Journal of Economics, Management & Agricultural Development Vol. 2, No. 2 39

Determinants of Outlet Choice for Fresh Fruits and Vegetables in City,

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 . A 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 , [email protected] 2 Assistant Professor, School of Management, University of the Philippines Mindanao, [email protected] (Author to whom all correspondence is to be addressed) 3 Assistant Professor, School of Management, University of the Philippines Mindanao, [email protected] 4 Assistant Professor, School of Management, University of the Philippines Mindanao, [email protected] 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 shares and are continuously expanding all over the National Capital Region (NCR) and other areas in , , 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 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 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 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 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 (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. In this research, the retail outlet attributes considered are as follows: 1) assortment, 2) atmosphere, 3) cleanliness, 4) convenience of location, 5) food safety, 6) mode of payment, 7) price, 8) product quality, 9) quality of service, 10) special offers, 11) speed of service, and 12) variety. Three main statistical approaches were employed in analyzing the data. First, a set of descriptive statistics was generated using the SPSS Statistics 23 to explain the context in terms of the consumers’ socio-demographic profile and fruits and vegetables shopping behavior. A multinomial logistic regression was then used to model the retail outlet choice for fruits with more than two retail outlet choices (Severin et al. 2001). A binomial logistic regression was applied in the vegetable retail outlet choice since the choices were limited only to two primary options (Goldman, Ramaswami and Krider 2002). Stata 12.1 was used to estimate the multinomial and binomial logistic models. The empirical specification of the utility (U) model is as follows:

Ui = xβi + εi = βi0 + βi1Agei + βi2HSi + βi3Educi + βi4Inci + βi5Expi + βi6Freqi

+ βi7Attri1i + βi8Attri2i + βi9Attri3i + βi10Attri4i + βi11Attri5i + εi (1)

where x represents the explanatory variables, β refers to the parameters of the explanatory variables, and i corresponds to the retail outlet choice with a value of 1- neighborhood, 2-wet market, 3-supermarket, 4-trade center for fruit retail outlets; and 0-neighborhood and 1-wet market for vegetable retail outlets. Age refers to age, HS to household size, Educ to number of years of formal education, Inc to monthly income, Exp to monthly expenditure to fruits or vegetables, Freq to frequency of shopping to fruits or vegetables, Attri refers to retail outlet attributes (top 5) specific to fruits or vegetables retail outlet choice, and ε to the error term. The marginal effects of the variables were calculated using the delta method to warrant direct interpretation of the probability of choosing a particular retail outlet.

Journal of Economics, Management & Agricultural Development Vol. 2, No. 2 43

Data Collection Nine (9) villages in Tagum City are considered urban while the remaining 14 villages are rural. The sampling frame consists of households only in urban villages since those in the rural villages have limited exposure to modern retail formats. Cross- section data were collected from 2011 to 2012 using quota sampling procedure. Quota sampling is a standard approach in consumer studies (Verbeke 2006). The distribution of the sample size was proportional to the number of households as provided by the Philippine Statistics Authority Provincial Office. The distribution of the 200 respondents is as follows: Apokon (27), Magugpo East (21), Magugpo North (14), Magugpo Poblacion (7), Magugpo South (16), Magugpo West (18), Mankilam (42), San Miguel (18), and Visayan Village (37). Key informant interviews were also done in the different retail outlets in Tagum City in 2012 to supplement the analysis. Results and Discussion Trends and Development The large national retail chains have been conservative in penetrating the market in . SM Retail is the first large retail chain to expand to Davao region particularly in 2001 (SMIC 2005-2014). Its first Savemore store in Davao City was originally the Makro store, part of the retail chain whose foreign eq- uity was purchased by the SM group in 2007 (Romo and Digal 2009). On the other hand, Robinsons supermarket opened its first store in Davao in 2009 (SMIC 2005- 2014). It is the first large retail chain to open a supermarket in Tagum City in Davao region last May 2016. Among the top three retailers, only Rustan’s limited its aggres- sive expansion in the NCR region and opened only one Rustan’s supermarket and another one Shopwise supermarket in de Oro City (Table 1). Table 1. Number of outlets opened in the modern retail food industry, Philippines, 1971-2015

