Johannesburg, 19 January 2016 - The perception that South Africa’s Traditional Trade (TT) sector is shrinking in the face of increasing pressure from modern retail outlets could not be further from the truth. Sales through South Africa’s 134,000 Traditional Trade (TT) outlets currently amount to R46-billion per annum, which equates to one of every five rand spent and one third of all consumer goods packages sold in South Africa.
These are the latest findings by global measurement company Nielsen based on an expansion of its existing, in-depth retail universe. This has resulted in a significantly expanded measurement of the traditional trade channels that is even more demographically and geographically representative of South Africa’s consumer spend.
Nielsen South Africa MD Craig Henry explains, “The retail environment in developing countries around the world is highly dynamic. It constantly changes in response to evolving macro and micro economic realities, new technologies and changes in the supply and demand of fast-moving goods. The universe is now an excellent reflection of our dynamic market place, and provides the most comprehensive coverage of both the modern and traditional trade retail environment in South Africa.”
The sizeable growth of the TT sector has taken place against the backdrop of South Africa’s population increasing from 38-million in the early 1990s to 54-million by 2014 (Stats SA). Additional factors driving its growth include the rapid progression of the middle class in terms of improvement in their socio economic standing.
South Africa’s marketplace is also more retail dense than ever before, with the number of Modern Trade outlets – Hypers and Supers - having increased from 790 to 2 875 and branded convenience stores having increased to more than 4 500 outlets. TT has, however, more than kept up with its more formal counterparts, with the number of outlets having grown from 31 000 to 134 000 in the last 20 years – a massive 100 000 new outlets. Interestingly, these stores are equally prevalent in both urban and rural areas and there are in fact, now more urban traditional trade than rural traditional trade outlets in South Africa, at 81 587 and 52 472 respectively.
As a result, the sector has seen continued increase in sales, driven by higher shopping frequency and steadfast shopper loyalty despite modern branded formats opening up in less urbanised areas. This means that whereas Modern Trade stores have seen a 9% annual increase in spend; TT stores have achieved 10% increase showing that they’re holding their own in the retail sector. They’ve also seen a healthier 7% increase in the number of goods sold, compared with the Modern Trade sector that achieved 4%.
One of the key areas of growth within the TT sector, emanates from the positive evolution of spaza shops (counter service TT stores) that have become more organized, increasing the range and variety of brands and categories they offer, while being conveniently located on commuter routes or close to shoppers’ place of work or home, and being increasingly competitively priced.
This has seen spazas gaining popularity amongst modern trade shoppers. A massive 48% of shoppers have visited a Spaza outlet in the last seven days, versus 38% in 2012, representing a 10% increase in shoppers visiting the channel.
In addition, shoppers visit spazas, on average, more than four times a week (18 times per month) compared to supermarkets which they visit just once a week. This provides four times as many opportunities for brands to connect with consumers and increased opportunities to expose them to new products.
What’s clear about traditional shoppers is that far from a simple sell, they have strong preferences about when, where and how they like to shop. Key insights to consider include the fact that a TT shopping trip is not always a ‘monthly’ bulk shopping trip, nor is it always a ‘top up’ shop – it all depends on the size of the store, the location and the range available.
Operating in Traditional Trade therefore doesn’t mean having a one pack size product offering that will meet the entire market’s needs, it’s vital to understand demand in various channels and formats to meet the needs of South Africa’s diverse and highly complex TT customer base.
Download the report here.
Nielsen Holdings plc (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers watch and buy. Nielsen's Watch segment provides media and advertising clients with Total Audience measurement services for all devices on which content — video, audio and text — is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry's only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen also provides its clients with analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries, covering more than 90% of the world’s population. For more information, visit www.nielsen.com.
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