza environment – consumers see a brand they recognise and make a purchasing decision based on that recognition,” he says.

This means that bigger brands will generally compete more successfully in Spaza shops – those brands that consumers will ask for by name, for example asking for “Sunlight” as opposed to “dish washing liquid”.

A number of brands have launched successfully within Spaza shops to the lower end of the market, says Henry. “Brands that ensure their value proposition speaks to a particular need within this market do very well. Pack size, for instance, is a critical component for success. Brands such as Ariel, Maq and Kingsley Beverages have concentrated specifically on this sector and achieved great success. It does, however, require a very different strategy,” he says.

Though the Spaza environment is not one where consumers would do a total shop, Nielsen has revealed that consumers will visit a Spaza shop more than four times a week, compared to supermarkets which they will go to just once. “Shoppers are more likely to use Spazas for top-up shopping. Certain categories do particularly well here, such as meal time staples (rice, maize and sugar) as well as immediate consumables (sweets, snacks and confectionary),” he says.

Visual presence is crucial, as is hitting the right price point. As more and more spaza shop owners purchase their products directly from wholesalers, thus shortening the route to market, pricing is becoming more reasonable. With advances in technology and as manufacturers gain a better understanding of this sector of the market (something that Nielsen is committed to making happen), as well as improved distribution channels, opportunities for brands will abound. “There has been a lack of clarity and understanding in terms of pinpointing the opportunities; however, I predict this is likely to change with technology and ongoing research,” he concludes.

The big take-out: The traditional trade sector in South Africa opens up a world of opportunity for brands that take the time to understand how this segment of the market works and structure value propositions that appeal to their unique needs.