South Africa’s informal retail sector processes R178 billion annually. That’s 35% of total grocery sales flowing through more than 150,000 small outlets: spaza shops, house shops, small grocers.
These shops turn over R2 million per year on average. They’re visited by 80% of the population. And they’re growing at 10% annually, faster than formal retail.
If you’re a food and beverage distributor in South Africa, a significant share of your revenue probably comes from serving this channel. The question is whether you actually understand it.
Three questions most distributors can’t answer
Talk to mid-market distributors long enough and a pattern emerges. The ones processing 500 to 5,000 orders a month, running 3 to 25 routes. They know their customers. They know their products. But ask them these three questions and you’ll get silence, or a guess:
- Which customers ordered last week? Not the regulars you see every Tuesday. All of them. Across every channel orders came in through.
- Which routes are actually profitable? Not which routes are busy. Which ones make money after fuel, driver time, returns, and credit notes?
- Where is stock sitting idle? Not what’s in the warehouse right now. What’s been sitting there for weeks because the demand pattern shifted and nobody noticed?
These aren’t advanced analytics questions. They’re the basics. And the reason most distributors can’t answer them is the same: their operational data lives in notebooks, spreadsheets, WhatsApp threads, and the memory of the person who handles each account.
The spaza shop opportunity is real, and growing
The numbers are hard to ignore:
- R120 billion flows through spaza shops alone, roughly 5.2% of GDP
- 150,000+ outlets nationwide, most without formal addresses or digital infrastructure
- 10% annual growth, outpacing formal retail
- The government has committed R500 million to spaza shop formalisation
Smollan’s acquisition of Yebo Fresh connected 72,000 township merchants to e-commerce. The informal trade digitisation race has started.
But here’s the tension: the outlets are going digital while the distributors serving them are still running on paper.
A market growing faster than the systems serving it
When a market grows at 10% annually, the operational gaps that were manageable at a smaller scale start compounding. An order you could track in your head at 200 orders a month becomes invisible at 800.
The distributors who will capture the growth in informal trade are the ones who can answer those three questions. Not because of sophisticated technology. Because they have basic visibility into what’s moving, where, and for whom.
The ones who can’t answer them will still be busy. They’ll still have full trucks leaving the warehouse every morning. They just won’t know which of those trucks is making money.
What the R178 billion number actually means for you
This isn’t an abstract market figure. It’s the value of the channel you’re probably already serving.
The question isn’t whether informal trade matters. It’s whether your operation has the visibility to serve it well as it grows, or whether you’re absorbing costs you can’t see because the data is trapped in five different places.
In the next post, we’ll look at exactly what those hidden costs are.