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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.

Retail

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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    Dr Kin Kariisa

    Group CEO - Next Media

    Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
    With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
    Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.

    Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.

    Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.

    • Other current and previous roles played by Dr Kin Kariisa:
    • Lecturer of e-Government and Information Security to graduate students at Makerere University, Kampala and Radbond University in the Netherlands
    • Director of Eco Bank Uganda Limited, one of the largest banks in Africa
    • Chairman of the National Association of Broadcasters, an umbrella industry association for all Television, Radio and online broadcasters in Uganda.
    • Chairman of Board of Directors of Nile Hotel International, that owns the leading hotel in Uganda, Kampala Serena Hotel.
    • Chairman of Board of Directors of Soliton Telmec Uganda, the leading telecom company in Optic fibre business managing over 80% of optic fibre in Uganda.