An Economic Model of the Evolution of Food Retail and Supply Chains from Traditional Shops to Supermarkets to E‐Commerce

Abstract

Food retail has been in continuous evolution for the past century, both in developing and developed countries: from local traditional stores to supermarkets to e-commerce. In this paper we analyze the evolution of food retail by building a store choice equilibrium model and provide an illustrated discussion. The patterns in retail in any given time and place of different types of stores (such as traditional shops, supermarkets, and online e-commerce) depend on two main factors. The first are consumers' characteristics such as income, tastes, and travel costs of going to different stores and/or shipping costs if purchasing online. The second are the stores' cost structures, which include item costs from upstream producers, the costs of procurement supply chains (beyond the cost of the item) for perishable items, and the costs of in-store storage. We show under what conditions in equilibrium the different retail types exist and which can become dominant, and what types of goods (dry packaged foods versus perishables) are distributed by what type of retailers.

Co-creation Benefits by Re-configuring the Value Network in Creative Agri-food Transformation through the SMEs e-commerce channel: A Business Market Perspective

“…The government of Indonesia also officially designated food industry as one of the prioritized sectors as a major contribution to the Gross Domestic Product (GDP). The situation aligned with the evidence regarding urban food retail continuous evolution in the globe, which initiated by developed countries such as the United States and Western Europe, and followed recently by countries in Asia, Latin America and Africa (Lu & Reardon, 2018). Although, the adoption of e-commerce for agri-food market in developing countries has different characteristics with small-scale firm domination (Zhang, 2017) compared to developed countries with larger firms for a global scope (Henderson, Dooley, Akridge, & Carerre, 2005;Lu & Reardon, 2018).…”

“…The situation aligned with the evidence regarding urban food retail continuous evolution in the globe, which initiated by developed countries such as the United States and Western Europe, and followed recently by countries in Asia, Latin America and Africa (Lu & Reardon, 2018). Although, the adoption of e-commerce for agri-food market in developing countries has different characteristics with small-scale firm domination (Zhang, 2017) compared to developed countries with larger firms for a global scope (Henderson, Dooley, Akridge, & Carerre, 2005;Lu & Reardon, 2018). As a response to the agri-food sector development, the growing agri-food e-commerce potential in Indonesia offers a tremendous opportunity as well as challenges.…”

“…The situation of e-commerce development in the agri-food industry has applied not only for processed food but also for fresh agricultural products that have perishable nature, high moisture content and short shelf-life characteristics. A study by Lu and Reardon (2018) shows a piece of empirical evidence that new technologies offer lower costs (i.e. procurement costs, shipping costs) for perishable products such as fresh produce would result in the modern retails (e.g.…”

Modernization of African Food Retailing and (Un)healthy Food Consumption

“…Food systems in developing countries have been evolving rapidly in the last few decades, with a growing role played by modern retailers such as supermarkets, hypermarkets, convenience stores, and fast-food restaurants [1][2][3][4]. The modernization of food systems is largely driven by consumer preference changes resulting from urbanization, income growth, and globalization [5][6][7][8][9]. However, at the same time consumer preferences and demand may also be shaped by changing food environments [10][11][12].…”

Mobile application supported urban-township e-grocery distribution

“…Yet, in order to successfully offer e-grocery operations, the infrastructure needs to be embedded within the geographical and economic structures (Murphy, 2007). In fact, the top ten global leading e-grocery retailers thrive due to their advanced telecommunication systems, high number of stores and DCs capabilities dispersed across different markets, and mature logistics systems which are considered to be some of the veins that sustains e-grocery operations (Polacco and Backes, 2018;Lu and Reardon, 2018;Walmart, 2018). Yet, small e-grocery retailers in the townships and rural areas of South Africa contend without the infrastructural and resource muscles observed in the practice of top grocery retailers.…”