Skip to content

Big brands blind to market changes

October 12, 2014

Spazas have been reshaping the national retail landscape away from the media glare and researchers, tapping into underserviced markets.

More and more South Africans are creating their own livelihoods rather than holding out for jobs, and this creates a larger mass market, according to research released this week by the UCT Unilever Institute.

The finding is backed up by government research that shows over the past decade informal-sector employment grew twice as fast as formal employment.

This sector now contributes more to the economy than mining.

And with slowing middle-class growth, business and marketers were ignoring the mass market at their peril, said UCT Unilever Institute director Professor John Simpson.

The researchers looked into how businesses and marketers could connect with the mass market, which is where about two-thirds of South Africans are living in more than 10million households that earn less than R6000 a month.

The researchers believe that under-reporting in the biggest consumer segment may result in drastically underestimating economic activity and consumer spending.

“In some cases we found as much as a 1000% difference between recorded and unrecorded figures. It means many companies are basing their sales and marketing strategies on commonly held myths and inaccurate figures,” said Simpson.

The middle-class “bubble” has masked the fact that most South Africans were still poorly marketed to and established brands were in a fragile state, he said.

“Local marketers have long underestimated the size and complexity of the market, and have focused on wealthier consumers. Some major brands have started to lose ground to lesser-known brands.”

While there are signs that the formal retail sector’s expansion into developing areas was beginning to meet with success, the study shows many poorer consumers still rely on informal traders – especially from the middle to the end of the month.

“To a large extent this is because fast-moving consumer goods and especially food supplies dwindle by mid-month. Both rural and urban consumers step up their visits to spazas to replenish their grocery cupboards as spazas have smaller pack sizes and other innovative sales methods.”

Simpson said it was time for local marketers to rethink their consumers. He said many companies did not know their customers as well as they thought they did.

UCT Unilever Institute is best known for its research on South Africa’s black middle-class market. With growth slowing in that segment, the institute embarked on a study of the mass market and discovered substantial change.

Its research associate, the Sustainable Livelihoods Foundation, found that one in 10 households operated a form of informal trade or service in the poor areas they surveyed. If this trend is extrapolated nationally it could represent more than a million small businesses.

“Some businesses are earning six- and seven-digit annual figures,” said Simpson.

“One street trader takes home R11000 a month from selling ‘walkie talkies’ – a township delicacy of chicken feet and beaks.”

Source: Sunday Times

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: