Restructuring of Food Retail Markets in Countries of the Global South: The Case of Emerging Supermarkets in Dhaka, Bangladesh (Handel und ... Retailing and International Marketing) 3658333146, 9783658333140

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Handel und Internationales Marketing Retailing and International Marketing Bernhard Swoboda · Thomas Foscht Hanna Schramm-Klein Hrsg.

Christine Hobelsberger

Restructuring of Food Retail Markets in Countries of the Global South The Case of Emerging Supermarkets in Dhaka, Bangladesh

Handel und Internationales Marketing Retailing and International Marketing Series Editors Bernhard Swoboda, Universität Trier, Trier, Germany Thomas Foscht, Karl-Franzens-Universität Graz, Graz, Austria Hanna Schramm-Klein, Lehrstuhl für Marketing, Universität Siegen, Siegen, Germany

Die Schriftenreihe fördert die Themengebiete Handel und Internationales Marketing. Diese charakterisieren – jedes für sich, aber auch in inhaltlicher Kombination – die Forschungsschwerpunkte der Herausgeber. Beide Themengebiete werden grundsätzlich breit aufgefasst; die Reihe bietet sowohl Dissertationen und Habilitationen als auch Tagungs- und Sammelbänden mit unterschiedlicher inhaltlicher und methodischer Ausrichtung ein Forum. Die inhaltliche Breite ist sowohl im Sinne eines konsumentenorientierten Marketings wie auch einer marktorientierten Unternehmensführung zu verstehen. Neben den Arbeiten, die von den Herausgebern für die Schriftenreihe vorgeschlagen werden, steht die Reihe auch externen wissenschaftlichen Arbeiten offen. Diese können bei den Herausgebern eingereicht und nach einer positiven Begutachtung publiziert werden. The book series focuses on the fields of Retailing and International Marketing. These two areas represent the research fields of the editors—each of them as a single research area, but also in combination. Both of these research areas are widely understood. Consequently, the series provides a platform for the publication of doctoral theses and habilitations, conference proceedings and edited books, as well as related methodological issues that encompass the focus of the series. The series is broad in the sense that it covers academic works in the area of consumer-oriented marketing as well as the area of marketoriented management. In addition to academic works recommended by the editors, the book series also welcomes other academic contributions. These may be submitted to the editors and will be published in the book series after a positive assessment.

More information about this series at http://www.springer.com/series/12697

Christine Hobelsberger

Restructuring of Food Retail Markets in Countries of the Global South The Case of Emerging Supermarkets in Dhaka, Bangladesh

Christine Hobelsberger Berlin, Germany Vom Fachbereich Wirtschaftswissenschaften der Technischen Universität Kaiserslautern genehmigte Dissertation D 386 2020

ISSN 2626-3327 ISSN 2626-3335 (electronic) Handel und Internationales Marketing Retailing and International Marketing ISBN 978-3-658-33314-0 ISBN 978-3-658-33315-7 (eBook) https://doi.org/10.1007/978-3-658-33315-7 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Planung/Lektorat: Anna Pietras This Springer Gabler imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Preface

Since the early 1990s, the emergence and expansion of supermarkets in countries of the Global South is driving a sometimes-considerable structural change of the food retail markets and their distribution channels on site. This may have farreaching development effects—be it for “traditional” food retailers, (agricultural) producers and intermediaries, for consumers, and not least the natural environment. Some of these potential implications, such as productivity increases, lower consumer prices, or higher environmental, food quality and safety standards are highly desirable. On the other hand, these benefits, if any, may be distributed unequally among the actors along the food distribution chains, and, through displacement processes, may even put thousands of livelihoods at risk. Not least, traditional food retail formats, such as wet markets and mom-and-pop stores, may fulfil an important function within the social fabric of communities. The decline of traditional food retail formats therefore may also imply the loss of sites of social interaction and exchange. As shown by Christine Hobelsberger in her doctoral thesis, the question of what impact the emergence of supermarkets may have on food systems in countries of the Global South is not completely new: It has already been starting point of scientific research and development-policy considerations in the aftermath of World War II. In view of the dynamic of the more recent developments since the early 1990s, however, the question has gained new topicality and relevance. Against this backdrop, Christine Hobelsberger sheds light on the first nearly two decades of the emerging supermarket industry in Bangladesh, and in particular its capital city Dhaka. Coming from a retailers’ perspective, she traces the so-far development of supermarkets in Dhaka, and Bangladesh, and depicts current hindering factors to the local supermarket industry’s further development, as well as supermarket managers’ measures to tackle these challenges. On the

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other hand, Christine Hobelsberger explores the (potential) implications of emerging supermarkets for other food retailers on-site, and thereby puts an emphasis on so-called kacha bazars (wet markets) as exemplary “traditional” food retail format. According to the findings of this primary data-based study, Bangladesh’s supermarket industry is as yet shaped by domestic players and accounts for only a small share of the country’s food retail market. It therefore comes as no surprise that supermarkets’ competitive pressure and impact on Dhaka’s traditional kacha bazars is still limited. Nonetheless, Bangladesh’s supermarket industry is already characterized by a high dynamic, and visionary entrepreneurs, who, despite numerous persisting obstacles, make considerable efforts to promote their industry further. The actual outcomes of these efforts and their implications for other actor groups along the country’s food distribution channels still remain to be seen, and deserve further consideration. With her present explorative study, Christine Hobelsberger has not only made an important contribution to the discourse on the implications of emerging supermarktes in countries of the Global South, but also created a valuable basis for further research and (development) practice related to Bangladesh’s emerging supermarket industry. Prof. Dr. Michael von Hauff

Acknowledgements

When I started my dissertation project, I was very well aware that I was about to undertake a longer and sometimes demanding journey. Nonetheless, I would have never expected that incidents in my real life beyond the infamous academic “ivory tower” would pose the real challenges in the years to come. In some of those phases, I even doubted that I would find the strength to finally bring this project to an end. The more I feel the profound need to thank all the people and institutions who accompanied me on the various steps and highs and lows of this long and exciting journey, and without which I would have never come to the point of typing the last words of this document. I would like to express my sincere gratitude to my supervisor Prof. Dr. Michael von Hauff: Starting from providing me the opportunity to do my PhD in this unique research project and program, up to his persistent support, patience, and confidence in me and this endeavor. I am also very thankful to Prof. Dr. Katharina Spraul for being my second supervisor and for providing me with many valuable suggestions. I further thank Prof. Dr. Tanja Rabl for being my third examiner, and Prof. Dr. Oliver Wendt for chairing the examination committee. I also thank Professor Dr. Prof. h.c. Bernhard Swoboda, Prof. Dr. Thomas Foscht, and Univ.-Professor Dr. Hanna Schramm-Klein for accepting my thesis in their book series “Handel und internationales Marketing.” My deepest thanks to all my interview partners in Dhaka for their time, their trust, and the valuable insights they provided me in a dynamic and fascinating field. Without their cooperation and support this thesis would lack the crucial essence. Onek, onek dhonnobad to my Bangladeshi research assistants in Dhaka and Kaiserslautern: Md. Biozid Jessorey, Rezwan Du, Zinnia Naoshin, Sobhana Nowshin, and Md. Nasim Fardoze. Not only would my fieldwork in Dhaka have

