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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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3 Impact of the supermarket revolution

3.1 Impact on traditional retailers

As the market share of supermarkets grows, the market share of traditional retailers declines. This decline happens fastest in large cities and among small general stores selling processed foods and dairy products. They have trouble competing with the supermarket chains, which buy their products in bulk and have economies of scale. Fresh produce shops and wetmarkets hold out longer, because they are able to adapt and to modernise (Reardon and Gulati, 2008). Traditional retailers typically are small, are family operated and employ marginal labour. They make use of simple methods and technologies. They also don't have enough financial, marketing and management skills (Weatherspoon and Reardon, 2003).

3.2 Impact on smallholders

Supermarkets increasingly dominate food retail. As a result, they will determine the conditions and potential for small farms to sell agri-food products to the urban market. Farmers are faced with some challenges. Supermarkets are diffusing and then rapidly consolidating their procurement systems to gain economies of scales. This means that farmers need to supply larger transaction volumes than was common in traditional markets. This implies that farmers either need to have large producer scale or that tight co-ordination is needed among small farmers, in which small farmers can aggregate their supply to meet high-volume demand over a full year. A second challenge that small farmers face is that retailers have an advantage in buying from farms that are exporting as well. There are signs of a convergence between export standards and domestic retail product standards. If retailers buy from exporting farms, they meet the commercial and product requirements of the export markets, which means that they also easily meet the standards of the domestic procurement systems of supermarkets. These changes imply hefty entry requirements and even barriers to many farmers. Entry requires investment in organisation, farming practises, packing shed configuration, post-harvest practises and capital, such as buying a truck (Weatherspoon and Reardon, 2003).

If supermarkets buy from small farmers, they tend to buy from farmers who have the most non-land assets (like equipment and irrigation) and the greatest access to infrastructure (like roads and cold chain facilities). If farmers lack the needed assets, supermarkets chains sometimes help them training, credit, equipment and other needs (Reardon and Gulati, 2008).  

3.3 Impact on consumers

Consumers benefit from the supermarket revolution. Supermarkets charge consumers lower prices and offer them more divers and higher quality products than traditional retailers. These are competitive advantages for supermarkets, which allow them to spread quickly and win consumer share (Reardon and Gulati, 2008).

The rapid expansion of supermarkets leads to a change of the food system in developing countries. The supermarket revolution may affect dietary patterns and nutrition in those countries. People who get their groceries from supermarkets consume higher amounts of calories and they change their dietary composition towards more processed foods. These consumption changes can lead to positive or negative nutrition and health outcomes, depending on the initial nutrition status of individuals (Qaim et.al., 2014). There is a study for Guatemala that concludes that supermarkets contribute to unhealthy diets and rising waistlines (Asfaw, 2008). Popkins (2004) concluded in his study that problems of overweight and obesity are growing in many developing countries, often coexisting with undernutrition in the same locations. On the other hand, a study for Tunisia states that supermarkets may contribute to improved dietary quality (Tessier et al. 2008).

4 Conclusion

The supermarket revolution has already progressed far and will continue progressing, especially in developing countries. There are several factors that led to this supermarket revolution. Urbanisation, increasing income and the increase in ownership of a refrigerator are a few examples, but the most determining factor is the continued liberalisation of retail foreign direct investment.

The supermarket revolution creates opportunities for smallholders who have access to infrastructure and own some needed nonland assets. On the other hand, it will present challenges for smallholders who do not possess the needed nonland assets. It will also form challenges for traditional retailers, who are competition with these supermarkets.

The rise of supermarkets also has an influence on consumer behaviour. Supermarkets charge consumers lower prices and offer them more divers and higher quality products than traditional retailers. Therefore, the rise of supermarkets will affect the dietary patterns of households. It can have a positive or a negative impact, depending on the initial nutritious status of the household. It can for example lead to less undernourishment, but it can also lead to obesity

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