Year/ Period Total Format/ Area 1971- 1981- 1991- 2001- 2011- 1971- 1980 1990 2000 2010 2014/2015 2014/2015 A. SM SM department stores NCR 3 3 4 6 4 20 Other Luzon 3 16 3 22 Visayas 3 1 1 5 Mindanao 2 2 4 Sub-total 3 3 10 25 10 51 SM hypermarkets NCR 14 9 23 Other Luzon 8 8 16 Visayas 3 5 8 Mindanao - - Sub-total - - - 25 22 47 SM Savemore NCR 1 20 18 39 Other Luzon 11 41 52 Visayas 1 6 8 15 Mindanao 1 6 7 Sub-total - - 2 38 73 113

44 Lastimado, Romo, Sarmiento and Shuck

SM Supermarkets NCR 2 4 5 4 15 Other Luzon 3 12 4 19 Visayas 1 1 3 5 Mindanao 2 2 4 Sub-total - 5 17 8 13 43 Waltermart NCR 5 5 Other Luzon 17 17 Sub-total - - - - 22 22 A. TOTAL 3 8 29 96 140 276 B. Robinsons supermarket NCR 2 1 15 20 38 Other Luzon 2 19 34 55 Visayas 1 1 7 9 18 Mindanao 5 6 11 B. TOTAL 3 4 46 69 122 C. Rustan's Supermarket NCR 18 Other Luzon 2 Visayas 3 Mindanao 1 Sub-total 24 Shopwise NCR 6 Other Luzon 4 Visayas 1 Mindanao 1 Sub-total 12 C. TOTAL 36

Source of basic data: Robinsons Retail Holdings Inc., (2013-2016), Rustan's Supermarket (2016), SMIC (2005-2014) As the eighth most competitive component city nationwide in terms of economic dynamism, government efficiency, and infrastructure, Tagum City is a potential area for expansion for SM Retail (National Competitiveness Council 2016). With Robinsons supermarket’s initial step to open one supermarket in Tagum City, the authors speculate that SM Retail might also open one in the City. It is possible for SM Retail to locate another Savemore store in Tagum City. The Savemore stores are intended to penetrate the informal sector in urban and rural communities where the shoppers buy on a daily basis (SMIC 2010, SMIC 2014). These stores are mostly stand-alone and located near residential areas where there is limited space (SMIC 2010). Partnership with CityMall Commercial Centers Inc., a community mall developer, is a strategic move for the company to further expand to different areas in Visayas and Mindanao. The key decision criteria in choosing a location for new stores are area, population, local economy, household size, and accessibility (SMIC 2011, SMIC 2014). SMIC (2014) aims to deliver customers’ preference for convenience, product assortment, and greater value for money.

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With respect to consumers’ perspective, Tila and Laorden (2015) and Barroso and Shuck (2015) reported that consumers from Davao City and City (major cities in Northern and Southern Mindanao, respectively) mostly purchase vegetables from the wet market. This is consistent with the findings of Concepcion (2005). However, a major difference was noted in the frequency of purchase for both wet market and supermarket outlets from three times a week to once a week. This may be attributed to the increasingly busy lifestyle of Filipinos (Nielsen 2015). With regards to the specific attributes when buying vegetables from the wet markets, consumers primarily consider price and then freshness. On the other hand, convenience and cleanliness are considered as the top two reasons for purchasing in supermarkets (Tila and Laorden 2015, Barroso and Shuck 2015). Socio-demographic Profile of Consumers A large majority of the sample-respondents are female (90%) as they are responsible in purchase decisions for fruits and vegetables. The age of the respondents ranges from 17 to 72 years old while the average age is 42 years old. The respondents have an average of 5 members in the household whose ages range from 11 to 42 years old. The range of the years of formal education is 2 to 15 with the average educational attainment of at least high school. The monthly income ranges from PhP 1,500 to PhP 150,000 with average of PhP 13,950. Fruit Retail Outlet Choice Four retail outlet choices were identified by the respondents for fruit expenditures, namely, neighborhood market (12%), wet market (76%), supermarket (3%), and trade center (9%). The neighborhood market is in the form of a small retail store (sari-sari store), mobilized vendors who sell fruits as hawkers or with push carts, or mini market (talipapa). The majority of the respondents identified the Tagum Public Market located in Magugpo West as the preferred retail outlet choice for fruits. The bulk of the fruits in the wet market are procured from Sto. Tomas, Davao del Norte and Mawab and Pantukan, Compostella Valley. The wholesalers in the wet market also identified other traders as coming from Diwalwal, Compostela Valley, and , . The third retail outlet is the supermarket including the NCCC, JS Gasiano, Gasiano Grand Mall, and Puregold. Only a few respondents (3%) prefer supermarket as their retail outlet choice for fruits. The trade center (Tagum Cultural and Trade Center) in Roxas Street is the fourth retail outlet identified by the respondents. This is open from 6:00 PM to 2:00 AM and trades a variety of food apart from fruits. Fruits in this outlet, however, are more expensive than those in wet markets. The respondents spend from PhP 50 to PhP 2,500 or an average of PhP 520 per month for fruits. They purchase fruits once, twice or three times a week. The decision maker of the household is usually the mother (89%), followed by the father (7%), and other members of the household (4%). In terms of the retail outlet attributes, the top five primary shopping considerations are convenience of the location (80%), price (72%), product quality (51%), speed of service (43%), and assortment (35%). The top five fruits usually purchased by the respondents include banana (88%), mango (79%), pineapple (42%), apple (31%), and watermelon (30%).

