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News Junction > Blog > Business > Informal retailers growing faster than sector giants
Informal retailers growing faster than sector giants
Business

Informal retailers growing faster than sector giants

Published August 8, 2023
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4 Min Read
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The country’s traditional trade (TT) sector is growing at a faster rate than the dominant modern trade (MT) sector as consumer shopping preferences change with lessening disposable income.

This is according to NielsenIQ (NIQ) South Africa’s insights released on Monday, assessing the sales performance of 17 000 stores within the fast-moving consumer goods (FMCG) industry.

According to the NIQ SA, the traditional trade sector – which includes non-branded superettes and spaza shops – grew by 23.6% in the 12-month period ended June 2023, raking in R187 billion in annual spend compared to R151 billion in the previous year.

The growth rate is ahead of the modern trade sector, which grew by 14.7% in the same period.

“Independent retailers have successfully commanded a substantial share of the market and now account for R27.40 of every R100 in FMCG sales,” Gareth Paterson, market leader at NIQ SA, says in a statement.

“This reflects the changing preferences of consumers and the lasting impact of Covid-19 hard lockdowns on spending patterns.”

Proximity to consumers

According to the research, independent retailers’ detailed understanding of local consumers gives them a competitive advantage over modern traders.

The consumer intelligence company reports that informal retailers are better placed to respond to the consumer’s immediate basket needs and have the freedom to adjust product offerings to cater to demand.

In addition, NIQ SA notes that independent retailers have also benefitted from the manufacturers’ quest for profit by investing in route-to-market strategies, which have effectively trimmed down supply chain nodes for independents and resulted in significant cost savings.

On the other hand, it notes that modern traders find it hard to compete for the consumer’s coins as unprecedented load shedding drives up operational costs, making it harder for retailers in this sector to compete with independent retailers under a better price banner.

Read:
Retailers going backwards as SA consumers buckle
Tiger Brands wants a piece of the multibillion-rand informal market

“This trend has also created a situation where more than half of the Top 200 food and beverage items were cheaper in TT during Q4, 2022,” according to NIQSA.

“In addition, prices in MT and TT have converged, even during high promotional periods like Black Friday and December in 2022, and Traditional Trade outlets have continued to offer items at better prices, even in the absence of promotions.

“Moreover, the inherent agility of TT outlets allows them to respond quickly to consumer demands. If consumers express a preference for a specific brand, the outlets promptly start stocking it.”

“This responsiveness to consumers’ needs has become a key factor driving its growth,” says Paterson.

Last week, JSE-listed food manufacturer Tiger Brands revealed its route-to-market strategy targeting the multibillion-rand informal retail sector to support sales growth.

NIQ SA believes that manufacturers supplying the sector will need to pay more attention to the thriving informal sector to understand the participating consumers’ basket needs and create the necessary solutions to maintain its relevance in the industry.

“For brands looking to stay competitive and sustain growth, a strategic focus on TT is becoming imperative. As this trend continues, businesses that align with consumer needs and leverage the agility of TT outlets stand to thrive in this evolving market landscape,” Paterson says.

Listen to this MoneywebNOW podcast with Simon Brown:

You can also listen to this podcast on iono.fm here.

#Informal #retailers #growing #faster #sector #giants

TAGGED:fasterGiantsGrowingInformalretailerssector
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