Sandton and Soweto, Cape Town and Khayelitsha. These sets of urban areas are examples of South Africa’s two distinct retail faces: the slick, established economy and the underrated and still frequently misunderstood informal sector. But how much opportunity is there to be had by formal business tapping into this often neglected sector?
According to June-July 2016 issue of the ‘IMM Journal of Strategic Marketing’, the idea of big business partnering with the informal sector is gaining increasing traction as marketers become more aware that this is a good way to connect with large numbers of consumers.
Dr Tashmia Ismail, who co-authored the book ‘New Markets, New Mindsets’, is one of those who believes the outlook has shifted significantly. “A greater number of companies have awakened to the opportunity, as well as the complexity and hard work that it takes in this market,” she tells the magazine.
South Africa’s banks and retailers are experimenting with non-traditional and more inclusive models aimed at the informal sector, Ismail says, as are major corporates such as GlaxoSmithKline, Unilever, Nestlé and Parmalat.
Retailer Pick n Pay is another. It recently championed the first spaza-to-store conversion in Diepkloof, Soweto by transforming the Monageng Market, which had been run as a spaza outlet since 1972, into a fully-fledged Pick n Pay store. The pilot scheme will see owner Solly Legae and his family receiving guidance from Pick n Pay and the Gauteng Department of Economic Development.
While the informal trading sector is a relatively hard-to-define market, research company Nielsen reported in a study entitled ‘South Africa’s Not So Traditional, Traditional Trade’ that sales through the country’s 134 000 ‘traditional trade’ outlets currently amount to R46-billion per annum, which equates to one of every R5 spent and one third of all packaged consumer goods sold.
The study noted that while modern trade (formal retail) stores had seen a 9% increase in spend, traditional trade outlets showed a 10% increase. There had also been a healthier 7% increase in the number of goods sold, compared with the modern trade sector’s lower figure of 4%.
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