46 Lastimado, Romo, Sarmiento and Shuck

The multinomial logit model for fruit retail outlet choice in Tagum City used 200 observations with a Log pseudolikelihood = -103, a Pseudo R-squared of 0.34, a Wald Chi-square (33) = 171, and a statistically significant p-value = 0.00 (Table 2). To interpret the model, a marginal analysis was performed (Table 3). An additional one household member decreases the likelihood of purchase at the trade center by 0.02%. This implies that smaller households prefer the trade center. A PhP 1,000 increase in income increases the probability of purchase at the supermarket by 2%. This implies that an increase in income among residents of Tagum City makes the supermarket a more attractive choice. A PhP 1,000 increase in fruit expenditure decreases the likelihood of buying at the neighborhood market by 31% while it increases the probability of purchasing at the wet market by 40%. This implies that as the fruit expenditure increases, the buying behavior of the respondents suggests shifting from neighborhood market to wet market. Table 2. Results of multinomial logit model estimation for fruits retail outlet

Robust [95% Item Coef. z P>z Interval] Std. Error Conf. Base = Neighborhood Wet market Age -0.037 0.025 -1.480 0.139 -0.086 0.012 Household size 0.094 0.134 0.700 0.483 -0.169 0.357 Education -0.158 0.116 -1.360 0.174 -0.386 0.070 Income -0.014 0.042 -0.350 0.730 -0.097 0.068 Expenditure 4.129*** 1.083 3.810 0.000 2.007 6.251 Frequency -0.164 0.284 -0.580 0.564 -0.721 0.393 Convenience -1.401 1.106 -1.270 0.205 -3.569 0.766 Price 1.267** 0.615 2.060 0.039 0.062 2.473 Product quality 0.051 0.547 0.090 0.925 -1.021 1.123 Speed of service 1.034* 0.570 1.810 0.070 -0.083 2.152 Assortment 2.250*** 0.724 3.110 0.002 0.831 3.668 Constant 3.325 2.331 1.430 0.154 -1.244 7.894 Supermarket Age -0.103** 0.048 -2.120 0.034 -0.197 -0.008 Household size 0.322 0.326 0.990 0.323 -0.316 0.960 Education -0.131 0.325 -0.400 0.687 -0.767 0.506 Income 0.065 0.047 1.380 0.169 -0.028 0.158 Expenditure 3.255** 1.531 2.130 0.034 0.254 6.256 Frequency -0.135 0.927 -0.150 0.884 -1.952 1.681 Convenience -4.917*** 1.775 -2.770 0.006 -8.397 -1.438 Price -1.179 1.181 -1.000 0.318 -3.494 1.135 Product quality -0.442 1.125 -0.390 0.695 -2.646 1.763 Speed of service 2.159 1.327 1.630 0.104 -0.442 4.760 Assortment 1.339 1.996 0.670 0.502 -2.572 5.251 Constant 3.696 4.118 0.900 0.369 -4.375 11.766

