Unpacking South Africa's R190 Billion Retail Giant Challenging Shoprite Pick n Pay and SPAR

South Africa’s retail landscape is undergoing a quiet but significant shift, as a R190 billion segment of the economy increasingly challenges the dominance of established supermarket giants such as Shoprite, Pick n Pay and SPAR.

Often referred to as the township or informal retail economy, this sector is made up of spaza shops, township traders and independent wholesalers. Once viewed as peripheral to the formal economy, it has now emerged as a powerful and resilient retail force, driven by proximity, flexibility and deep-rooted community understanding rather than scale and standardisation.

According to Annelene Dippenaar, Chief Business Officer at Shop2Shop, the strength of this “hidden” retail giant lies in how closely it mirrors the daily realities of South African consumers. Speaking to BusinessTech, Dippenaar said spaza shops and informal traders thrive because they are embedded within the communities they serve and operate in direct alignment with local income patterns and needs.

She explained that traders understand exactly what their customers can afford and when they are paid, whether daily, weekly or irregularly. This insight shapes pricing strategies, product selection and even pack sizes. The ability to buy three nappies instead of an entire pack, for example, can be life-changing for households without stable monthly incomes.

Inventory in township stores is structured around real income cycles rather than traditional monthly purchasing power. Break-pack options, single-unit sales and smaller quantities reduce financial pressure on households and limit waste. Dippenaar said this highly adaptive approach has allowed the sector to expand steadily, even as the formal economy struggles.

The contrast is reflected in employment data. In 2025, formal sector employment declined by 245,000 jobs, while the informal sector added more than 17,000. Today, the township economy contributes about 5.2% of South Africa’s GDP and supports an estimated 2.6 million jobs.

While growth in the informal retail sector is often incremental and difficult to measure, Dippenaar said it is characterised by constant innovation and responsiveness. Most spaza shops operate within walking distance of homes or near transport hubs, selling essential groceries, household goods and prepared meals. In communities where transport costs are high and time is limited, this proximity provides a decisive competitive advantage over large retailers.

Product ranges are also carefully tailored to local cultural preferences, allowing traders to meet specific tastes that national chains may overlook. Trust plays a central role in this ecosystem. Shop owners often know their customers personally, understand their financial circumstances and, in some cases, offer flexible payment arrangements based on social accountability rather than formal credit agreements.

Local procurement further strengthens the model. Many spaza shops source stock from nearby independent wholesalers, who in turn purchase from local manufacturers producing goods designed specifically for township markets. Dippenaar said this shortens supply chains, reduces logistics costs and keeps money circulating within communities.

This decentralised structure also supports jobs linked to transport, delivery and order-taking, while building internal value chains that deepen local wealth creation. It allows traders to respond quickly to supply disruptions, pricing pressures and shifts in consumer demand — something large retailers often struggle to do.

In contrast, Dippenaar noted that major retail chains are constrained by systems designed for uniformity and scale. “Stock, pricing, payments, layouts – everything is governed by uniform processes,” she said, adding that these structures limit agility in an economy marked by ongoing disruption.

She suggested that traditional retailers could learn from the township economy by decentralising operations and opening smaller, customised outlets within communities, rather than relying solely on large, centralised stores.

Industry data supports the growing influence of this sector. The latest Trade Intelligence Formal Independent Channel Report shows that formal independent retail now accounts for nearly a third of South Africa’s fast-moving consumer goods (FMCG) market.

Historically focused on bulk cash-and-carry models supplying spaza shops, independent wholesalers have evolved as households increasingly turn to them to stretch tight budgets. Andrea Slabber, Insights Lead at Trade Intelligence, said everyday consumers are now shopping in these outlets alongside small businesses.

As a result, around 90% of independent wholesalers have adapted their stores, introducing separate checkouts, smaller trolleys and single-item purchases at competitive prices. Trade Intelligence data shows that 11% of South African households shop in this sector — on par with Clicks’ reach, far ahead of Woolworths, and edging closer to Checkers.

As cost pressures persist and consumer behaviour continues to shift, South Africa’s R190 billion township retail economy is no longer operating in the shadows. Instead, it is emerging as a formidable competitor, reshaping how and where millions of South Africans shop — and forcing the country’s biggest retailers to rethink their strategies.