Nafcoc ‘proves’ foreigners run better shops

2013-12-08 14:00

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The National African Federated Chamber of Commerce (Nafcoc) has commissioned research to demonstrate how locally owned spaza shops are being driven out of the market by better-organised, foreign-owned shops in townships.

It is called the Township Monitor Index and the results of the first two waves of shop surveys were released this week.

The results seem to confirm the widely held belief that foreign-owned shop owners are offering better prices and better choice.

The point is to understand “why most of Nafcoc’s members are not able to compete in the township retail space”, the organisation said.

According to Nafcoc, “most” of its members end up closing their shops or renting them out to foreigners.

Although only seven South African-owned and seven foreign-owned shops were canvassed alongside five formal retailers, Nafcoc sees the results as evidence that foreign shop owners are beating locals on price through bulk buying.

“Considering their sheer numbers. If spaza shop owners combined resources to do bulk buying, they would achieve greater supplier discounts and become highly competitive,” says Nafcoc, using the term ‘spaza’ to refer only to locally owned shops.

The commissioned researchers from TMS Research visited the shops in Soweto, Diepsloot and Sebokeng twice to compare the prices of several basic consumables.

The results show that large retailers, including Pick n Pay, Shoprite and Checkers, generally beat the prices of all township shops, but the South African spazas also had higher prices than their foreign counterparts most of the time.

“It would appear that the differentiation can be attributed to the weak buying power of spaza shop owners who, unlike the foreign nationals and large retailers, do not buy in bulk and therefore do not achieve the same level of discounts from their suppliers,” Nafcoc said.

The best prices were to be had at formal retailers 19 out of 30 times and 10 out of 30 times at foreign-owned shops for products ranging from bread and eggs to nappies and tinned pilchards.

“The most interesting finding is that the big retailers are cheaper,” says Katleho Bohloa, an economist with Nafcoc. “Our focus is not on the foreigners and what they are doing,” she said.

She admits that no foreign shop owners were interviewed to establish their procurement practices.

“It’s not just about bulk buying; its about business strategy.”

Nafcoc’s researchers also found that neither locally owned nor foreign shops display prices and that it was “apparent” that different people get charged different prices. The foreign shops were “mainly” to be found in busy transit areas like taxi ranks, main roads or malls.

“Most spaza shops” were in residential areas consisting of converted shipping containers in yards, Nafcoc says.

It further reports that the foreign shops were better looking and advertised themselves with branded exteriors, while the South African shops were mostly less attractive and less branded.

“This is just a pilot study,” says Bohloa.

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