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Trade Center Age -0.083** 0.038 -2.150 0.032 -0.158 -0.007 Household size -0.330 0.244 -1.350 0.176 -0.807 0.148 Education -0.010 0.187 -0.060 0.956 -0.377 0.356

Income 0.022 0.043 0.520 0.606 -0.063 0.107 Expenditure 2.390* 1.423 1.680 0.093 -0.399 5.180 Frequency -0.084 0.395 -0.210 0.832 -0.859 0.691 Convenience -2.267 1.484 -1.530 0.127 -5.177 0.642 Price 0.731 0.987 0.740 0.459 -1.203 2.666 Product quality 1.951* 1.024 1.910 0.057 -0.056 3.957 Speed of service 0.000 0.920 0.000 1.000 -1.804 1.803

Assortment 4.632*** 1.024 4.520 0.000 2.625 6.638 Constant 1.890 3.716 0.510 0.611 -5.392 9.173 ***, **, * Significant at 1%, 5% and 10% probability levels, respectively Table 3. Marginal effects for fruits retail outlet Delta [95% Item dy/dx Method z P>z Interval] Conf. Std. Error Neighborhood Age 0.003 0.002 1.600 0.109 -0.001 0.007 Household size -0.006 0.010 -0.620 0.533 -0.026 0.013 Education 0.012 0.009 1.260 0.207 -0.006 0.030 Income 0.001 0.003 0.270 0.785 -0.005 0.007 Expenditure -0.309*** 0.088 -3.500 0.000 -0.482 -0.136 Frequency 0.012 0.021 0.570 0.567 -0.030 0.054 Convenience 0.116 0.081 1.420 0.155 -0.044 0.275 Price -0.091** 0.046 -1.990 0.046 -0.181 -0.002 Product quality -0.009 0.041 -0.220 0.823 -0.089 0.071 Speed of service -0.078* 0.043 -1.800 0.071 -0.162 0.007 Assortment -0.178*** 0.052 -3.440 0.001 -0.280 -0.077 Wet market Age 0.001 0.003 0.250 0.801 -0.004 0.006 Household size 0.024 0.016 1.530 0.125 -0.007 0.055 Education -0.019 0.014 -1.410 0.158 -0.046 0.007 Income -0.004 0.004 -1.160 0.248 -0.011 0.003 Expenditure 0.396*** 0.096 4.140 0.000 0.209 0.584 Frequency -0.016 0.032 -0.500 0.616 -0.080 0.047 Convenience -0.002 0.085 -0.020 0.983 -0.168 0.164 Price 0.157*** 0.059 2.630 0.008 0.040 0.273 Product quality -0.082 0.057 -1.440 0.150 -0.194 0.030 Speed of service 0.108* 0.058 1.870 0.062 -0.005 0.220 Assortment 0.058 0.078 0.740 0.456 -0.095 0.212 Supermarket Age -0.001 0.001 -1.360 0.174 -0.003 0.001 Household size 0.007 0.006 1.070 0.283 -0.005 0.019 Education 0.000 0.007 -0.030 0.972 -0.013 0.013 Income 0.002** 0.001 1.970 0.049 0.000 0.003 Expenditure -0.005 0.026 -0.210 0.831 -0.056 0.045 Frequency 0.000 0.019 0.000 0.998 -0.037 0.037

48 Lastimado, Romo, Sarmiento and Shuck

Convenience -0.074** 0.035 -2.100 0.036 -0.143 -0.005 Price -0.048* 0.026 -1.850 0.065 -0.099 0.003 Product quality -0.017 0.022 -0.810 0.419 -0.060 0.025 Speed of service 0.029 0.028 1.050 0.292 -0.025 0.084 Assortment -0.025 0.035 -0.690 0.487 -0.094 0.045 Trade Center Age -0.002 0.002 -1.410 0.160 -0.006 0.001 Household size -0.024** 0.012 -1.980 0.047 -0.049 0.000 Education 0.008 0.009 0.880 0.381 -0.010 0.025 Income 0.002 0.001 1.450 0.148 -0.001 0.004 Expenditure -0.082 0.056 -1.460 0.143 -0.191 0.028 Frequency 0.004 0.017 0.230 0.822 -0.030 0.038 Convenience -0.040 0.039 -1.030 0.305 -0.117 0.037 Price -0.017 0.042 -0.400 0.687 -0.100 0.066 Product quality 0.109** 0.045 2.440 0.015 0.021 0.197 Speed of service -0.059 0.038 -1.540 0.122 -0.134 0.016 Assortment 0.145*** 0.048 2.990 0.003 0.050 0.239

