Spaza shop spending is on the rise
Spaza shops continue to grow in popularity, even as listed businesses and formal retailers try to grow their footprint in the informal economy.
The second Township Customer Experience Report conducted by research company Survey 54 and digital marketing agency Roger Wilco shows that 44% of respondents say they are spending more at local spaza shops than last year.
It interviewed 1,400 township residents.
The increased spend could be due to the special R350 Covid-19 grant.
The same township research conducted in 2020 predicted more people switching to mainstream retailers in township malls where prices may be lower. But this hasn’t been the case due to the high cost of transport to reach a mall.
Large retailers at township malls are usually accessed by taxi once a month for bigger monthly shops with the nearby spaza stores offering convenience, credit and smaller pack sizes at month-end, the report reads.
The report quotes marketing agency Nielsen estimating there were about 142,000 spaza stores in SA in 2017 that had grown to 150,000 in 2021.
One egg
It means listed retailers continue to face competition in the informal sector, though spaza shops see large retailers with competitive pricing and high ranges as a threat to their existence.
“We open a box of eggs and sell an egg individually. So until Shoprite can sell one egg, it will have competition,” says African Accent spaza shop owner and spaza shop distributor Brian Mabuza.
Brian Makwaiba, founder of the Vuleka online ordering platform for spaza shops, says in the report that local stores offer credit to consumers in a way large retailers can’t.
“In some instances, in the week that people are about to receive their Sassa grants or salaries, they get items on credit at spaza shops for two to three days.”
Retailers have been moving into townships since Shoprite opened its first store in one in 1995. It also sells through its Usave brand of much smaller convenience stores and shipping containers.
The low-income sector, which includes the township economy, accounts for 65% of the grocery retail market, according to Pick n Pay.
It predicted the low-income grocery sector would grow by more than R142bn to R855bn by 2025, at a much faster rate than middle and wealth income grocery segments.
Pick n Pay invests heavily in Boxer Supermarkets aimed at the discount market. It has upgraded ten spaza stores in the past financial year, which are run by local entrepreneurs, under its brand name. It has 38 of these.
Spaza shops, often run by Somalis and Bangladeshis, have been sites of xenophobic attacks but remain popular shopping destinations.
Donated food
Mabuza, who owns three spaza stores in Katlehong on the East Rand, said community members are loyal to local businesses that provide employment and are open for long hours. What retailer will open up after hours to sell a customer a headache tablet, he asks.
His spaza shop has a relationship with the community having donated food in lockdowns and because he has lived in Katlehong his entire life.
Locally owned stores are also less vulnerable to looting when unrest breaks out that often affects bigger brands and malls, he said.
Mabuza introduced a brand of kombucha, a fermented drink, to 770 spaza shops and says brands are beginning to realise spaza shops are a space in which to launch brands into the township economy.
“If you came up with a juice brand and you wanted to crack the township market, you wouldn’t go to a big retailer because there are bigger brands there.
“If you come to a spaza shop, you get personal care from the shop owner.”
Many spaza shops also deliver by bicycle to residents who use Whatsapp to order goods, giving the stores an advantage over listed retailers.
A Whatsapp bundle costs R30 a month, which means even if consumers run out of data, they can still use the app.
Mabuza, who worked in formal retail managing a clothing store chain in Cresta and Melrose Arch malls in Johannesburg, said formal retail struggles to understand the township economies.
In the Township Customer Experience Report, 90% of respondents thought that spaza loyalty card programmes would be a good idea, mimicking retailers Shoprite, Pick n Pay, Clicks and Dis-chem that offer discounts or points that can be swapped for cash.
This would require innovation and partnerships across stores.
Mabuza disagrees with the survey results.
“You don’t need a loyalty card. The loyalty card is the relationship you have with the spaza store.”