The South African retail giant coming after Checkers, Pick n Pay and SPAR

Independent wholesalers and retailers, once focused on bulk distribution, are rapidly gaining ground on big chains like Checkers, Pick n Pay and SPAR by adapting to household shoppers, offering competitive prices, and community-focused service.

Andrea Slabber, Insights Lead at Trade Intelligence, explained on the Kaya Biz podcast that these retailers are becoming increasingly popular with average consumers.

Previously, independent wholesalers focused on distribution, selling goods in bulk to traders for affordable prices. Meanwhile, consumers went to well-known retailers like Checkers, Shoprite, Pick n Pay, SPAR and Woolworths for their groceries.

However, these wholesalers have recently started to shift gears, Slabber explained. “They realised that South African household grocery shoppers were interested in cashing in on these great deals.”

“Obviously, if you sell something at wholesale price, it comes at a lower price tag.” Cash-strapped South Africans started going to these wholesalers to buy groceries at a discounted price.

This inspired these retailers to modify their stores and offerings to better suit the needs of household grocery shoppers.

“These days, just about 90% of these former wholesale outlets and cash and carry outlets are very well geared to serve household shoppers.”

They now offer separate checkout points with small basket trolleys, so customers don’t have to buy in bulk. Consumers can now go to these stores and do their daily shopping or even buy a single item at a highly discounted price.

Shoppers also do not necessarily have to compromise on experience to shop at these stores, Slabber explained.

“They actually dress them up, the stores look like a beautiful, first-world modern trade grocery store at one end, and the other end would be the big outlet for the traders to buy in bulk.”

Since price is only of the main factors shoppers look at when deciding where to buy their groceries, this has made these wholesalers highly competitive.

Major retailers fight back

South Africa’s Fast-Moving Consumer Goods (FMCG) market is extremely competitive, and the country’s biggest retailers are not simply sitting back while wholesalers steal their customer base.

“Modern trade retailers are seeing these shifts, and they are also trying to infiltrate the independent territories,” Slabber said.

For example, the Shoprite group, which is Checkers’ parent company, has Shoprite Cash & Carry and Usave, which offer discounted groceries.

In the case of Usave, items are brought directly from manufacturers, ensuring that its customers benefit from bulk prices, without actually having to buy bulk quantities.

The store’s formats range from supermarket sizes to container shops, which are popular in townships.

In 2024, Shoprite’s Group CEO, Pieter Engelbrecht, commented that there are plans to open 540 new Usave stores in the next five years.

“There is room for at least 1,000 of these stores in South Africa over the next five years. We use these store formats where we can’t own land, such as where tribal authorities own the land or where there is limited infrastructure.”

Engelbrecht explained that the current macroeconomic environment is difficult for consumers, particularly as the month-end approaches. Travel costs are also burdensome. This is where Usave comes in handy.

“We have seen a strong interplay between Shoprite and Usave. Our data shows that [at] month-end people flock to Shoprite to buy their groceries, but come mid-month they visit Usave stores because they are within walking distance.”

According to Slabber, there is also another element which gives independent retailers, whether it is a wholesale outlet, a cash and carry outlet or a spaza shop, an edge over larger retailers.

The “secret sauce”, she said, is community-centricity. “Those traders and business owners know the communities they serve so well, and they have the assortments that suit the needs of those communities, and the relationships are well established.”

In some cases, these retailers will offer their clients credit, allowing them to buy items when they may be cash-strapped. “That just shows you the incredible sense of trust between the household grocery shopper and the trader.”

Runway for growth

Slabber explained that wholesale has proved so successful that some traders have even completely shifted their business models. Midway wholesalers, also known as midi wholesalers, are an excellent example of this.

This is where a few stores or store owners band together to gain purchasing power so that they can buy larger volumes at a more competitive price.

They start distributing this stock to other traders, and often, these businesses become so successful that they move entirely into distribution and abandon the retail aspects of their business.

“There are literally thousands of midi wholesalers now acting as midway distributors between the big wholesalers or even the suppliers and the traders.”

The growth of these independent retailers isn’t expected to end any time soon. In fact, Slabber explained that it is likely to experience a boom.

“We already see that in the numbers,” she said. For quite a few years, independent traders had a faster rate of turnover growth compared to corporate retailers.

However, between 2023 and the start of 2024, when load-shedding was at a high, independent traders’ growth was lagging behind.

When a Checkers store, for example, is hit with load-shedding, they are able to tap into Shoprite’s alternative energy network.

Independent wholesalers and spaza shops do not have that option. They either need to make a significant investment in alternative energy, which may be entirely unaffordable, or they need to shut down their business.

“But now we see the recovery, and we do believe that they are growing from strength to strength,” Slabber said.