How small traders have transformed Joburg's CBD

Johannesburg's CBD was once the sole preserve of fashion giants such as Foschini and Truworths. Now informal stall owners are giving patrons such bang for their buck they may even be usurping the retail juggernauts

Sitting on a yellow bucket on the pavement in Eloff Street, Siphiwe Sibindi is making a R20 sale at her clothing stall. Within metreslie her biggest competitors - Foschini and Truworths stores.

"I can make R200 in a day, but it may also be less. The most I have made is R800 to R1,000, which is usually at the end of every month," said Sibindi.

In the early 1900s, retailers converged on Eloff Street to capture the market share of consumers looking for high-end and reputable brands.

Fast-forward to today, and consumers with a growing appetite for fast fashion and cheap Chinese imports are driving informal trade to diversify the retail offering.

Glenn Wood, operations director at Truworths, said: "The influx of informal traders means an influx of more customers, so retailers have benefited from this scenario."

He added that informal traders had not had any significant impact on the "small but consistent growth" of their stores in the CBD, adding that "from time to time we need to take legal action against informal traders and some Chinese shop owners for selling counterfeit and genuine Truworths-branded clothing".

But for Kim Kantunda, who works at Flower Vesa Fashions, formal retailers in Eloff Street have only survived because they have adopted the business styles of informal retailing.

"When we opened these shops, big retail shops were not as fast as us when it came to bringing in stock ... but now these big retail shops can bring stock once or twice a month. We are more than them; even the customers we have are more than theirs."

Kantunda said that although they imported their clothing from Thailand, China and Dubai, they also had their own designers who created on-trend clothes.

"We are also cheaper than they are. They can sell a top for R400 and we sell a top for R60 to R90; for R400 you can buy three, four tops."

According to the Nielsen Traditional Trade Report for 2015, sales through traditional trade outlets accounted for R46-billion. Gauteng had the highest number of these outlets (28,674), followed by the Eastern Cape at 21,504.

You have these informal guys who are very competitive... who will buy on cash because if the price point is right

Craig Henry, MD for Nielsen South Africa, said: "As informal retail becomes more organised and competitive, greater opportunities for entrepreneurship and employment exist - the traditional trade sector is a large contributor to this development potential."

South Africa's 25.5% unemployment rate and an estimated 0.8% growth forecast by the World Bank foster the perfect environment for a thriving informal retail sector.

Johan Enslin, CEO of Lewis Group, said that one of the challenges of operating in the city was the lower foot traffic and slowdown in trading due to the value shopping centres that had been built across the country.

But he added that "trading in the CBD remains viable as long as retailers are able to contain costs".

The retailer - which has three stores in the CBD but has not traded on Eloff Street since 1974 - said its competitive advantage had been its credit sales offering, despite the increase of informal traders.

"Lewis continues to attract customers owing to the quality of its merchandise and its credit offering.

"Informal traders generally deal with cash customers."

Lewis's credit sales as a percentage of total sales were 65.9% in the six months to September, compared with the 69.7% in the first half of 2015. Truworths's credit sales growth in the first seven weeks of 2016 increased by 17%, and cash sales by 11%.

But Kyle Rollinson, an analyst at Avior Capital Markets, said: " Customers at that [lower] end of the market are already so heavily indebted that it's very difficult to extend any more credit from those trading retailers."

During the past year, Lewis's lending practices have been placed under much pressure by regulatory authorities that have targeted reckless lending.

Rollinson added that because Truworths traded at a higher price point, people would only be able to buy on credit.

"You have these informal guys who are very competitive on price ... who will buy on cash because if the price point is right, that eliminates the credit sales aspect.

"It's going to be a challenging time for the listed guys in the next 12 months, but I don't think informal retail has the infrastructure or the capabilities to eliminate formal retail."

But for Sibindi, informal retailing is about survival.

"Foschini has money; we are just people who are poor ... we are not like them."

tshandup@sundaytimes.co.za