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never been possible without you. You and your families also opened your doors and hearts for me and always allowed me to feel at home far away from home. I thank Reaz Uddin from the Alternative Movement for Resources and Freedom Society (AMRF) in Dhaka for complementing some of my interviews with vendors at kacha bazars, when the circumstances on-site in Dhaka no more allowed me to do it myself. I would also like to acknowledge the financial support of the German Research Foundation (DFG), which funded the research project “Multiple Modernities in the Megacity? Economic and Spatial Restructuring of Food Markets in Dhaka, Bangladesh” (Grant No. HA 1137/4-1) within the research program “Megacities – Megachallenge: Informal Dynamics of Global Change.” Being part of this program’s last two years has truly been a unique, enriching and inspiring opportunity for me. I owe special thanks to Dr. Markus Keck and Prof. Dr. Hans-Georg Bohle for developing the project idea, which finally led to the successful acquisition of the research project underlying this thesis. I am exceedingly grateful for the scholarship I have been granted by the Ministry of Science, Education and Culture in the Rhineland-Palatinate, which allowed me to re-enter my dissertation project and to create the prospect to still bring this heart project to an end. My thanks also go to Steen Kristian Gilbertson from Language Boutique in Berlin for proofreading this thesis. A very, very special thank to my roommates and colleagues in “Tin Number Road” – in particular to Dr. Joseph Strasser, Annika Salingré, Dr. Katrin Burkart, Dr. Harald Sterly, Lisa Wevelsiep, Nils Jahn, and Lena Opitz. I remember countless unforgettable moments together, ranging from our excursions in Dhaka and exciting glimpses into each other’s research projects, to inspiring discussions over dozens of cups of cha, mutual encouragement in difficult times and relaxing after hours on our rooftop. Onek dhonobad to Sheli and her girls for plenty of “soul food” in a double sense: To immerse ourselves into the richness of the Bangladeshi cuisine while at the same time enjoying children’s laughter is likely one of the best ways to start the working day, or to spend lunch break. Thanks to the “Remisianern,” in particular Frau Caze and Mina Braun: Working in your company at a cozy little shed in a backyard of bustling Bizim Kiez made my return to this project so much easier than it would have been working in isolation. I have always held the strong conviction that private life should not be neglected in favor of professional life. Admittedly, this is sometimes easier said than done. However, countless moments during the past years have demonstrated to

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me how worthwhile it is to follow this conviction, and what a great privilege it is to spend time with those you love. Unfortunately, but also luckily, there are too many names I would have to mention in order to personally express my deep gratitude for the people in my private life. To my friends and family, near and far: Thank you for everything! I thank my parents so much for supporting me and my endeavors from early childhood on, and for encouraging my curiosity and my intense interest in thinking outside the box. Last but by no means least I want to give heartfelt thanks to Tobias, for his love and never-ending motivation, encouragement, and support. Felice*, Jakob*, Levi, and Junis: No academic title would have ever taught me all the important lessons they allowed and still allow me to learn. I thank them from the bottom of my heart for the enrichment they are in my life.

Summary

For many decades already, purchasing food at supermarkets has been and still is a matter of course to the majority of consumers in the Global North. The widespread diffusion and even dominance of supermarkets in many countries of the Global South, however, is a comparatively recent phenomenon. Since the early 1990s, food retail markets in many of those countries have been witnessing a sometimes-drastic change from an atomistic market structure, which is characterized by a multitude of small, individual entrepreneurs such as market vendors, small-scale grocers, and street hawkers, to a rather oligopolistic structure, which is shaped by a comparably small number of dominant and powerful national and/or transnational supermarkets. Observers consider these developments as a sudden and deep shock to the local food distribution channels, with considerable implications for food producers, wholesalers, retailers, and consumers. The actual extent of restructuring processes of food retail markets in the Global South, as well as the corresponding implications for the local food distribution channels, however, heavily depend on the specific characteristics of the respective prevailing local setting. Even though Bangladesh entered the supermarket era nearly twenty years ago, up until the present time, the country has remained rather a “blind spot” on the research map, as there has neither been a comprehensive empirical study on the actual developmental state of supermarkets in the country, nor on supermarkets’ (potential) impact on other food retail formats and corresponding structural changes in local food retail markets. Against this background, the present thesis represents a descriptive case study, which aims to making a contribution to fill this research gap by developing an empirically grounded portrayal of the phenomenon of “supermarketization” in Bangladesh’s capital city Dhaka.

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Based on theoretical and conceptional reflections on markets and market structures, the fundamentals of retail management and modern food retail, and research findings on supermarkets’ structural impact on food retail markets in other country contexts, the thesis takes an approach of triangulating document analysis with empirical fieldwork in the form of semi-structured expert interviews and qualitative observations on-site in Dhaka. The objective of this thesis is thereby twofold: On the one hand, the thesis traces the so-far development of supermarkets in Dhaka, and Bangladesh, and depicts current hindering factors to the local supermarket industry’s further development, as well as supermarket managers’ measures to tackle these challenges. On the other hand, the thesis explores the (potential) implications of emerging supermarkets for other food retailers on-site. To this end, the thesis’ focus lies on so-called wet markets (Bengali: kacha bazars) as an exemplary “traditional” food retail format. Here, the thesis strives for the determination of supermarkets’ competitive pressure on kacha bazars in Dhaka, and kacha bazar vendors’ corresponding (proactive) coping strategies. The findings of this thesis reveal that Bangladesh’s supermarket industry is to date a “homemade” development, which, despite considerable achievements in the first nearly two decades of its existence, is still being hampered by considerable hurdles on both, the supply and the demand side. It therefore comes as no surprise that supermarkets’ competitive pressure and impact on Dhaka’s traditional kacha bazars is still very limited so far. Even though supermarkets have already become an inherent part of Dhaka’s food retail market, compared to other countries in the Global South, one can therefore not yet speak of a “supermarket revolution” in Dhaka, and even less in Bangladesh as a whole. Being based on extensive primary data, the exploratory findings of this thesis on the first nearly two decades of supermarkets in Dhaka and their structural implications for the capital’s food retail market provide a valuable base for further research in a dynamic field that can be assumed to be gaining great importance in the years to come. The thesis therefore concludes with corresponding implications for both, further research, and practice.

Contents

1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Relevance and Purpose of the Thesis . . . . . . . . . . . . . . . . . . . . . . 1.2 Objectives and Research Questions of the Thesis . . . . . . . . . . . 1.3 Structure of the Thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 3 5

2

Theoretical Reasoning on Markets and Market Forms . . . . . . . . . . . 2.1 Markets and their Structural Characteristics . . . . . . . . . . . . . . . . 2.2 Market Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1 The Functioning of Markets under Perfect Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Market Forms under Imperfect Competition . . . . . . . .

9 9 11

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The Fundamentals of Retail Management . . . . . . . . . . . . . . . . . . . . . . 3.1 The Functioning and Functions of Retail Management . . . . . . . 3.2 Competition in Retail and Development of a Retail Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Supermarkets and Modern Food Retail Management . . . . . . . . . . . . 4.1 The Origins and Developmental Milestones of Supermarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Approaching the Terms “Supermarket” and “Modern Food Retail” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Research Waves on Modern Food Retail in the Global South . . . . . 5.1 Research Wave on the Role of Modern Food Retail in Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.1 Presence and Diffusion of Modern Food Retail . . . . . .

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Contents

5.1.2

5.2

Impact of Modern Food Retail on Traditional Food Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.3 Modern Food Retail as Component of Economic Development Programs . . . . . . . . . . . . . . . . . . . . . . . . . . Research Wave on “The Rapid Rise of Supermarkets in Developing Countries” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.1 Diffusion Patterns of Modern Food Retail . . . . . . . . . . 5.2.2 Drivers for the Diffusion of Modern Food Retail . . . . 5.2.3 Impact of Modern Food Retail on Traditional Food Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.4 Governmental Responses toward Modern Food Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54 55 60 61 65 75 79

6

Interim Conclusion on Theoretical and Conceptual Reflections . . .

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Dhaka: The Emergence of a Capital and Megacity . . . . . . . . . . . . . .

