Original Research

High inventory levels: The raison d’être of township retailers

J. Orpha Cilliers
South African Journal of Economic and Management Sciences | Vol 21, No 1 | a1962 | DOI: https://doi.org/10.4102/sajems.v21i1.1962 | © 2018 Orpha Cilliers | This work is licensed under CC Attribution 4.0
Submitted: 01 June 2017 | Published: 23 May 2018


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Abstract

Background: This study investigates the cardinal role of optimal inventory decision-making in the performance of small formal retailers in Soweto, constituting a projected, lucrative retail environment.

 

Aim: The research question was how Soweto small retailers make inventory decisions to promote their income growth and age of the business. For this study, a descriptive research design was followed.

 

Setting: The universe of the study comprised all the formal small, medium and microenterprises located in Soweto township.

 

Methods: Using probability sampling, the sample size was set at 650 businesses. Of the 650 completed questionnaires, the responses of 297 respondents operating in the retail grocery and retail general stores sectors were analysed quantitatively using exploratory factor analyses, cluster analysis and cross-tabulation.

 

Results: This study showed that being more inclined to proactively maintain a high level of inventory could result in positive business performance in terms of both growth in income and age. Younger businesses (less than 5 years) could grow if they decide to stock up on sale items, purchase more items for sale, provide for customers’ fluctuating demands and buy more stock to save on transport costs. Purchasing less or the exact amount of stock as what can be sold within a month could be detrimental to the performance of general and grocery retailers in Soweto.

 

Conclusions: The results also show that if retailers want to grow and exist for 5 years and more, they should consider both proactively maintaining a high level of inventory and doing so with ease. In this study, the older (5 years and older) business groups were mostly owned by older people, who showed a tendency to establish themselves in stand-alone shops or smaller shopping centres. Older businesses also tend to buy stock daily or weekly, or when stock is low. These older businesses without income growth were mostly family businesses who displayed contentment with the status quo of business performance and seemed to lack entrepreneurial skills.


Keywords

Soweto Township; retailers; SMMEs; inventory; stock; income growth; business age; competitive

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