Retailers feel informal sector pinch

The country’s formal retail sector is posting heavy losses due to the influx of smuggled cheap substitutes being openly sold in front of most shops in urban centres.

Confederation of Retailers Zimbabwe (CRZ) president Mr Denford Mutashu said the continuous sprouting of informal traders has impacted negatively on registered retail outlets’ sales and profitability.

“Formal traders are currently in a difficult situation as they have to contend with informal traders, who are selling commodities available in shops at very low prices and this practice has seen anyone wishing or thinking of being an informal trader just “waking up” to become one,” he said.

The number of vendors selling various goods ranging from clothes, electrical appliances and foodstuffs on pavements in the Central Business Districts (CBD) in major towns and cities has been on the rise over the past few years largely due to the economic challenges.

Mr Mutashu said most of the goods sold by the informal traders were smuggled into the country.

“Most whiskeys are being smuggled into the country from neighbouring countries and you find them being displayed on car roofs, on the streets with the person selling them without liquor licences and this, to a certain extent, is promoting high levels of lawlessness.

“The (profit) margins for the sector have dropped. We used to put a margin of 10-15 percent, but have reduced to five percent and sales per square footage have also dropped. The average basket per shop has also reduced as the commodities are being offered outside.

“Expenses remain constant as shops can’t lay off workers overnight with equipment having to be maintained despite sales being low. Salaries have to be paid despite prices going down,” he said.

A number of retail outlets have been forced to close some of their branches due to dwindling sales.

An informal economy is the part of any economy that is neither taxed nor monitored. The sector makes up a significant portion of many economies  — 70 percent in Zimbabwe.

Spar Zimbabwe managing director Mr Terence Yeatman, concurred with Mr Mutashu, arguing that most consumers now preferred to buy from the informal sector in cash.

“Activities by the informal vendors definitely have a negative effect on our sales because people that purchase using cash tend to get goods at discounted prices, which is attractive for them,” he said.

Retailers are anticipating a dampened festive season due to flourishing informal sector coupled with the Government’s decision to remove import duty on maize and wheat, among other basic commodities.

A number of households are also relying on the Diaspora community especially from South Africa and Botswana to send them foodstuffs and other essential commodities.

“Customer turnout, this year, is a bit quieter than the previous years, but we are trying hard to keep up the Christmas spirit in our stores and within the community,” Mr Yeatman said.

Clothing retailer Edgars Stores has over the past years bemoaned the advent of unregulated commerce in the country which it said was hurting its operations.

Bulawayo Vendors and Traders Association executive director Mr Michael Mdladla Ndiweni said there was nothing sinister about the informal traders’ activities as they were only correcting an economic ill being perpetrated by the formal sector.

“There is nothing new about vendors selling on the streets. They are just bringing commodities from outside the country and selling them at prices that people can afford.

“Up until retailers reduce their prices, they will not see customers coming to their shops. Retailers must charge prices that are affordable to the general public,” he said.