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Research Design and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 Research Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.1 Semi-Structured Expert Interviews . . . . . . . . . . . . . . . . . 8.2.2 Qualitative Observations . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.3 Document Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Modern Food Retail in Dhaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 The Outset of Modern Food Retail in Dhaka . . . . . . . . . . . . . . . 9.1.1 Drivers for the Emergence of Modern Food Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.2 Dhaka’s Supermarket Landscape at the End of its First Decade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.3 Supermarkets’ Retail Strategies . . . . . . . . . . . . . . . . . . . 9.1.4 The “Bangladesh Supermarket Owners’ Association” (BSOA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 Hindering Factors to the Expansion of Modern Food Retail in Dhaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2.1 Hindering Factors to Modern Food Retail on the Supply Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2.2 Hindering Factors to Modern Food Retail on the Demand Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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10 Modern Food Retail’s Impact on Dhaka’s Kacha Bazars . . . . . . . . . 10.1 General Influencing Factors on Kacha Bazar Vendors’ Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2 Modern Food Retailers’ Competitive Pressure on Kacha Bazars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2.1 Perceived Competitive Advantages of Modern Food Retailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2.2 Perceived Competitive Advantages of Kacha Bazars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2.3 Expected Future of Dhaka’s Food Retail Markets . . . .

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11 Summary of Key Findings and Implications for Further Research and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Summary of Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Implications for Further Research and Practice . . . . . . . . . . . . .

195 196 201

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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186 187 189

List of Figures

Figure 1.1

Figure Figure Figure Figure Figure

1.2 2.1 2.2 2.3 3.1

Figure 3.2 Figure 5.1 Figure 6.1 Figure 7.1 Figure 8.1 Figure 9.1 Figure 9.2 Figure 9.3 Figure 9.4 Figure 9.5

Research Foci of the Overall Research Project “Multiple Modernities in the Megacity? Economic and Spatial Restructuring of Food Markets in Dhaka, Bangladesh” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure of the Thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Demand Curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Supply Curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Equilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retailers’ Hinge Function in the Distribution Channel for Consumer Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steps in Developing a Retail Strategy . . . . . . . . . . . . . . . . . . Modern Food Retail-Induced Main Changes in the Distribution Channel . . . . . . . . . . . . . . . . . . . . . . . . . . . Influencing Factors on Modern Food Retail in the Global South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rush Hour in Dhaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interview Sites for Explorative Survey among Kacha Bazar Vendors in Dhaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facets of Traditional Food Retail and Wholesale in Dhaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Influencing Factors on Modern Food Retail in Dhaka/Bangladesh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impressions from a Distribution Center of a Major Supermarket Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supermarket Street Banners . . . . . . . . . . . . . . . . . . . . . . . . . . Socioeconomic Disparities in Dhaka . . . . . . . . . . . . . . . . . . .

4 5 14 16 19 28 30 70 86 101 112 123 134 138 145 171

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Figure 9.6 Figure 10.1

List of Figures

Impressions from Supermarket Outlets in Dhaka . . . . . . . . . Kacha Bazar Vendors in Dhaka . . . . . . . . . . . . . . . . . . . . . . .

178 184

List of Tables

Table 2.1 Table 8.1 Table 8.2

Types of Market Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Research Process underlying the Thesis . . . . . . . . . . . . . . Overview of Semi-Structured Interviews with Experts and Key Informants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24 106 109

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1

Introduction

The following three subchapters describe the relevance and purpose of this thesis, its underlying objectives and research questions, as well as its structure. Here, just as in the following chapters, the terms “Global South” and “Global North” will be applied instead of “developing countries,” “emerging countries,” and “developed countries.” The terms “Global South” and “Global North” will thereby not be understood as geographical assignments, but rather as an attempt to neutrally describe different positions of countries in a globalized world. They thus tend to acknowledge the different historical experiences countries had with regard to colonialism and exploitation, and to take into account causes, consequences, and connections for comparably (dis)advantageous societal, political, and economic positions. In contrast, the often-used terms “developed country” and “developing country” implicitly imply a hierarchy that suggests development to be a positive process towards the status of an industrialized country. However, in times of the Sustainable Development Goals (SDGs)1 as defined in the United Nations’ 2030 Agenda, the author takes the view that every country worldwide should in a sense be considered a “developing country.”

1 The

2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals, which are an urgent call for action by all countries in a global partnership. The SDGs recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth—all while tackling climate change and working to preserve the natural environment (United Nations 2018, n.p.). © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_1

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1.1

Introduction

Relevance and Purpose of the Thesis

For many decades already, purchasing food at supermarkets has been and still is a matter of course to the majority of consumers in the Global North. The widespread diffusion and even dominance of supermarkets in many countries of the Global South, however, is a comparatively recent phenomenon. Since the early 1990s, food retail markets in many of those countries have been witnessing a sometimes-drastic change from an atomistic market structure, which is characterized by a multitude of small, individual entrepreneurs such as market vendors, small-scale grocers, and street hawkers, to a rather oligopolistic structure, which is shaped by a comparably small number of dominant and powerful national and/or transnational supermarkets. In view of these restructuring processes, some observers also speak of a “supermarket revolution in developing countries” (Reardon & Hopkins 2006, p. 522), which is considered as a “sudden large ‘shock’” (ibid, p. 524) to the local food distribution channels, which goes along with considerable implications for food producers, wholesalers, retailers, and consumers on-site. At the same time, however, there are also critical voices, which on the one hand acknowledge that certain restructuring processes in local food retail markets are taking place, but at the same time warn of hasty conclusions by pointing out that: “[..] when a significant new trend is first isolated, it is quite common for the pioneering analyses to overgeneralize both its reach and its impact. The new trend is seen to be much more widespread and have a much greater impact than is subsequently found to be the case. It requires further analysis to understand sources of variability and consider how what appear to be overwhelming tendencies are adapted in highly variable environments.” (Humphrey 2007, p. 434)

It thus becomes clear that the actual extent of the restructuring processes of food retail markets in the Global South, as well as the corresponding implications for the players along the local food distribution channels, not only need to be studied and assessed carefully, but also explicitly consider the specific characteristics of the respective prevailing local setting. Even though Bangladesh entered the supermarket era nearly twenty years ago, up until the present time, the country has remained rather a “blind spot” on the research map, as there has neither been a comprehensive empirical study on the actual developmental state of supermarkets in the country, nor on supermarkets’ (potential) impact on other food retail formats and corresponding restructuring processes on local food retail markets. Against this background, the present thesis

1.2 Objectives and Research Questions of the Thesis

3

strives for making a contribution to fill this research gap, and that way represents a descriptive case study (Schwandt & Gates 2018, p. 346 f), whose objective lies in developing an empirically grounded and preferably complete and detailed portrayal of the phenomenon of “supermarketization” in Bangladesh’s capital city Dhaka. To this end, the thesis addresses the subsequently described objectives and research questions.

1.2

Objectives and Research Questions of the Thesis

This thesis has been conducted as part of the research project “Multiple Modernities in the Megacity? Economic and Spatial Restructuring of Food Markets in Dhaka, Bangladesh,” which was carried out in the context of the German Research Foundation’s Priority Program 1233 “Megacities-Megachallenge – Informal Dynamics of Global Change.” The research project assumed the restructuring processes of urban food retail markets to be driven by the complex interplay of global and local forces of social, cultural, economic and political structures, and aimed at understanding these dynamics in the specific context of Bangladesh’s capital city Dhaka. The project consisted of two sub-projects, which shed light on the subject matter from the two complementary perspectives of supply and demand: in the course of the sub-project underlying this thesis, the focus was put on the examination of Dhaka’s food retail market under the influence of emerging supermarkets from the retailers’ perspective. The other sub-project, which was carried out by members of the Department of Geography at the University of Bonn, explored consumers’ preferences and potential changes in food shopping and consumption practices in light of emerging supermarkets in Dhaka (Figure 1.1). The examination of the retailers’ perspective on emerging supermarkets in Dhaka in the course of the sub-project underlying this thesis comprised two components. On the level of supermarkets, the sub-project strived to answer the following questions: • When, why, and how did supermarkets emerge in Dhaka? • How did supermarkets in Dhaka develop over time, and what does the current supermarket landscape look like? • What development potential and what constraints do supermarkets currently face in Dhaka, and what strategies do supermarket managers implement in order to exploit this potential or to overcome these constraints, respectively?

