When was the last time you entered a corner shop that was locally owned and operated?

We often make light of the Indians, Somalians, Pakistanis and Bangladeshis who so successfully keep South Africa’s corner shop industry ticking over – but the truth is that locally owned shops are dwindling rapidly.

Accounting for 9.2% of home-based employment, informal corner shops are a significant contributor to township livelihoods.

Rory Liedeman led a research group to investigate the informal businesses in the area of Delft. Specifically, he wanted to investigate why spaza shops run by foreigners, in particular Somalis, were more successful than those operated by South Africans.

They key finding pointed to a fundamental difference in business practice – which resulted in a larger scale of operations by foreigners.

The researchers found that “foreign shops appeared to have positioned their business to compete directly with established South African businesses.”

Using a sample of six key commodities, the study revealed that foreigner-owned shops purposefully discounted their prices to steal market share from existing shops. The paper also revealed that:

The foreign-run shops were also better stocked and appeared to be generally favoured by local consumers.

But, more importantly, cultural and ethnographic differences between local shop owners and Somalian shop owners meant that local owners simply cannot adopt the same approach.

The relative strength of the social networks of the shopowners matter a great deal when it comes to the success of the store. Somalian owners group together to ensure cheap labour, group purchasing, strategic investment in certain areas and microfinance.

The social networks of local owners, conversely, are weak in comparison.  They are often limited to immediate family members providing menial labour – and not much else.

[Source : Business Day]