***, **, * Significant at 1%, 5% and 10% probability levels, respectively With respect to the top fruit retail outlet attributes, customers who consider the convenience of location as an important factor have 9% lower chance of shopping at the supermarket. For price-conscious consumers, their buying behavior favors the wet market over the neighborhood market and supermarket. Consumers who are price conscious have 9% and 5% lower probability of purchase at the neighborhood market and supermarket, respectively, while there is a 16% higher likelihood of buying at the wet market. On the other hand, quality conscious consumers have 11% higher probability of buying at the trade center. Consumers who are particular about the speed of service have 8% lower likelihood of buying at the neighborhood market while there is an 11% higher probability of purchase at the wet market. Lastly, consumers who are particular about product assortment have 18% lower chance of buying at the neighborhood market while there is a 15% higher likelihood of purchase at the trade center. Vegetable Retail Outlet Choice About 19% of the respondents consider the neighborhood market as a good source of vegetables especially those in the villages farther from the city such as Apokon (5.13 km) and San Miguel (3.90 km). A large majority (80%) of the respond- ents prefer the wet market as their source of vegetables. Most of these vegetables are sourced from Davao City, New Corella, Davao del Norte, and within Tagum City. The last option is the supermarket but it is identified by only 1% of the respondents. The trade center is not identified by the respondents since vegetables are rarely sold in this outlet. The monthly vegetable expenditures of the respondents range from PhP 100 to PhP 6,000 or a monthly average of PhP 780. Most of the respondents bought vegeta- bles once or two to three times a week. The decision to purchase vegetables is primar- ily made by mothers (90%), sometimes fathers (7%), and other household members (3%). The top retail outlet attributes for vegetables except the last one are similar to the case of fruits. These are convenience of location (83%), price (74%), product quality (45%), speed of service (44%), and cleanliness of the retail outlet (30%). The top five most purchased vegetables are pumpkin (83%), eggplant (73%), okra (51%), string beans (48%), and Malabar spinach (31%).

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The binary logit model for vegetable retail outlet choice in Tagum City used 198 observations with a Log pseudolikelihood = -70, a Pseudo R-squared of 0.29, a Wald Chi-square (11) = 30, and a statistically significant p-value = 0.002 (Table 4). A PhP 1,000 increase in income is associated with an increase in the probability of purchas- ing at the wet market by 8% (Table 5). A PhP 1,000 increase in vegetable purchases also increases the likelihood of purchasing at the wet market by 31%. This implies that with increasing income and vegetable expenditures, the buying behavior of the respondents suggests a shift from the neighborhood format to wet market. In terms of retail attributes, respondents who consider the convenience of location as an im- portant factor have 18% lower probability of buying at the wet market. The location- conscious respondents favor neighborhood market over the wet market. However, price-conscious respondents are found to have 11% higher chance of purchasing at the wet market compared to the neighborhood market. Lastly, respondents who are particular on the cleanliness of the retail outlet have 17% higher probability of buying at wet market compared to the neighborhood market. This implies that neighborhood markets such as mini-market (talipapa) are less preferred than the wet market. Table 4. Results of binomial logit model estimation for vegetables retail outlet