4

1

Introduction

Figure 1.1 Research Foci of the Overall Research Project “Multiple Modernities in the Megacity? Economic and Spatial Restructuring of Food Markets in Dhaka, Bangladesh”. Source: Keck (2010, p. 19, modified)

Furthermore, the sub-project explored the (potential) implications of emerging supermarkets for other food retailers on-site. To this end, the sub-project’s focus was on so-called wet markets (Bengali: kacha bazars) as an exemplary “traditional” food retail format. Here, wet markets can be understood as a publicly or privately-owned grouping of individual stalls located in multistory buildings or in open space that offer a wide product assortment ranging from perishables, such as vegetables, meat, or fish, to dry and preserved food. Stalls selling similar items are in close proximity to each other, which provides the convenience for customers to compare product quality and prices. The term “wet” reflects the constant wetness of the floor, e.g. as a result of melting ice used to ensure the freshness of the food sold, the frequent spraying of vegetables, and the cleaning of meat and fish stalls. On the level of kacha bazars, the sub-project addressed the following questions: • Do kacha bazar vendors in Dhaka already feel the competitive pressure from supermarkets, and if yes, how and to what extent? • How do kacha bazar vendors picture the future of Dhaka’s food retail market in view of emerging supermarkets? • Do kacha bazar vendors in Dhaka (proactively) react to competitive pressures from supermarkets, and if yes, by what means?

1.3 Structure of the Thesis

5

Based on the sub-project’s findings, the present thesis finally draws empirically grounded conclusions on the current actual structural changes in Dhaka’s food retail market under the influence of emerging supermarkets. The thesis then concludes with the delineation of the resulting need for further research and implications for practice.

1.3

Structure of the Thesis

With the objective to tackle and answer the previously described research questions, the thesis is structured as shown in Figure 1.2, and described below.

Figure 1.2 Structure of the Thesis. Source: Own

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1

Introduction

All over the world, under the influence of emerging supermarkets, food retail markets have witnessed a considerable change in market structure, and a corresponding shift from formerly atomistic food retail markets to rather oligopolistic market forms. Against this background, chapter two provides a theoretical framework for the explanation of changes in market structures by drawing on microeconomic market theories. Besides delineating the term “market,” principal market forms and their characteristics will be described, as well as the factors that may lead to the emergence of a particular market form. The analysis and examination of a market requires, among other things, a clear delineation of the market under study in terms of the range of commodities or services to be included. Against this background, and coming from a definition of food retail, chapter three covers the basics of the functioning and functions of retail management, as well as the particularities of competition in retail and the importance of the development of a retail strategy. Starting from the previous general and theoretical view of market forms, retail management practices, and competition in retail, chapter four sheds light on the historical origins and evolutionary development stages of modern food retail in the United States—the cradle of supermarket evolution—as well as the revolutionary structural changes supermarkets brought to food retail markets not only in the United States, but all over the world. Based on the preceding explanations, the chapter closes with a working definition of the terms “supermarket” and “modern food retail,” as they will be applied throughout the rest of this thesis. Chapter five then turns toward the specific case of the emergence and expansion of supermarkets in countries of the Global South, their impact on “traditional” food retail formats, and hence the restructuring processes they initiated in local food retail markets. Two major interrelated research waves on the subject matter, their respective research interests, underlying assumptions and findings are depicted in order to identify influencing factors and mechanisms of action that may also be of relevance for the examination of Dhaka’s food retail market under the influence of emerging supermarkets. Chapter six provides an interim conclusion on the theoretical and conceptual reflections made in the previous chapters. The following second part of this thesis then turns toward the examination of the specific case of (potential) supermarketinduced structural changes in Dhaka’s food retail market. Chapter seven introduces the field and the geographical boundaries of the market under consideration in this thesis by depicting the historical cornerstones of Dhaka on its way from a small settlement to today’s vibrant capital and megacity. Here, particular emphasis will be placed on historical events that have shaped Bangladesh’s economy, political landscape and society until the present

1.3 Structure of the Thesis

7

day, and thus have also had a decisive influence on the developments in Dhaka’s food retail market described later on. Chapter eight provides an explanation of the research design and the methods of data collection and data analysis that were applied in order to answer the research questions underlying this thesis. Chapter nine finally turns to the results that were achieved in the course of the empirical work on Dhaka’s food retail market under the influence of emerging supermarkets. Based on a description of the beginnings and the development of Dhaka’s supermarket landscape in the course of its first decade, persisting and current hindering factors for supermarkets’ further expansion as well as supermarket managers’ corresponding coping strategies will be described. Chapter ten sheds light on supermarkets’ impact on Dhaka’s kacha bazars, and kacha bazar vendors’ (proactive) responses to supermarkets’ competitive pressures. Finally, chapter eleven provides a summary of the thesis’ key findings on the (potential) restructuring processes of Dhaka’s food retail market under the influence of emerging supermarkets. Considering the limitations of this thesis, the chapter closes with implications for practice and further research.

2

Theoretical Reasoning on Markets and Market Forms

As already outlined in the previous introductory chapter, the emergence and diffusion of supermarkets may at some point imply a significant structural change in the original food retail market. This change is usually characterized by a shift from a formerly atomistic to a rather oligopolistic market structure, which may correspond to considerable implications for the groups of actors that are involved in the respective local food distribution channels. The examination of Dhaka’s food retail market under the influence of emerging supermarkets consequently requires the understanding of markets, the characteristics of principal market forms, and the influencing factors that may lead to the emergence of a particular market form. Drawing on microeconomic market theories, the present chapter therefore provides an explanatory approach for structural changes in markets, and thus forms an important basis for the generation and interpretation of the empirical findings on the development of Dhaka’s food retail market.

2.1

Markets and their Structural Characteristics

In everyday language, the term “market” can be applied in manifold forms, whereas the best definition depends on the purpose at hand. From a microeconomic point of view, a market is commonly defined as the economic place of the encounter of supply and demand for a particular good, service, or asset. At markets,

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_2

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market participants—namely sellers and buyers1 —interact to determine the quantities and prices of a certain commodity. That way, a market functions as an information and coordination process, in which market players signal what they intend to buy or sell in what amounts and at what price (e.g. Samuelson & Nordhaus 2010, p. 26 f; Mankiw & Taylor 2018, p. 59). While some markets take place at physical locations, where buyers and sellers can engage in face-to-face bargaining, other markets are rather imaginary places and business is conducted over the telephone, by computer, or the internet (Samuelson & Nordhaus 2010, p. 26). Furthermore, markets do not exist independently, but are rather interrelated with one another. For instance, a market may depend on production factors or intermediate goods supplied by another market, or commodities may have a complementary or substitutional function, as described below (Siebert 2003, p. 86). In order to systematically describe real and ideal-typical markets, and with the goal of making (theoretical) predictions about markets and how market participants will behave in them, economists have developed several models of market forms. Each model is based on single or combined structural characteristics, and these characteristics have a qualitative and a quantitative dimension (Siebert 2003, p. 130; Herdzina & Seiter 2015, p. 154). The qualitative dimension of market morphology comprises three major characteristics: • First, markets can be defined depending on their degree of organization, which may range on a continuum between completely unorganized to highly organized. However, as markets in modern market economies feature a certain degree of organization due to various legal regulations such as contractual standards, safety regulations, or opening hours, completely unorganized markets are rather unlikely to be found in reality (Herdzina & Seiter 2015, p. 154). • Second, markets can be defined by their degree of openness. This characteristic ranges from closed to open, and refers to the opportunity for other economic entities to participate in a market (Siebert 2003, p. 94; Herdzina & Seiter 2015, p. 155). • The third qualitative dimension is the degree of perfection, which ranges from perfect to rather imperfect. A perfect market exists when the commodities traded are homogenous, which means that buyers and sellers regard all 1 In

this context, buyers include consumers who purchase goods, services, and assets, and firms, that buy labor, production factors or intermediate goods that they use to produce goods and services. Sellers include firms, that sell their goods and services; workers who sell their labor; and resource owners who, e.g., rent land or sell mineral resources to firms (e.g. Pindyck & Rubinfeld 2013, p. 7).

