An analysis of food purchasing patterns, preferences and perceptions of low income consumers in South Africa

Abstract

In recent years there have been concerns that large supermarkets are encroaching on Spaza shops (Charman, et al., 2019), decreasing Spaza shop consumers, and taking away the only source of income of many Spaza shop owners. With rapid urbanisation in South Africa, large food retailing companies have identified townships and fringes of urban regions as areas for growth. As a result, the last decade has seen numerous formal retailing outlets in the form of supermarkets/shopping malls being established in these regions. This was driven by rapid income growth in these regions, since the previous decade, along with saturated retail markets in established urban areas. Within this context, the Competition Commission launched an inquiry in 2017 to determine the effects that the presence of supermarkets in township areas has on Spaza shops. There have also been a few other studies done on the effect of supermarkets on informal retailing in townships, for example Ligthelm (2008), Charman, et al. (2012) and Piper and Yu (2016). Another report done by Charman et al. (2019) also focused on the impact that the presence of formal retailers had on traditional, informal retailers in a township in Cape Town. These studies, however, have a common limitation in that they did not consider consumer preferences and possible benefits related to food and grocery purchases of township dwellers, and therefore failed to form a holistic picture.

This study aimed to provide a balanced view of Spaza shops and supermarkets operating in the same geographical area by specifically analysing consumer perspectives and price differences related to the two different retail formats.

Data gathered during three surveys performed in parallel was analysed to provide a holistic picture on the presence of supermarkets in peri-urban areas in South Africa. The study aimed to analyse the data and achieve the following objectives:

• Determine if there was a significant difference between the prices of supermarkets and Spaza shops.

• Determine if there was a significant difference in consumer preferences for supermarkets as a retail outlet for selected food products.

• Determine which key demographic factors affected consumer choices between supermarkets and Spaza shops as a retail outlet of choice.

• Determine if competition from major retailers was the only significant business challenge faced by Spaza shop owners.

This was ultimately done against a backdrop of a rhetoric that portray supermarkets as a disruptive force to the livelihoods of Spaza shop owners. The consideration of the benefits of the existence of supermarkets in peri-urban areas for consumers, however, have been limited.

The data used in this study was collected in October 2017 by the Bureau for Food and Agricultural Policy. The surveys were conducted in townships of Johannesburg, Ethekwini, and Cape Town. Within each of these areas, maximum variation purposive sampling was undertaken, and the screening requirement was that the respondent had to do grocery/food shopping at Spaza and/or retail outlets. The first survey was a supermarket price, product range and unit sizes survey. The second survey was a consumer survey, and the third survey was a Spaza shop owner survey.

Prices of products were aggregated and converted into a standard unit size in order to compare price levels in the two retail formats. A t-test was subsequently used to establish whether there was a significant price difference between the large grocery retailers and informal Spaza shops. In order to analyse consumer preferences, a Probit model was used to analyse the key demographic determinants associated with the purchasing preferences of low income consumers. The results from the Spaza shop owner survey were used to determine the major business challenges faced by Spaza shops.

The results showed that most of the basic food items analysed in this study were significantly cheaper at supermarkets than they were at Spaza shops and that income was the most significant demographic factor that influenced consumer shopping choices between the two retail formats. The cheaper price of most basic food items at supermarkets provided an advantage to low income consumers living in peri-urban areas, since it gave them the option of spending less of their disposable income on food. Contrary to this advantage, however, the establishment of supermarkets in peri-urban areas posed a disadvantage to Spaza shop owners. Results of the Spaza shop owner survey showed that Spaza shop owners saw supermarkets as one of their major business challenges. Spaza shop owners found the pricing of supermarkets difficult to compete with.

It can be concluded that the absence of supermarkets in peri-urban areas would potentially make the survival of Spaza shops somewhat more feasible, but this would ultimately deprive township consumers of access to the benefits associated with large-scale formal retailing.

Future research that includes a food security aspect could provide more insight into the benefit of having both retail formats in the same geography, in terms of food access and affordability. Also, future studies that cover a wider geographical area could provide more information on whether supermarkets across the country are cheaper than Spaza shops and if the establishment of supermarkets in all peri-urban areas in South Africa can ultimately benefit low income consumers.