South Africa’s hidden retailers with R170 billion in sales beating Shoprite and Pick n Pay

South Africa’s traditional or informal retail sector continues to grow at a faster pace than its formal, established rival. 

This is despite tailwinds for formal food retailers in the form of lower inflation and interest rates, which have boosted consumer spending and economic growth.

These formal retailers, particularly Shoprite through Usave and Usave eKasi, have tried to take on spaza shops and informal traders on their own turf.

However, the informal sector has proven remarkably resilient, with its sales growth consistently outpacing that of its formal counterpart. 

NielsenIQ’s State of the Retail Nation analysis for the first quarter of 2026 shows that food retailers are having a good time of it in South Africa. 

The firm’s data revealed above-inflation growth in sales value and volume, with South Africans spending R173.6 billion on fast-moving consumer goods in the first three months of 2026. 

“Softer inflation, reflecting a combination of more stable food prices and lower fuel costs, gave consumers and retailers some breathing room in the early months of 2026,” managing director for NIQ South Africa Zak Haeri said. 

This is expected to flip in the second quarter of 2026, as rising fuel prices amid renewed conflict in the Middle East push inflation higher and result in interest rate hikes. 

In line with historical trends, NielsenIQ noted that sales through traditional trade channels outstripped sales in modern, formal trade channels across many categories.

Traditional retail, for NielsenIQ, refers to independent stores that sell consumer goods with a fixed, physical location. 

This includes taverns, spaza shops, and independently-owned superettes. These retailers combined generated R43.1 billion in sales in the first quarter, at an annual run rate of R170 billion. 

NielsenIQ’s data showed that modern trade channels, which include online retail, franchised stores, and branded outlets, saw a unit volume increase of 1.7% for the first quarter. 

The firm said traditional retail sales growth far outpaced this, but warned that it may not continue its winning streak. 

This is because large, formal retailers are well-equipped to absorb inflation through their scale, promotions, and private-label offerings. 

Traditional retailers do not have these luxuries and are highly sensitive to a drop in employment and economic growth in particular regions. 

Spaza shops are formidable 

Spaza shops and other informal retailers have competitive advantages of their own in the battle against JSE-listed giants. 

These retail giants are increasingly encroaching on the territory of spaza shops as they want a slice of the growing informal retail pie. 

Shoprite’s Usave has led the charge in this regard, with Boxer following closely. Both are growing strongly, but have made little impact on the success of spaza shops. 

Formal retail chains find it tough to operate in the environments where spaza shops are so successful, with there being little to no formal infrastructure. 

This means that Shoprite and Boxer cannot rely on their highly efficient distribution networks, scale, and wider variety of items to beat informal retailers. 

They have had to introduce small-format stores, such as Usave’s eKasi containers, to operate alongside spaza shops. 

These stores require less supporting infrastructure, offer a narrower range of goods, and can be located deep within a township or informal settlement. 

This is effectively an attempt to copy the success of spaza shops, which are able to attract customers with extreme proximity. 

Camissa Asset Management analyst Katlego Dinake explained that informal retailers can penetrate deep within townships or informal settlements. 

This results in unmatched convenience for basic goods, with formal retailers unable to do this to the same extent. 

Informal retailers also have deep community ties that enable them to serve specific needs within a township or informal settlement. 

These retailers do not have to stock the same goods as other spaza shops somewhere else. They can tailor their stock to the community and what it demands. 

Crucially, because these retailers are located so deep within a township or informal settlement, customers do not have to spend money on transport to get to their stores. 

This becomes increasingly important when transport costs rise amid fuel price spikes and in the middle of the month, when consumers want cheap, convenient goods that meet their needs.

In this way, informal retailers can offer ‘break-bulk’ sales that enable consumers to buy small quantities of a product instead of a full box or bag, for example.