2.2 Market Forms

11

commodities as equivalent. That is to say, there are no qualitative differences, the commodity’s price is the same regardless of where and when it is sold or bought, and sellers are not preferred by buyers due to personal reasons such as family relations or sympathy. Perfect markets also feature full market transparency so that all market participants are fully informed on the market conditions: buyers know the quality of commodities, the prices of all sellers, and are aware of all sellers, and where a given commodity can be purchased. Sellers not only know all of the market conditions, but also the production and cost conditions (Siebert 2003, p. 94; Herdzina & Seiter 2015, p. 155 f). In addition to the above-described three qualitative dimensions, Siebert (2003, p. 130) further considers the time period over which a market is analyzed. Thus, as factors, such as a seller’s capacity or access to a market that may change over the course of time, a distinction must be made between short-term and long-term market analysis. The quantitative dimension of market morphology refers to market occupation, say the number and relative size of market participants. On both sides, the side of the buyers and the side of the sellers, the number of market participants may range from one to infinity. As a consequence, the number of market occupation schemes is actually countless. However, in order to reduce complexity when analyzing markets and the behavior of market participants, economists distinguish three major types of market occupation forms, namely markets with many market participants, markets with a few market participants, and markets with only one market participant. From the sellers’ point of view, in accordance with the number of sellers in the respective markets, these forms are referred to as polypoly or atomistic competition, oligopoly, and monopoly (Siebert 2003, p. 130; Herdzina & Seiter 2015, p. 157).

2.2

Market Forms

The combination of the previously described qualitative and the quantitative dimension of markets results in the market form. In the following, the most basic market form, namely the perfectly competitive market, will be described. Even though a perfectly competitive market is a theoretical and hypothetical construct, the model facilitates the comprehension of all other market forms (Krugman & Wells 2017, p. 71 ff).

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2.2.1

2 Theoretical Reasoning on Markets and Market Forms

The Functioning of Markets under Perfect Competition

Regarding the quantitative dimension, perfectly competitive markets are characterized by many sellers. Theoretically, the individual market share of a seller in a perfectly competitive market—say the fraction of the total industry output accounted for by that seller’s output—is close to nil. In reality, however, each seller’s market share is too small in size relative to the overall market to affect the market price or market conditions. This characteristic of competitive markets is also referred to as “atomistic” (Siebert 2003, p. 131). Regarding the qualitative dimension, a market can be perfectly competitive only if the commodities traded are homogenous; this is a precondition that is in reality rarely met. In theory, perfectly competitive markets are further characterized by full market transparency (Mankiw & Taylor 2018, p. 60). In practice, the assumption of perfect information is usually interpreted in such a way that market participants can easily acquire most of the information that is most relevant to their choices. Finally, perfectly competitive markets tend to be open so new sellers can smoothly enter the industry, and existing sellers can easily leave. Though not a necessary characteristic of perfectly competitive markets, free market entry and exit ensure that the number of sellers in an industry can adjust to changing market conditions, and that sellers in an industry cannot artificially keep other sellers out (Frank 2015, p. 321 f). As each seller in a perfectly competitive market can sell all of its commodities at the market price, it has little reason to lower its price below the market price—assuming the seller is striving to maximize its profits. Nor will the seller charge more than the market price, as buyers would then make their purchases elsewhere. As a consequence, all market participants in perfectly competitive markets are pricetakers, as they must accept the price the market determines (Mankiw & Taylor 2018, p. 60 f). As already outlined above, markets fulfill an important function by coordinating supply and demand. The interaction between the supply of a commodity and the demand for a commodity is explained by the law of supply and demand, which will be discussed in the following paragraphs.

2.2.1.1 The Law of Demand The demand for any commodity is the amount of the commodity that buyers are willing and able to purchase at a certain price (Samuelson & Nordhaus 2010, p. 47; Mankiw & Taylor 2018, p. 62). Following the law of demand, other things held constant, the quantity demanded for a specific commodity rises as the price for that specific commodity falls, and vice versa. This relationship between quantity demanded and price can be explained by two effects that normally occur

2.2 Market Forms

13

simultaneously, but are distinguished for the purpose of analysis (Pindyck & Rubinfeld 2013, p. 119): • The income effect: Provided that a buyer’s income remains constant, the fall of the price of a commodity leads to a buyer’s increased income. As the buyer can now afford to buy more, the quantity demanded for that specific commodity rises as the price for that specific commodity falls, all other things held constant. • The substitution effect: When the price of a specific commodity falls, the specific good becomes cheaper relative to other goods. Thus, the buyer will tend to replace other commodities with the now cheaper substitute. However, the degree of responsiveness toward price changes may vary widely from one commodity to another. The magnitude of this responsiveness is measured through price elasticities, which is the percentage change in the quantity demanded of a good resulting from a 1 percent increase in its price. In particular, two general factors seem to have a pronounced effect on the elasticity of demand for a specific commodity: First, and most important, the more close substitutes there are for a particular commodity, and the better the substitutes, the more elastic the demand for a specific commodity will be, as buyers will find it easy to switch from one commodity to another. Second, the longer the time that buyers have to respond to a price change, the fuller the adjustment they can make will be (Pindyck & Rubinfeld 2013, p. 33). The above-described relationship between a commodity’s market price and the amount of that commodity that buyers are willing and able to buy is called the demand schedule, or demand curve. The demand schedule can either be expressed as equation QD = QD (P) or be represented graphically: In the demand curve, the price (P) of a given commodity is measured on the vertical axis while the quantity demanded (Q) of a given product is measured on the horizontal axis. Demand curve D indicates the amount of a commodity demanded at a certain price. For instance, quantity demanded at price P1 would be Q1 . The movement along the demand curve is called a change in quantity demanded, say a change in the quantity a consumer is willing to buy when a commodity’s price changes. The market demand represents the aggregate amount of all individual demands. Reflecting the law of demand, just as the individual

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Figure 2.1 The Demand Curve. Source: Pindyck & Rubinfeld (2013, p. 24)

demand curve, the market demand curve is negatively sloped (Krugman & Wells 2017, p. 72 ff). Besides changes in the quantity of a product demanded, say, shifts along the demand curve, a change in demand may also occur, which causes a shift in the demand curve. This is the case when influences other than a commodity’s price change. A shift in the demand curve may be caused by several factors, e.g.: • Average income of consumers: for most goods, with rising incomes, consumers tend to buy more even if prices don’t change and vice versa. Given a constant market price, e.g. P1 as in Figure 2.1, an increase in income levels would thus lead to an increase in the quantity demanded, e.g. from Q1 to Q2 , as in the above example. As this increase would occur no matter what the market price, the entire demand curve would see a shift to the right, here from D to D’. Similarly, given their greater incomes, consumers should be willing to pay a higher price, e.g. P2 instead of P1 . Again, this would lead to a shift of the demand curve to the right (Pindyck & Rubinfeld 2013, p. 24). While the relationship described holds true for “normal goods,” the quantity demanded

