The Effects of Informal Competition on the Financial Performance of Formal Clothing Retailers in Gweru


Author(s): Mutsa Madziwa, Wadesango Newman & Lovemore Sitsha

This study examined the effects of informal competition on the financial performance of formal clothing retailers in Gweru. Informal competition refers to the presence of unregulated, non-traditional sellers who offer similar products or alternatives to formal clothing through informal channels such as street markets, online platforms, and social media. The aim of this research was to understand how the presence of informal competition impacts the sales, profitability, and overall financial performance of formal clothing retailers. The study adopted a quantitative research approach. Questionnaires were used to collect data. The results of the study proved that there is a negative relationship between informal competition and the financial performance of formal clothing retailers in Gweru. The formal retailers are experiencing a decline in the volume of sales and profits, the market share is decreasing so as the customer base. However, the financial performance of formal retailers is solely not affected by informal competition. The research findings showed that there are other elements that affect the financial success of formal merchants even though informal competition has an impact on that performance. These factors include, financial leverage, size of firm, competition from other formal retailers and changing shopping habits of consumers due to economic factors including unemployment and inflation. Creativity and innovation in marketing strategies will help to catch up with the dynamic Zimbabwean environment. This also includes improving their online marketing strategies and try to learn from the informal retailers how they market their products.