Robust [95% Item Coef. z P>z Interval] Std. Error Conf. Base = Neighborhood Wet market Age 0.017 0.020 0.830 0.405 -0.023 0.056 Household size 0.143 0.131 1.100 0.273 -0.113 0.399 Education -0.162 0.113 -1.440 0.150 -0.383 0.059 Income 0.069* 0.037 1.880 0.060 -0.003 0.141 Expenditure 2.822*** 1.011 2.790 0.005 0.840 4.803 Frequency -0.388 0.236 -1.650 0.100 -0.850 0.074 Convenience -1.530** 0.748 -2.050 0.041 -2.995 -0.064 Price 1.015** 0.444 2.290 0.022 0.146 1.884 Product quality 0.237 0.455 0.520 0.602 -0.654 1.128 Speed of service -0.297 0.517 -0.580 0.565 -1.311 0.716 Cleanliness 1.540 0.635 2.420 0.015 0.294 2.785 Constant 1.195 1.974 0.610 0.545 -2.674 5.064 ***, **, * Significant at 1%, 5% and 10% probability levels, respectively Table 5. Marginal effects for vegetables retail outlet

[95% Item dy/dx Delta Method z P>z Interval] Conf. Wet market Age 0.002 0.002 0.840 0.403 -0.003 0.006 Household size 0.016 0.014 1.100 0.270 -0.012 0.044 Education -0.018 0.013 -1.440 0.150 -0.043 0.007 Income 0.008* 0.004 1.830 0.067 -0.001 0.016 Expenditure 0.314*** 0.093 3.380 0.001 0.132 0.496 Frequency -0.043* 0.025 -1.710 0.087 -0.093 0.006 Convenience -0.170** 0.082 -2.070 0.039 -0.331 -0.009 Price 0.113** 0.045 2.530 0.011 0.026 0.200 Product quality 0.026 0.051 0.520 0.603 -0.073 0.126 Speed of service -0.033 0.057 -0.580 0.563 -0.145 0.079 Cleanliness 0.171*** 0.066 2.600 0.009 0.042 0.300

***, **, * Significant at 1%, 5% and 10% probability levels, respectively 50 Lastimado, Romo, Sarmiento and Shuck

Conclusion and Policy Implications Rapid modernization of food retailing is evident all over the Philippines albeit at a lower rate in Mindanao. Tagum City, in its urban villages, is still dominated by the traditional market in both fruit and vegetable sectors. Nevertheless, the economic health of Tagum City could attract further expansion of modern retail national chains. In fact, the key features of the national chain modern retail formats turn out to be the top important retail attributes for shoppers’ decision in purchasing fruits and/ or vegetables. These include convenience of location, price, product quality, speed of service, product assortment, and cleanliness of the retail outlet. If the entry of the modern retail formats could provide more job and income opportunities in Tagum City, higher fruit and vegetable expenditures and more convenient shopping particu- larly for mothers can be expected. Fruit and vegetable buyers in the City will benefit if the trade center and wet markets are developed alongside the modern retail expansion. Fruit buyers who go to the trade center have smaller households and are more conscious of the product quality and assortment. Those who prefer the wet markets have higher fruit spending, price conscious, and are particular with the speed of service. Lastly, supermarket buyers predominantly have higher income. Vegetable buyers, on the other hand, have higher income and vegetable spending, and prefer the wet markets to other traditional formats for their cheaper vegetables and cleanliness. Moreover, those who patronize the neighborhood stores are primarily location-conscious. The research findings have implications at the levels of policy, private business, non-government organizations, and local government. An improved food retail regulatory environment involving review and revision of Republic Act 8762 would encourage higher foreign investment and enhance competition among the local and foreign players; consequently, this could improve the efficiency of the operations and lower the prices of fruits and vegetables. This will also provide employment opportunities that would narrow down the gap between the high and low income earners and increase consumers’ purchasing power and fruit and vegetable expenditures in preferred retail outlets. Expansion of the modern local and foreign retail formats in Tagum City would provide the consumers more options with regard to their preferred retail outlet attributes; thus, promoting consumer welfare. Other important retail attributes such as food safety, good ambience, quality service, mode of payment, and special offers are offered by the modern retail chain formats. However, the expansion of modern retail formats might be unfavorable to the farmers who are supplying to the traditional retail formats. Hence, NGO- or government-led community projects need to be designed to assist the farmers in developing their skills in linking with the institutional markets. For Tagum City local government, the most feasible action in the short run is to develop the wet markets and trade centers into retail formats that exhibit the preferred retail outlet attributes among the consumers in Tagum City. Such improvements are evident in other areas such as Valencia City, and Cubao, City.

Journal of Economics, Management & Agricultural Development Vol. 2, No. 2 51

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