Want to launch a spaza shop? This is one of the most popular township business ideas and a great way to make money. You just need to make sure you understand the opportunities and risks involved and set up your shop the right way.
Follow this guide for what you need to know about planning, funding, and launching a spaza shop.
Spaza Shop Industry Overview
A spaza shop is one of the biggest township business trends. They’re a major part of any township economy, providing essential goods to township residents. These township shops also form significant employment and income opportunities within townships.
The informal economy contributes about 5.2% to South Africa’s GDP, and spaza shops and informal grocers make up one of the largest sectors in this.
Why Spaza Shops Are So Important
Even with large-scale retailers becoming more prominent in townships, tuck shop sales aren’t slowing down.
In a busy area, the shop can make a great turnover, as long as they sell the right items with high enough demand. This usually includes food essentials, snacks and drinks, airtime and data, as well as household necessities.
There are many spaza shop success stories out there. Examples of small tuck shops receiving business assistance and development are not uncommon, which can help these businesses grow far beyond small tuck shops.
Tuck shops form the cornerstone of many township communities. They have helped all kinds of people build lives for themselves and develop successful businesses.
Challenges Of Running a Tuck Shop
Spaza shops may present lucrative township business opportunities, but they also come with plenty of challenges.
Running an informal shop can make it difficult for business owners to access seed capital or offer collateral for business funding. Finding the right location for a small tuck shop is also challenging, as retail infrastructure in townships is lacking. Tuck shop owners also can’t always access bulk orders and take advantage of economies of scale, which results in a smaller profit margin.
Of course, these shops are also in competition with the many larger retailers out there, who are able to offer a wider selection of products at lower prices.
Spaza Shop Opportunities
Wherever there’s a busy township, there are plenty of opportunities for spaza shops. This includes classic convenience store shops, as well as a township shop business like a food truck or cellphone shop.
These days, there are unique funding opportunities available for spaza shop owners, such as the Township and Rural Entrepreneurship Programme (TREP). Some areas also offer tuck shop franchise opportunities.
The Spaza Shop Support Scheme also makes it possible for spaza shop owners to access an extra R7000 to help them get their business off the ground.
Spaza Shop Laws and Regulations
Starting a tuck shop requires the right licenses and permits. You will need a business license and a valid trading permit. If selling prepared food, you will need a certificate of acceptability.
By definition, spaza shops must not be larger than 30㎡, and they must exist in residential areas. These shops are not permitted to sell alcohol or any other restricted items.
You will need to contact your local municipality to find out more about the specific laws and regulations of opening a tuck shop.
Getting Started With a Spaza Shop
Besides finding the right location and getting all of your licenses and permits in place, there are a few things to consider when starting a spaza shop.
Setup Costs
The startup cost of your tuck shop depends on your location, the size of your business, and what products you will stock. Starting a new shop will require shelving, fridges, a cash register, and of course the stock you will sell. You may also require a vehicle.
Spaza Shop Tech Tools
Running a shop these days also requires certain technology. You should have a machine to accept credit card payments, which will require a smartphone at the minimum, or a computer or tablet. You should also have a point of sale (POS) system, which can run on a dedicated POS device or on a mobile app. Accounting software and inventory management software will make running your business a lot easier.
With a good location and a strong management system in place, you could turn a simple tuck shop into a lucrative business. Just make sure you are set up with the right tools and licenses, and that you know the ins and outs of running your business. Spaza shops are a great way to start a business and enter the world of entrepreneurship.
