Market Assessment

Assessing the Spaza Shop Market in South Africa - Triple Trust Organization 2003

    TTO studied the market for business services among informal spaza shops: convenience stores offering basic goods such as bread, matches, and paraffin. The aim of the study was to better understand problems they faced and to design a program that could address their needs and increase benefits for the entrepreneurs and their customers. An incremental market assessment allowed TTO to assess program implications for each stage of the study and to determine what information was still needed and design the next step. The study, carried out in four stages, included research on the spaza market and shops, the BDS market, and targeted research on the supply chain, customer preferences, and specific services.

    Focus group discussions and surveys of shop owners and customers helped determine the size of the market, how it operated, the roles of its most important players, and key constraints.

    Methods for info gathering
    Focus group discussions, secondary source research, qualitative, surveys, in-depth interviews

    Summary of results
    The study found that the majority of shops were owned by women (58%) who wanted to build their businesses and considered registering them. There were over 14,000 shops in the study area with an with an estimated annual turnover of $110M and because they are so convenient, most township residents purchase goods daily from spaza shops, spending about $18/month. Most shop owners did not receive formal support to start their businesses and few were aware of business services or providers though some received signs from suppliers and discounted flyers from large wholesalers. In general, shop owners had few direct links to manufacturers and shopped with a variety of retailers and wholesalers who rarely provided discounts or special services.

    The key constraints spaza owners faced include:

    · Insufficient and limited range of stock,
    · Difficult and costly transportation of goods from suppliers to shops,
    · Lack of safe and adequate storage,
    · Environmental problems (pests, rain), and
    · Theft and security issues.

    Close analysis of research findings revealed gaps in TTO's knowledge and understanding of the spaza shop market. It also revealed a lack of data on how much township residents spent each month on a basket of goods and little understanding of their purchasing habits, particularly what they could, but did not, buy. They also needed to know more about the types and size of spaza shops and the supply and distribution chains and about existing (if any) BDS in the spaza shop market, the level of usage, and providers.

    To address this situation, TTO shifted to a qualitative data gathering methodology, using focus group discussions and adapting questions, language, terminology, and the product concept test assessment tool. TTO found this approach to be more user-friendly and it was easier for shop owners to understand and respond to questions. When applied, it became clear that there was in fact a market for BDS, but there were few suppliers.

    These activities showed TTO the importance of being innovative in applying research tools and methods and of choosing assessment tools and methodologies that would enable it to gather useful information, uncover hidden BDS, and make decisions on appropriate interventions.

    Associated Activities and Documents
    Market Assessment
    »Using Non-conventional Research Methods to Understand BDS in Weak Markets, TTO South Africa, Tladi & Isaacs, 2004
    Programme Design
    »TTO in the Retail Sector, South Africa, 2005