Small, home-based grocery stores, known as spaza shops, are ubiquitous throughout the township areas of urban South Africa, constituting an important business in the informal economy. In recent years, this retail market has become a site of fierce competition between South African shopkeepers and foreign entrepreneurs, especially Somalis, and is often cited in the media as one reason behind the xenophobic attacks on foreigners. Drawing on original data collected in the Delft township in the city of Cape Town, this paper demonstrates that foreign entrepreneurs, overwhelmingly Somalis, have come to own around half of the sizeable spaza market in Delft in the last five years. This increase is attributable to larger scale and price competitive behaviour as these entrepreneurs operate collectively in terms of buying shops, and stock, as well as in stock distribution. Also important are some more customer friendly services too. Compared to the more 'survivalist' local business model where individual owners look to supplement existing household income rather than generate an entire livelihood, the Somali business model has rapidly outcompeted local owners, bringing spaza prices down and forcing many locals to rent out their shop space to foreign shopkeepers. Consequently, while South African shopkeepers resent the Somali influx, most consumers appreciate the better prices and improved service. The rise of Somali shopkeepers thus represents a transformation of business practice in the spaza sector from survivalist to entrepreneurial modes.