In South Africa, where public transport can cost up to 10 percent of monthly income, informal spaza shops located conveniently in townships pose serious competition to formal supermarkets and other retail stores that are harder to reach.

Spaza shops are “a multitude of small informal shops who form an invisible matrix in the informal economy,” said GG Alcock, CEO of Minanawe Marketing, in a BizNews report. Minanawe is a specialty informal sector activations business. Alcock is author of “Third World Child” and “Kasinomics.”

About 20 percent of all money spent in South Africa is spent in informal stores, to the tune of $2.94 billion US per year, according to to Nielsen, a New York City-based global information and measurement company.

Spaza shops offer goods in small quantities at cheap prices, and they’re evolving to be more organized and increasing the range and variety of brands and categories they offer. They’re conveniently located on commuter routes or close to shoppers’ homes or workplaces.

While modern trade stores have seen a 9 percent annual increase in spending, traditional trade stores have seen 10 percent increase, Nielsen reported. They’ve also seen a 7 percent increase in the number of goods sold compared with the modern trade sector’s 4 percent.

Improving business opportunities in townships is key to improving South Africa’s economic woes, said economist Moipone Molotsi, director for small business development at University of Johannesburg, ENCA reported.

Social grants have grown dramatically in South Africa, with large amounts of money suddenly entering the lowest income groups — $8 billion US was paid in grants in 2015 alone, according to Alcock.

Spazas are “an invisible giant … awakening in the informal sector which is winning the purse and growing faster than the formal sector,” Alcock said.

They also made headlines around the world when foreign-owned shops were vandalized during xenophobic attacks in South Africa.

In 2010, the vast majority of spazas were run by immigrant traders, according to DailyMaverick.

There are now about 100,000 outlets split 70/30 between spazas and spazarette outlets. What’s the difference between them? Spazas are a hole in the wall offering small quantities, “very much the forecourt of the township,” Alcock said. Spazarette are larger — more like small, informal shops.

Of the total, about 70 percent are foreign run, mainly by Somalis, Ethiopians, Bangladeshis and Pakistanis. Research shows that the average spazarette turns over between 85,000 rand ($5440 US) and 200,000 rand ($12,807) a month.

On average, informal retailers are 7 percent cheaper than formal retailers on a basket of branded groceries, according to an informal retailer grocery price survey, Alcock said.

By shopping at an informal retailer, consumers avoid transport costs (20 rand or $1.28 for a return trip) to a formal retailer.

Spazas are getting more popular among modern trade shoppers, according to Nielsen. In 2012, 38 percent of people surveyed said they’d visited a spaza in the last seven days compared to 48 percent of shoppers today —  a 10 percent increase.

Shoppers visit spazas more than four times a week on average (18 times per month) compared to supermarkets which they visit once a week. That means four times as many opportunities for brands to connect with consumers and increased opportunities to expose them to new products, Nielsen reported.

So why is the informal sector growing? The main reason is the cost of transport to the formal stores. Public transport can cost up to 10 percent of consumers monthly income and shoppers must also pay for a second seat for groceries. Recent research showed shoppers included the cost of transport in their grocery budget. Transport costs often negated the savings. Although a formal retailer may only be 3 to 5 kilometers away, a taxi will cost a minimum of 20 rand return, and no one is going to walk that distance when the informal shop is just around the corner, Alcock said.

“The informal economy … could be a large part of what is keeping our economy afloat,” according to Alcock.” Open your eyes to the invisible matrix of the informal economy, it is here to stay and may be taking over a shop near you.”