2.2 Market Forms

•

•

•

• •

15

at any price for so-called inferior goods falls when income rises. In that case, consumers abandon inferior goods in favor of substitutes as soon as they can afford to (Samuelson & Nordhaus 2010, p. 48; Mankiw & Taylor 2018, p. 67). Even though some authors assume inferior goods to be of lower quality compared to their substitutes (Siebert 2003, p. 57; Frank 2015, p. 37 f), this does not necessarily have to be the case. Thus, inferior goods are just a more affordable substitute for more expensive goods, and may or may not be of lower quality (Pindyck & Rubinfeld 2013, p. 115 f). The demand for a commodity may be further influenced by the prices and availability of other (related) goods. This is particularly the case with substitute goods, say goods that tend to perform the same function. Thus, demand for good A tends to be low if the price for good B is low. In the case of complementary goods, say goods whose use is interrelated with another good, a fall in the price of one good raises the demand for another good, and vice versa (Samuelson & Nordhaus 2010, p. 48; Krugman & Wells 2017, p. 76). As market demand is derived from individual demands, it follows that the more buyers there are, the higher the demand is likely to be. A larger population, other things held constant, will thus mean a higher demand for goods (Samuelson & Nordhaus 2010, p. 48). Furthermore, changes in the way a population is structured, e.g. an increasing proportion of elderly people, may also influence demand (Mankiw & Taylor 2018, p. 68). Consumer expectations about the future may lead to a higher or lower demand for a good. For example, if it is expected that the price for a particular product may rise in the future, consumers may tend to buy a higher amount of that particular product at the current price. Similarly, a consumer expecting a higher income in the future is likely to spend more today and vice versa (Krugman & Wells 2017, p. 78; Mankiw & Taylor 2018, p. 68). Advertising, as well as subjective elements such as consumers’ individual tastes and preferences may also affect demand for a particular commodity (Krugman & Wells 2017, p. 78; Mankiw & Taylor 2018, p. 68). Finally, demand may be affected by special influences, such as the weather or the climate in a specific region (Samuelson & Nordhaus 2010, p. 48).

2.2.1.2 The Law of Supply The supply side of a market typically involves the terms on which businesses produce and sell their products. Following the law of supply, the quantity of a commodity supplied by an individual seller rises as the price rises, and falls as the price falls, other things held constant. This relationship between the price of a commodity and the quantity supplied is called the supply schedule, or supply

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curve (Samuelson & Nordhaus 2010, p. 51; Pindyck & Rubinfeld 2013, p. 22). The supply schedule can either be expressed as an equation: QS = QS (P) or it can be represented graphically (Figure 2.2):

Figure 2.2 The Supply Curve. Source: Pindyck & Rubinfeld (2013, p. 22)

Here, the vertical axis of the graph shows the price of a good, P, which is the price that sellers receive for a given quantity supplied. The horizontal axis shows the total quantity supplied, Q, measured in the number of units per period. Supply curve S indicates that quantity supplied and sold at a price P1 would be Q1 (Pindyck & Rubinfeld 2013, p. 22). Just as with demand, the degree of supply’s responsiveness toward price changes may vary widely from one commodity to another. Here, the price elasticity

2.2 Market Forms

17

of supply is the percentage change in quantity supplied divided by the percentage change in price. The price elasticity of supply is principally influenced by the ease with which production in an industry can be increased. The longer the period of time that firms have to expand their production capacity as a response to market price increases, the larger their supply elasticity will be, and vice versa (Samuelson & Nordhaus 2010, p. 72 f). The market supply represents the sum of the supplies of all sellers. Reflecting the law of supply, just as with the individual supply curve, the market supply curve is positively sloped (Krugman & Wells 2017, p. 82 ff; Mankiw & Taylor 2018, p. 69). Analogous to the above interpretations regarding demand, movements along the supply curve are thus referred to as a change in the quantity supplied. Shifts in the entire supply curve, say changes in supply, however, are caused by one or more factors affecting supply other than a commodity’s price (Samuelson & Nordhaus 2010, p. 52; Mankiw & Taylor 2018, p. 73). Factors leading to changes in supply are: • Prices of inputs, such as labor, energy, or machinery, primarily determine the production costs for a good. If input prices for a product are low relative to the market price, production may be more profitable and there is an incentive to supply more of a product at each price point. In turn, when input prices are high relative to the market price, firms produce little, switch production to other products, or may even get out of the business (Samuelson & Nordhaus 2010, p. 52; Mankiw & Taylor 2018, p. 74). Thus, given a constant market price P1 , a fall in input prices would lead to an increase in the quantity supplied, here from Q1 to Q2 . As a consequence, the entire supply curve would shift to the right (here from S to S’). Similarly, with lower production costs, companies would accept a lower market price, e.g. P2 . This would be the case no matter what quantity was produced. Again, the supply curve would shift to the right. • Technological advances have an important impact on production costs, and thus may influence a firm’s supply. Technological advances may range from scientific breakthroughs to better application of existing technology, and to the simple reorganization of work flows. Advances in technology lead to an increase in productivity, allowing more to be produced using lower factor inputs. As a result, costs may fall and supply may increase (Samuelson & Nordhaus 2010, p. 52 f; Krugman & Wells 2017, p. 86). • If the profitability of other goods is higher, in some cases a firm may switch to the production of the more profitable product (Siebert 2003, p. 69).

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• Goods may further be in joint supply, so that an increase in one product may also lead to an increase in the supply of another product, e.g. in the case of beef and leather (Mankiw & Taylor 2018, p. 53). • Supply may also be influenced by prices of related goods, particularly goods that are alternative outputs of the production process. If the price of one production substitute rises, the supply of another substitute will decrease (Samuelson & Nordhaus 2010, p. 52). • The higher the number of sellers in a market, the greater the quantity of a commodity supplied will be (Frank 2015, p. 39; Mankiw & Taylor 2018, p. 74). • The expectation of sellers that the price for a particular commodity will rise in the future may lead to the withholding of current supply in order to take advantage of the expected higher future prices and vice versa (Krugman & Wells 2017, p. 86; Mankiw & Taylor 2018, p. 74). • Finally, special influences such as the weather affecting crops, or changing attitudes and social expectations, e.g. over the production of organic food or ethical procurement, may have an influence on production decisions, and thus supply (Samuelson & Nordhaus 2010, p. 52; Mankiw & Taylor 2018, p. 74). Similarly, governmental decisions such as trade policies, environmental or social regulations may have a major impact on production and thus supply (Samuelson & Nordhaus 2010, p. 52).

2.2.1.3 Market Equilibrium The supply and demand curves explained above are used to describe the market mechanism, which is the tendency in free markets for the price to change until the market clears. The relationship between supply and demand exerts a force on price. Provided there is no government intervention, e.g. in the form of an imposition of price controls, in a competitive market, supply and demand will come into equilibrium at the intersection of the supply and demand curve (see Figure 2.3). At this price, the market clearing price (here P0 ), the quantity supplied and the quantity demanded are just equal (here Q0 ), and every market participant is satisfied (Pindyck & Rubinfeld 2013, p. 21). The market will remain in equilibrium until something causes either a shift in the demand curve or a shift in the supply curve, or both. It then takes time for the market mechanism to adjust again (Samuelson & Nordhaus 2010, p. 54 ff; Mankiw & Taylor 2018, p. 76 f). In the above Figure 2.3, for instance, if the price were initially above the market-clearing level, e.g. P1 , producers will try to produce and sell more than consumers are willing to buy. A surplus—a situation in which the quantity supplied exceeds the quantity demanded—will result. To sell this surplus—or at least

2.2 Market Forms

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Figure 2.3 Market Equilibrium. Source: Pindyck & Rubinfeld (2013, p. 25)

prevent it from growing—producers would begin to lower prices. Eventually, as the price fell, quantity demanded would increase, and quantity supplied would decrease until the equilibrium price P0 was reached. The opposite would happen if the price were initially below P0 , e.g. P2 . A shortage—a situation in which the quantity demanded exceeds the quantity supplied—would develop, and consumers would be unable to purchase all they would like. This would put upward pressure on price as consumers tried to outbid one another for existing supplies. Producers would react by increasing the price and expanding output again. As a consequence, the price would eventually reach the market clearing price P0 (Pindyck & Rubinfeld 2013, p. 25 f). The assumptions outlined above, however, make sense only for competitive markets, where both sellers and buyers have only little market power and thus little ability to affect the market price (Pindyck & Rubinfeld 2013, p. 26). Market forms and behavior under imperfect competition will thus be described in the following subchapter.

