South Africa is characterised by high unemployment and a relatively small informal sector.
This paper generates better insight into the economic relationship between formal and informal
sectors of the South African economy. It investigates whether or not the development of large
retailers displaces small informal retailers. The study focuses on current and former owners
of informal grocery shops “spaza shops” in a township of KwaMashu, Durban. The analysis
revealed that the impact of a large retailer is highly localised, with the greatest impact being
on shops adjacent to the mall. Within this radius, most informal shops experience lower
consumer volumes and are forced to adjust marketing strategies. These shops typically respond
to supermarket entry by diversifying commodities