The hidden retail giant coming for Shoprite, Pick n Pay, and SPAR

Independent retailers and wholesalers pose a major threat to South Africa’s established formal retail giants, with this sector becoming an increasingly attractive shopping destination for households that are strapped for cash. 

These retailers also pose a threat to the cash and carry or wholesale businesses of these retailers, with some turning to alternative suppliers and sources for better value. 

While this sector has historically catered to independent informal traders, such as spaza shop owners, it has begun to eat into the businesses of formal retailers. 

Formal retailers are also increasingly looking to compete with these businesses through their own wholesale offerings and smaller format stores in rural areas and near informal settlements. 

This competition is becoming increasingly intense, with formal retailers warning of the potential threat to their businesses. 

These retailers are also taking action to defend their hard-won gains in the wholesale market, while looking to grow their market share by leveraging their economies of scale. 

SPAR has issued the clearest warning about the potential threat to its business, which is particularly exposed to the rise of independent retailers and wholesalers due to its unique operating model. 

In its latest integrated annual report, the company said that its wholesale model depends on a mutually beneficial partnership with independent retailers. 

“Reduced loyalty or store exits diminish volume throughput and weaken economies of scale, thereby eroding group competitiveness in key markets,” it said. 

“Sustained margin pressure and the emergence of alternative buying groups further threaten network cohesion and long-term brand equity.” 

Independent retailers are the cornerstone of SPAR’s business model and provide a key differentiator from corporate retail chains, operating across multiple brands, including SPAR, TOPS, Build it, SPAR Health, and Pet Storey. 

“Retailer loyalty reflects the commitment of independent retailers to a brand or network. SPAR earns this loyalty by providing local business owners with the tools, training, systems and support needed to operate stores,” the retailer said. 

SPAR said it is investing in optimising its distribution networks, increasing operating efficiency, local sourcing, and enterprise development. 

Through these initiatives, it plans to build a stronger independent retail ecosystem that encourages greater loyalty to SPAR. 

The R268 billion hidden giant

SPAR is not the only retailer being affected by the rising challenge from independent wholesalers and retailers, with households shifting their spending behaviour towards these businesses. 

The sector has historically catered to independent informal retailers by selling products in bulk in the typical cash-and-carry format. 

However, in recent years, households have shifted their shopping habits to include more visits to independent wholesalers, according to Trade Intelligence’s data. 

This shift is driven largely by the search for value from South African consumers, with wholesalers typically offering products in bulk at lower prices than traditional retailers. 

Trade Intelligence estimates that the formal independent retail and wholesale sector is now valued at R268 billion, accounting for nearly a third of the country’s fast-moving consumer goods market. 

The firm’s data shows that 11% of South African households shop in the sector, meaning it has the same reach as Clicks, nearly four times Woolworths’, and not far off Checkers at 18%. 

With continuous investment in store layouts, merchandising and service, the old perception of ‘cash & carry’ as purely trader-focused is fading fast, Trade Intelligence said.

Independent wholesalers, who sell in bulk to businesses such as hospitality and informal traders and hybrids, who serve both traders and household shoppers, are a key route into the informal economy.

According to Trade Intelligence, 95% of informal traders source their stock through independent wholesalers, making the sector a vital enabler of entrepreneurship and employment.

“Many independents now offer full fresh departments, bakeries and butcheries, alongside bulk ranges,” Trade Intelligence insights lead Andrea Slabber said. 

“They’re evolving into true one-stop destinations, which makes them more attractive not only to traders but also to everyday household shoppers.”

Independent retailers have upscaled dramatically, from product range to pricing, quality and store experience. These retailers now rival and often outperform corporate stores.

Since independents are agile, they can change formats, pack sizes or promotions overnight – something larger groups cannot do.

That agility is matched by a deep local focus, with independents looking to beat national chains by offering specific products to particular communities. 

Independent retailers stock products from local farmers and smaller suppliers who cannot scale into corporate chains.