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2 Theoretical Reasoning on Markets and Market Forms

Market Forms under Imperfect Competition

Imperfect competition prevails whenever individual sellers in an industry can affect the price of their output to a certain degree. Hence, other than sellers in a perfectly competitive market, competitors in imperfect markets are price makers— they must decide on the price of their product (Samuelson & Nordhaus 2010, p. 170 f; Mankiw & Taylor 2018, p. 395). The three most important market structures in imperfect competition—namely monopoly, oligopoly, and monopolistic competition—will be described in the following subchapters.

2.2.2.1 Monopoly A monopoly (from Greek: “monos” = alone/single, and “polein” = to sell) is the most extreme deviation from a perfectly competitive market. In a monopoly, an industry is completely controlled by only one seller, who offers a single, undifferentiated good or service—say there is no industry offering a close substitute (Samuelson & Nordhaus 2010, p. 171; Krugman & Wells 2017, p. 407). As the monopolist is the only supplier of a certain commodity, its individual supply curve is also the market supply curve. The seller that retains a monopoly is thus itself the industry, and their market share is 100 percent. While a monopoly is literally and strictly speaking a market structure with only one firm, in reality a firm can also exert monopolistic power by being the dominant firm in the market (Mankiw & Taylor 2018, p. 394). Other than a seller in a perfectly competitive market, a monopolist has market power, and may change the price of a commodity whenever they feel this is necessary. Assuming that a monopolist strives for the maximization of profit, it will reduce its output and at the same time raise the price compared to perfect competition. Buyers then have to accept the new price, as there is no alternative (Samuelson & Nordhaus 2010, p. 188; Krugman & Wells 2017, p. 415 ff). However, in reality, most countries prevent firms from obtaining such excessive market power. To this end, governments apply antitrust laws—namely rules and regulations designed to promote a competitive economy by prohibiting corporate actions that are likely to restrain competition (Pindyck & Rubinfeld 2013, p. 389 f). The fundamental cause of the emergence and persistence of a profitable monopoly is barriers to entry which prevent other firms from entering the industry. Thus, monopolies are normally closed markets. The stronger the barriers to entry, the more difficult it is for a potential competitor to enter a market and the more market power a monopolist can exert (Mankiw & Taylor 2018, p. 396). The following factors may, alone or in combination, pose barriers to entry and thus give rise to the emergence of a monopoly:

2.2 Market Forms

21

• A firm’s exclusive control over important resources or inputs may pose a barrier to entry for potential competitors in a specific industry (Krugman & Wells 2017, p. 407 ff; Mankiw & Taylor 2018, p. 397). • Technological superiority, say the use of the most up-to-date and efficient technology may also result in a seller’s monopolistic position, as it allows the firm to produce products at a cheaper price and more efficiently than its competitors (Siebert 2003, p. 94 ff; Krugman & Wells 2017, p. 407 ff). • In some cases, monopolies emerge due to regulatory barriers, such as government-granted patents or copyrights, or foreign trade-tariffs and quotas (Samuelson & Nordhaus 2010, p. 175; Mankiw & Taylor 2018, p. 397 f). • A firm may further develop monopoly power through merger, acquisition or the takeover of other firms. As a consequence, the industry becomes more concentrated and the respective firm may erect barriers to entry for potential competitors. However, the emergence of monopolies through external growth is quite unlikely, as such acquisitions tend to be carefully monitored by governments (Mankiw & Taylor 2018, p. 400). • In the long run, by far the most important factor for explaining the emergence and persistence of a monopoly is economies of scale, which is a cost advantage that arises with the increased output of a product. In that case, a single firm can supply a good or service to an entire market at a lower cost than what it would be if there were several firms (Samuelson & Nordhaus 2010, p. 173; Krugman & Wells 2017, p. 407 ff). When economies of scale prevail in a very distinctive form, one seller will expand their output to the point where it produces most or all of the industry’s total output (Samuelson & Nordhaus 2010, p. 173). A monopoly that exists because of economies of scale is also referred to as natural monopoly. Entering a market where a firm has a natural monopoly is unattractive for potential competitors, as would-be entrants know that they cannot achieve the same low costs as the monopolist because, after entry, each firm would have a smaller piece of the market (Mankiw & Taylor 2018, p. 398 f). • In extreme cases, similar to economies of scale, network economies may function as a source of natural monopolistic power. Network economies occur when a good or service becomes more valuable as more consumers use it. A frequently cited example here is Microsoft’s Windows operating system, which achieved its dominant market position on the strength of powerful network economies (Frank 2015, p. 358 f; Mankiw & Taylor 2018, p. 395). However, it should be noted that none of the above factors is a guarantee for the secure existence of a monopoly in the long run. Exclusive control over important

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inputs and resources, as well as governmental decisions are transitory, and production processes may change over time (Samuelson & Nordhaus 2010, p. 171; Herdzina & Seiter 2015, p. 244). Not least, a market form may change in accordance with a commodity’s life cycle. Thus, when introducing a new commodity to the market, the particular seller may attain a monopolistic position. However, in the course of time, imitators may enter the market and cause an erosion of the innovator’s monopolistic position (Siebert 2003, p. 145; Samuelson & Nordhaus 2010, p. 171). In a diluted form, the above barriers to entry may lead to the emergence of an oligopoly, a market form which will be described in the following subchapter.

2.2.2.2 Oligopoly An oligopoly falls between the two extremes of perfectly competitive market and monopoly. Literally speaking, in an oligopoly (from Greek: “oligos”= few, and “polein” = to sell), there are only few sellers—more than one, but not many. In reality however, an oligopoly may also exist in a market with many sellers, among them only a few dominant sellers. The important feature of an oligopoly is that each individual firm can affect the market price (Mankiw & Taylor 2018, p. 453). Because there are few (dominant) sellers competing with each other, each oligopolist is likely to be aware of the action of the others. Thus, sellers in an oligopoly are interdependent—the behavior of one firm may influence, and may be influenced by, the behavior of other sellers. As a result of this interdependence, there is strategic interaction among the oligopolists, and tensions may arise between non-cooperative and cooperative behavior (Samuelson & Nordhaus 2010, p. 171; Krugman & Wells 2017, p. 447 ff). In the first case, a seller tries to act on its own without any implicit or explicit agreements with other sellers. In the second case, sellers may actively cooperate with each other by engaging in collusion in order to set their prices or outputs, divide the market among themselves, or make other business decisions jointly (Samuelson & Nordhaus 2010, p. 190; Mankiw & Taylor 2018, p. 454 f). As already mentioned above, oligopolies may arise when a monopoly’s barriers to entry exist in a diluted form. In some cases, oligopolies may also emerge because of high costs of entry which discourage potential competitors from entering a market. These barriers may either be tangible, such as in the airplane industry, where costs for the development and testing of new airplanes are high. Or barriers may be intangible, e.g. in terms of know-how, which would have to be acquired before entering an industry (Siebert 2003, p. 94 ff; Samuelson & Nordhaus 2010, p. 176). Another factor favoring the development of an oligopoly may be advertisement and product differentiation. In the first case, buyers’ product

2.2 Market Forms

23

awareness and loyalty to well-known brands may make it difficult for competitors to enter the market. In the second case, demands for each of the individual differentiated products may be so small that potential competitors have little interest in entering a market that will not be able to support a large number of firms (Samuelson & Nordhaus 2010, p. 176).

