Is the informal market to blame for the retail sector woes?

The retail sector has been trending the past week, following OK Zimbabwe’s financial. OK Zimbabwe released its financial results and things are not looking good. It seems like the retail sector is under siege. The informal sector seems to be gaining an edge over the formal retail sector posing a significant viability threat to formal retail business.

Tuck shops that have mushroomed everywhere seem to be enjoying a competitive advantage; offering cheaper alternatives which has seen a mass consumer migration to the small retail shops.

OK Zimbabwe Chairperson Herbert Nkala said, revenue for the year grew by 33.3% to ZWL311.3 billion from ZWL233.6 billion in the comparative period. In historical cost terms, revenue grew by 327.6% to ZWL260.5 billion from ZWL60.9 billion. Volumes for the year declined by 7.7% over the comparative period owing to local currency liquidity shortages and depressed consumer spending power.

The informal sector continued to expand at the expense of the formal retail sector as a result of exchange rate distortions in the market. He said profit after tax decreased by 36.0% to ZWL5.2 billion (Last year: ZWL8.1 billion) whilst in historical cost terms, the profit after tax increased by 111.7% to ZWL5.1 billion (Last year: ZWL2.4 billion