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Introduction the Food Retailing in the Philippines Has Experienced Rapid Modernization Due to the Influence of Supermarkets

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Introduction the Food Retailing in the Philippines Has Experienced Rapid Modernization Due to the Influence of Supermarkets Journal of Economics, Management & Agricultural Development Vol. 2, No. 2 39 Determinants of Retail Outlet Choice for Fresh Fruits and Vegetables in Tagum City, Philippines Russell Mae P. Lastimado1, Glory Dee A. Romo2, Jon Marx P. Sarmiento3, and Vlademir A. Shuck4 Abstract A continued dominance of traditional retail outlets is observed despite rapid modern retail expansion. To examine this trend in a predominantly agricultural area, a case study of Tagum City is conducted where developments in the retail food industry are presented and the determinants of retail outlet choice for fresh fruits and vegetables are identified. Multinomial and binary logit models were estimated to analyze the responses of 200 con- sumer-respondents among urban villages in Tagum City from 2011 to 2012. These were supplemented by key informant interviews. The results suggest that there is a potential for further expansion of the modern retail chain in Tagum City despite consumers’ preference for traditional retail outlets. The top retail outlet attributes for fruit and vegetable buyers are convenience of location, price, product quality, and speed of service. These findings have implications on consumer welfare, retail competition, and smallholder farmers. Keywords: retail outlet choice; fresh fruits and vegetables; binary logit; multinomial logit Introduction The food retailing in the Philippines has experienced rapid modernization due to the influence of supermarkets. A supermarket revolution has been observed in developing countries in Asia (Reardon and Gulati 2006; Reardon and Timmer 2007; Reardon, Timmer and Minten 2012). Modern retail sales in the Philippines increased three times faster than the growth in GDP from 1999 to 2008 (Romo et al. 2009). The food retail sales comprised almost 50% of the total modern retail sales in 2008 amounting to US$ 13 billion. The share of fresh produce in the food retail is about 10% which is within the range of the international trend (10 to 15%). Its estimated value increased from US$ 70 million in 1999 to US$ 418 million in 2010. The westernization of Asian diets has further contributed to the supermarket revolution in the country (Pingali 2007). While the enactment of RA 8762 (Retail Trade Liberalization Act of 2000) is intended to attract foreign investment in the country, the retail industry is still dominated by local entities. Romo and Digal (2009) enumerate the factors that explain this situation, namely, restriction on foreign land ownership, high capital requirement, local content requirement in retailer inventory for some categories on capital investments, lack of enforcement of laws that would regulate unfair competition, corruption, lack of anti-shoplifting law, and protective stance of the large local retailers. Romo et al. (2009), however, emphasize the following reasons: 1) partial retail trade liberalization, 2) perceived disadvantageous position in joint ventures, and 3) difficulty of foreign retailers to access real estate. 1 School of Management, University of the Philippines Mindanao, russel@filipinowebmasters.com 2 Assistant Professor, School of Management, University of the Philippines Mindanao, garomo@up.edu.ph (Author to whom all correspondence is to be addressed) 3 Assistant Professor, School of Management, University of the Philippines Mindanao, jpsarmiento2@up.edu.ph 4 Assistant Professor, School of Management, University of the Philippines Mindanao, vashuck@up.edu.ph 40 Lastimado, Romo, Sarmiento and Shuck While the Joint Foreign Chambers of the Philippines (JFC 2011) also cites the same factors, it adds documentary requirements and required public ownership after a specified period of operation. Modern retail formats in the country have high market shares and are continuously expanding all over the National Capital Region (NCR) and other areas in Luzon, Visayas, and Mindanao (Table 1). The top three supermarkets capture 38.9% of the market shares, namely, SM Retail (22.2%), Robinsons Retail (9.2%), and Rustan’s Group (7.50%) (Robinsons Retail Holdings Inc. 2015). According to the SM Investments Corporation (2014), SM Retail has opened a total of 276 retail outlets since 1971 all over the Philippines in various formats including department stores, hypermarkets, Savemore, and supermarkets. Expansion in Mindanao lags behind. The number of SM retail formats (140) in the Philippines opened in the years 2011 to 2014 is almost double the number of the retail formats (74) opened in 2000 to 2010. Mindanao has the lowest number of opened SM retail outlets (10) from 2011 to 2014. On the other hand, 69 new Robinsons malls were opened nationwide from 2011 to 2015, only six of which are located in Mindanao (RRHI 2015). Lastly, Rustan’s caters to high-end market as reflected in its strong presence in Makati area where 8 of its 24 branches are located while only one outlet is located in Mindanao (Rustan's Supermarket 2016). While the retail landscape is expected to be more