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South Africa’s traditional trade sector shows strong resurgence
By our News Team | 2023
Traditional trade retail sales grew by almost 24% in the year ending June 2023. By comparison, the modern trade sector grew by only 14.7%.
The traditional trade sector in South Africa has experienced an impressive post-pandemic resurgence, reaching new heights in total FMCG sales, including liquor and tobacco, in 2023.
This is according to the latest analysis by consumer intelligence company NIQ, which finds that the sector achieved US$9,92-billion (R187-billion) in annual spend in the 12 months up to the end of June 2023.
Photo credit: V Grigas via Wikimedia Commons
That total compares to US$8,01-billion (R151-billion) in the previous year, equating to 23.6% growth. By comparison, the modern trade sector grew by only 14.7% over the same period.
For the study, NIQ measures 17,000 South African stores on an ongoing basis.
“Independent retailers, which include non-branded superettes and spaza shops (informal convenience shops), have successfully commanded a substantial share of the market and now account for R27.4 (US$1,45) of every R100 (US$5,30) in FMCG sales,” says NIQ South Africa Market Leader, Gareth Paterson.
“This reflects the changing preferences of consumers and the lasting impact of Covid-19 hard lockdowns on spending patterns.”
Growing parity between modern trade and traditional trade outlets
He also points to a growing parity between modern trade and traditional trade outlets, which can be attributed to manufacturers investing in route-to-market strategies, leading to the removal of nodes in the supply chain.
The optimisation has resulted in significant cost reductions, benefitting independent retailers and their consumers.
“This trend has also created a situation where more than half of the top 200 food and beverage items were cheaper in [traditional trade outlets] during Q4, 2022,” notes Paterson.
“In addition, prices in [modern trade] and [traditional trade] have converged, even during high promotional periods like Black Friday and December [Christmas holiday period] 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 [traditional trade] 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.”
He believes another driving factor is that traditional trade outlets have not been impacted as much by South Africa’s ongoing electricity crisis (known as load shedding), given their lesser reliance on cold storage facilities.
Modern trade outlets, on the other hand, have been forced to spend significant sums of money on running generators to keep their store lights on and tills operating. This has resulted in a severe knock to operating costs and their ability to offer discounted prices to consumers.
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