The informal sector in South Africa consistently thrives. It is the unsung backbone of South Africa’s free trade, quietly serving thousands of South African households in all nine provinces.
Image supplied. Ged Nooy, GM of Field Force provides three trends that stand out in the current informal trade market
Yet, in many ways, this juggernaut of local commerce remains a missed opportunity for FMCG manufacturers that stand to reap immense benefits if they understand – and capitalise on – the sector.
Why FMCG manufacturers need to notice the informal market
FMCG manufacturers must double down on this sector, and here’s why. According to South African FMCG and retail reports, it is estimated that approximately 30% of retail sales are conducted in South Africa’s informal sector (Trade Intelligence), and depending on the product category, this figure can spike up to 50%.
Accenture Africa research shows that there are over 150,000 Spaza stores across South Africa, with 80% of the country’s population shopping at these stores daily.
Beyond that astounding number, the informal market is experiencing phenomenal growth (23% versus the formal market at 14.7% – NIQ).
There are also favourable circumstances for manufacturers, in that landing products on informal shelves is more cost-effective than the formal market, as there are no trading terms in place.
Plus, manufacturers have more influence on informal shoppers than they do on formal shoppers, given that formal retailers own the shopper relationship and messaging to shoppers more and more.
Three trends stand out in the current informal trade market:
- Proximity, relationship
- Cash is King
What to focus on
We know the trends, but what should FMCG manufacturers focus on specifically?
- Understanding the shopper, the consumer and the trader
- Know your route to market and execute
- Support the trader
- Be visible in the community
“Everyone is doing it, so why don’t you?”
While the informal market might appear – at least at face value – to be less organised and less predictable than the formal sector, applying an understanding of the market, its shoppers and consumers can bring unprecedented awards.
Let’s not miss the golden opportunity this year to connect with the lifeblood of South Africa’s informal shopper. Possibility awaits around several corners in our streets, settlements and urban hideaways.