concentrated in favor of modern retail formats, there is evidence of consumers’ continuous support for the traditional market like wet market and mom and pop stores in the country. This is also evident globally as observed in the vitality of the traditional retail stores and some resistance of consumers to purchase fresh produce in modern retail formats (Humphrey 2007). Wet markets still play a major role in the Philippines as the primary retailer of the consumers (Digal and Concepcion 2004). This is expected to continue if the players are able to access government fund for technology upgrade. One successful case is reported by Asma (2015) where micro, small and medium enterprises in CALABARZON region were assisted by the Department of Science and Technology (DOST) through its Small Enterprise Technology Upgrading Program (SETUP). Although some consumers have shifted to shop in supermarkets because of comfort, convenience, cleanliness, and well-maintained structure, many Filipinos still purchase fresh produce in wet markets (Digal 2001). Mom and pop stores locally known as sari-sari stores offer limited items that are usually dry goods. These retail outlets are patronized by the Filipino consumers because they offer repackaged items in cheaper prices and allow credit terms (Romo and Digal 2009). The traditional retail accounts for 65% of all the retail outlets located in the Philippines (Department of Foreign Affairs and Trade 2002). Although modern retail format dominance could result in the displacement of a few small traditional retailers in the country, some retailers such as Savemore report 250 local employment opportunities for every new modern retail format (Digal 2015). One interesting case of retail format modernization in the context of the urban- rural city is that of Tagum City. It is a first class city of the province of Davao del Norte in Mindanao. It has a total land area of 19,580 hectares which is predominantly occupied by agricultural lands and a population of 215,967 and 43,193 households as of 2007 (Official Website of Tagum City 2016). Journal of Economics, Management & Agricultural Development Vol. 2, No. 2 41 There are a few supermarkets in Tagum City, namely, New City Commercial Center (NCCC), JS Gaisano, Gaisano Grand Mall, Puregold, and Robinsons supermarket. The main wet market is Tagum Public Market in Barangay Magugpo West and operated and managed by the City Government (Official Website of Tagum City 2016). As the city is composed of urban and rural villages, it is interesting to analyze the pattern of consumer pattern with respect to the increasing number of supermarkets. Hence, this study discusses the trends and developments in the retail food industry and identifies the determinants of retail outlet choice of fresh fruits and vegetable consumers. Methodology Conceptual Framework The decision to choose a retail outlet format is conceptualized as being influenced by three main factors – trends and development in the food retail industry, socio-demographic profile, buying behavior, and retail outlet attributes (Figure 1). The first factor gives a background of the changing landscape of the retail industry in the context of Tagum City. The socio-demographic profile covers gender, age, marital status, education, occupation, income, family size, and distance to the retail outlet (Cherukuri and Aryasri 2011, Carpenter and Moore 2006). In this research, the socio-demographic profile includes 1) location, 2) gender, 3) age, 4) household size, 5) education, and 6) income. Figure 1. Conceptual framework showing the factors affecting consumer retail choice The buying behavior of the household includes the expenditure level and frequency of visit. The purchase volume is a critical determinant for food shopping choice in India (Cherukuri and Aryasri 2011). The frequency of food shopping whether three times a week or more, twice a week, once a week, once a fortnight, every month, less than once per month, and first time at store is a crucial determinant for food purchasing decisions (Clarke et al. 2006). 42 Lastimado, Romo, Sarmiento and Shuck In this research, the expenditure level is the estimated monthly spending of the household allocated for fruits and vegetable consumption. The frequency of visits is categorized as 1) once a month, 2) 2-3 times a month, 3) once a week, 4) 2-3 times a week, 5) 4-6 times a week, and 6) every day. Various retail outlet attributes are explored in the literature. Severin et al. (2001) identify good quality, wide selection, good service, prices, latest fashion, convenient location, nice atmosphere, good sales/bargain, easy parking, and easy to get around. Clarke et al. (2006) also recognize the retail attributes such as location/convenience, choice/range, price, size, staff, clean, quality, layout, parking, offers, under one roof, open 24 hours, ambience, restaurant/café, and nonfood as important retail outlet attributes to consumers. Carpenter and Moore (2006) focus on price, competitiveness, courtesy of personnel, cleanliness, product selection, hours of operation, atmosphere, ease of access, security, parking facilities, crowding, presence of eating places, special events, seats/rest area, and ease of children as important retail outlet attributes.
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