Traditional trade outlets such as spaza shops, taverns and independent stores outperformed larger retail chains in the first quarter of the year, as consumers moved toward smaller, more frequent purchases to manage tight budgets.This is according to NielsenIQ’s (NIQ South Africa) state of the retail nation report, which shows that traditional trade generated R43.1bn in sales during the quarter, continuing a trend seen throughout last year. By contrast, modern trade channels, including large retail chains and online platforms, recorded slower growth, with unit volumes increasing by just 1.7%.Overall, consumers spent more than R173.6bn on fast-moving consumer goods (FMCG) in the quarter. The NIQ said sales value rose by 6.5% year on year, while unit sales increased by 9.1%, indicating that consumers are buying more items, often at lower prices.“Lower inflation provided a modest tailwind for traditional trade, particularly among highly price-sensitive consumers. However, demand remains constrained by weak income growth and elevated unemployment,” said NIQ South Africa managing director Zak Haeri.The report attributes the strong performance of traditional outlets to their proximity to consumers and flexible purchasing options. These stores allow shoppers to buy smaller quantities more frequently, helping them manage cash flow and reduce transport costs.“Traditional outlets retain a structural advantage through proximity and flexible purchasing, enabling smaller, more frequent transactions that help households manage cash flow and transport costs. While easing price pressure supports stabilisation, especially in food staples, growth remains uneven and highly contested,” he said.The report shows that affordability has become a key factor shaping consumer behaviour across the retail sector. In the technology and durables (T&D) market, unit sales grew faster than sales value as prices fell and consumers opted for cheaper products.Sales volumes increased in categories such as IT equipment and televisions, but overall value fell due to lower average selling prices. The telecoms segment, including smartphones, recorded a 7.5% drop in unit sales and a 3.1% drop in value, as consumers delayed upgrading devices.The move towards affordability is also visible in FMCG categories.Fastest-growing segmentsNIQ said while food sales reached R28.1bn, with volumes up 4.5% and value up 7.2%, growth was uneven. Snacking was listed with the fastest-growing segments, while baby food and care was the only category to decline, with sales value falling by 2.1%.Private label products also lost market share during the quarter, declining by 1.1% compared with the same period last year. It was driven by stronger performance in traditional trade and increased promotional activity from branded products, NIQ said.After a strong start to the year, the outlook for the retail sector is becoming uncertain. Inflation, which eased in early 2026 due to stable food prices and lower fuel costs, is expected to rise in the coming months.“Softer inflation, reflecting a combination of more stable food prices and lower fuel costs, gave consumers and retailers some breathing room in the early months of 2026,” Haeri said.However, fuel price increases have already pushed inflation higher, with consumer inflation reaching 4% in April. Rising input costs and global factors are expected to add further pressure.These conditions are likely to affect consumers and retailers. Shoppers are expected to cut back on spending, delay nonessential purchases and continue seeking lower-priced options, while retailers may face increasing pressure to balance pricing with maintaining sales volumes.“Inflation is expected to accelerate through the second half of 2026, driven by increasing input costs and spillovers from the conflict in the Middle East. Brands and retailers must make well-considered price increases in response,” said Haeri.“Retailers and brands will need to balance protecting their margins with targeted value offerings to sustain volumes in this constrained environment. Those that fail to adapt their value proposition risk losing share as consumers become increasingly selective in their spending priorities.”