Shopit is changing the way wholesalers and micro retailers are doing business in South Africa’s townships. The startup is digitising informal groceries or spaza shops and connecting them to the formal economy.
Their mobile app allows small groceries to order stock at affordable prices — all delivered to their storefront. Spaza owners can compare wholesaler’s prices and place an order without paying a commission fee.
The app promotes wholesaler’s products to a wider audience, assists them with their inventory control, and helps them make better business decisions.
Last Mile for BoP was founded by Arnaud Blanchet in 2013 in Cape Town. Prior to starting the company, Arnaud was CFO at the Women’s Forum — a startup based in Paris and Shanghai.
The business model
Shopit’s business model is closely integrated with local wholesalers and their infrastructure. It enables them to be asset-light and leverage wholesaler’s infrastructure.
The app aggregates the catalogues of large wholesalers in the market and displays their product catalogues. Spaza shops can compare prices and select the best products.
Shopit charges a subscription fee and makes a commission on products sold. Shop owners only pay a distribution fee, and deliveries are made by Shopit’s local owner-drivers. According to the company, spaza owners can save up to 10% on their inventory costs by using the service.
The eCommerce app is tailored for informal markets and integrated with leading wholesaler management software and cashless payment solutions in South Africa.
It’s user-friendly and visual and can be used by illiterate shoppers. It’s light on data and only requires 4MB to download.
Beyond subscription fees and sales commission, Shopit’s main revenue stream comes from consumer goods companies.
FMCG (fast-moving consumer goods) companies pay for banner and pop-up ads to promote their products on the site. Companies also pay a fee to access market data and reports — allowing them to tailor their marketing offerings to the informal sector.
Micro retail challenges
In a recent Cape Town township survey, 89% of informal grocery store owners listed the lack of business skills and working capital as major constraints to run their businesses. Spaza shops often have no business records, experience regular stockouts, stock a limited product range, and procure products at high prices.
Spazas make use of wholesalers to break bulk into smaller more affordable quantities, and wholesalers provide credit when required. Smaller quantities are more economical, but they pay higher prices. They are frequently stuck in a credit-trap with one of two wholesalers – making shopping around for the best deals difficult.
Spaza shops are mostly not in direct contact with consumer goods companies and are mostly unregistered and underserved. With limited outlet and shopper insights, brand owners often lack data on informal trade.
Consumers in townships often complain about higher prices of spazas and the need to travel long distances for lower-priced goods. South African townships were historically ignored in favour of shopping malls and town centres. However, a growing population and an increase in disposable income, make it an attractive market for companies. Traditional trade is estimated to contribute around 35 percent of total grocery sales in South Africa.
Shopit operates in a number of townships around Cape Town. They have recently launched in Johannesburg and are also targeting Pretoria and Durban townships. They are currently servicing more than 5,000 stores and are adding 100 stores a week.
They are also looking to expand their wholesale base and are in discussion with the largest wholesaler group in Southern Africa. Beyond South Africa, fast-growing West African markets are also on their radar.