Posted by The traditional trade sector in South Africa has demonstrated remarkable resilience, achieving a staggering R187 billion in annual spend in the 12 months leading up to June 2023, compared to R151 billion in the previous year, marking an impressive growth rate of 23.6%. This outpaces the modern trade sector, which saw a growth rate of only 14.7% during the same period.
According to the latest analysis by NIQ South Africa, the sector experienced a resurgence after the Covid-19 pandemic, reaching new heights in total FMCG sales, including liquor and tobacco, in 2023. The data, collected from an ongoing measurement of 17,000 stores, provides comprehensive coverage of the FMCG industry in South Africa, with exceptionally detailed information collected in the market.
Notably, independent retailers, including non-branded superettes and spaza shops or informal retailers, have claimed a substantial share of the market, accounting for R27.40 of every R100 in FMCG sales, as stated by Gareth Paterson, the market leader at NIQ South Africa. This shift reflects changing consumer preferences and the enduring impact of COVID-19 lockdowns on spending patterns.
One contributing factor to this success is the increasing parity between modern trade and traditional trade outlets, which can be attributed to manufacturers investing in route-to-market strategies, leading to the streamlining of the supply chain. This optimisation has resulted in significant cost reductions, benefiting independent retailers and consumers alike.
Moreover, more than half of the Top 200 food and beverage items were found to be cheaper in traditional trade during Q4, 2022, according to Paterson. Even during high promotional periods, such as Black Friday and December in 2022, traditional trade outlets continued to offer better prices without relying on promotions.
Paterson emphasises the inherent agility of traditional trade outlets, enabling them to respond promptly to consumer demands. This responsiveness to consumers’ needs has emerged as a key driver of the sector’s growth.
Another significant advantage of traditional trade outlets is their lesser reliance on cold storage facilities, making them less susceptible to power outages compared to modern trade outlets. The latter have had to bear substantial operating costs to run generators and keep their lights on and tills operating during power outages, affecting their ability to offer competitive prices.
As a result of these developments, independent stores are no longer just a destination for quick purchases and top-ups. They have evolved into one-stop shopping destinations where consumers can conveniently purchase all their essential needs, leading to a notable shift in consumer behaviour.
This shift has important implications for manufacturers in the market. Brands experiencing declining volumes in modern trade but seeing growth in traditional trade must pay attention to product availability. Consumer ‘out-of-stock sensitivity’ is high, and the absence of key product lines from modern trade stores may lead consumers to shift their loyalty to other brands or products, resulting in potential volume shrinkage in modern trade.
The Supply Chain Lab 