Influence of second-tier retail expansion on micro-enterprise sustainability in Soweto

Abstract

Background: This article explores the experiences of micro-enterprise owners in Soweto, focussing on the impact of formal retailers penetrating the informal market. The expansion of formal retailers into townships like Soweto raises concerns for local micro-enterprises.

Aim: The study examines how micro-enterprise owners experience and respond to the challenges posed by formal retailers operating nearby in Soweto.

Setting: The research was conducted in Soweto, South Africa, where the informal market plays a crucial economic role, and formal retail growth influences local businesses.

Methods: A qualitative phenomenological approach was used to explore the lived experiences of micro-enterprise owners. In-depth interviews were conducted with three participants during the pilot study and 25 during the main study. The data were analysed thematically.

Results: Findings showed that micro-enterprises located more than 5 km from formal retailers experienced no negative impact and reported positive interactions. In contrast, those within a 5 km radius reported negative effects, with formal retailers harming their businesses. Other challenges included competition from foreign-owned shops and insufficient government support.

Conclusion: Stronger regulatory frameworks are needed in townships, as current enforcement is inadequate. Micro-enterprise owners must adapt to competition by developing strategies to address these challenges. Collaboration between governments, micro- and macro-enterprise owners and managers is vital for fair competition.

Contribution: This study enhances understanding of the effects of formal retail penetration on informal micro-enterprises in townships and underscores the need for regulatory measures and stakeholder cooperation.