2.2.2.3 Monopolistic Competition As the term “monopolistic competition” suggests, this market structure combines some features typical of a monopoly with other features typical of perfect competition. Similar to perfect competition, monopolistic competition is a market structure with free entry and exit in the long run, and a large number of sellers with small individual market shares. Other than in perfect competition, however, monopolistic competitors do not sell homogenous commodities. In monopolistic competitive markets, each firm sells a product which is at least slightly different from those of other firms. The difference between the commodities may only be perceived by the consumer, or it may be real. As a consequence of the differentiated products, each seller has some ability to set the price for its own product, and thus has some market power. Unlike a monopolist, however, a monopolistically competitive firm does face competition. Thus, the amount of product it can sell depends on the prices and products offered by other sellers in the industry (Samuelson & Nordhaus 2010, p. 171; Krugman & Wells 2017, p. 472 ff). While oligopolies allow cooperative behavior, the large number of sellers as well as free market entry and exit in monopolistic competition do not provide this option. As a consequence, in monopolistic competitive markets, product differentiation tends to be the only way to capture market share from rivals and to attain a certain market power (Krugman & Wells 2017, p. 486 ff). To this end, sellers try to differentiate their products and services in order to meet the needs of specific market segments, which consist of relatively homogenous customer groups with similar buying habits or characteristics, such as age, income, location, tastes, or interests. In the short run, a competitive monopolistic firm will then behave like a monopoly, by reducing its output while at the same time raising the price compared to the perfect competition. In the long run however, given free entry into a monopolistically competitive market with more competitors entering the market, sellers experience declining economic profits (Mankiw & Taylor 2018, p. 432 ff). Table 2.1 provides a summary overview of the main characteristics of the above-described types of market structures: The analysis and examination of a market requires a clear delineation of the market under study in terms of both geographical boundaries, as well as the range of commodities or services to be included. While it is comparably easy to define a

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Table 2.1 Types of Market Structures Structure

Number of sellers and degree of product differentiation

Part of economy where prevalent

Perfect competition

Many sellers; identical Financial markets and products agricultural products

Seller’s degree of control over price

None

Imperfect competition Monopolistic competition

Many sellers; many Retail trade, gas real or perceived stations, personal differences in products computers

Oligopoly

Few sellers; little or no Steel, chemicals difference in product Cars, word processing Few sellers; products software are differentiated

Monopoly

Single seller; product without close substitutes

Franchise monopolies (electricity, water); Microsoft Windows, patented drugs

Some

Considerable

Source: Samuelson & Nordhaus (2010, p. 172, modified)

market’s geographical boundary, it is much more challenging to delineate a market in terms of the offered commodities or services—at least when those are heterogenous. Here, the difficulty lies in defining to what degree of heterogeneity a commodity or service will still be assigned to the same market (Pindyck & Rubinfeld 2013, p. 9 f; Herdzina & Seiter 2015, p. 214). Against this background, and against the background of the research questions underlying this thesis, the following two chapters describe the fundamentals of retail management, and modern food retail management in particular.

3

The Fundamentals of Retail Management

As became clear from the research questions depicted in subchapter 1.2, the objective of this thesis lies in analyzing the structural changes in Dhaka’s food retail market that are possibly being reflected in emerging supermarkets. Hence, in regard to geographical boundaries, this thesis focuses on Bangladesh’s capital city Dhaka as will be described in chapter 7. Concerning the commodities and services to be included in the market of relevance for this thesis, the author focuses on food retail, which can be understood as the marketing and sale of food items, both processed and fresh, to consumers for home preparation and personal or family consumption (Langer 2013, p. 43). Thus, food retail markets not only involve the sale of commodities, namely food items, but also of services, and are thus more complex than suggested by the rather simple models and assumptions described in the previous chapter. The following two subchapters therefore depict the basics of the functioning and functions of the non-online retail process for consumer goods, as well as the particularities of competition in retail.

3.1

The Functioning and Functions of Retail Management

In most economies, producers and manufacturers typically produce a large quantity of a limited variety of goods in a central location. Final consumption, however, usually takes places over wide geographical areas, with consumers demanding only a limited quantity of a wide variety of goods. In this setting, distribution channels are the pipelines through which goods flow from producers and manufacturers via wholesalers and retailers to ultimate consumers. Here, retailers are the business organizations that purchase goods from producers, manufacturers or wholesalers, and sell these goods to consumers for their personal or household © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_3

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use (Levy, Weitz & Grewal 2018, p. 6). In some cases, retailers may feature a certain vertical integration, by performing more than only one level of activity along the distribution channel (Zentes, Morschett & Schramm-Klein 2017, p. 3). In order to make sure that products reach final consumers in an efficient manner, each distribution channel member has to perform a variety of functions. While wholesalers and retailers may perform the same or similar functions, it is customer structure that differentiates wholesale from retail. Thus, wholesalers’ actions are directed toward commercial customers, such as retailers, while retailers direct their efforts towards satisfying the needs of final consumers (Levy, Weitz & Grewal 2018, p. 6). The functions of retail comprise: • Building an assortment of products, whereas retailers specialize in the assortment they offer, be it fashion, furniture, or, as in the case of this thesis, food items. In fulfilling this function, retailers preselect and bundle products from different producers and manufacturers, and offer these in one location in proximity to the consumers’ homes. That way, retailers help producers and manufacturers to bridge the often considerable geographical gap between production site and final consumers. On the consumer side, retailers provide product variety and allow product comparison, which significantly reduces consumers’ transaction costs, in particular search costs (Zentes, Morschett & Schramm-Klein 2017, p. 5 ff; Levy, Weitz & Grewal 2018, p. 7). • Breaking bulk: While producers and manufacturers have to produce on a large scale in order to exploit economies of scale and thus be most efficient, the scale of consumption tends to be much smaller. By breaking bulk, retailers bridge the scale of production and the scale of consumption, as they offer producers’ and manufacturers’ products in smaller quantities that are tailored to the final consumers’ needs (Zentes, Morschett & Schramm-Klein 2017, p. 6). This function is also reflected in the French origin of the term “retail” (French: “retaillier”), which means “to cut a piece off” or “to break bulk” (Levy & Weitz 1998, p. 9). • Retailers hold inventory by ordering, storing, and monitoring merchandise to make sure products are available when customers want them. That way, retailers bridge the temporal gap between production and consumption. Maintaining inventory is a speculative venture, which goes along with considerable risks, as the retailer has to absorb losses caused by volatile or incorrectly estimated demand, product spoilage, or changing customer preferences. In addition to these opportunity risks and costs, maintaining inventory is also entailed with direct expenses, such as the cost of warehousing, insurance, or taxes. By maintaining inventory, retailers remove these costs and risks from

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27

producers, manufacturers, and customers (Ghosh 1994, p. 74 f; Levy, Weitz & Grewal 2018, p. 7). • Advertising and service: This function comprises the display and promotion of merchandise, as well as in-store and after-sales service. In performing these functions, retailers enhance customers’ shopping convenience and minimize the customers’ risk when buying a product, as customers can see, touch, or even test the products, and seek advice before and after purchasing. Not least, these functions may stimulate demand and thus benefit producers and manufacturers (Ghosh 1994, p. 76 f; Levy, Weitz & Grewal 2018, p. 7). • Furthermore, retailers maintain the information flow within distribution channels: They provide customers with producers and manufacturers’ information about products and trends, and producers, manufacturers, and suppliers with firsthand information on consumption patterns, customer characteristics, and needs (Zentes, Morschett & Schramm-Klein 2017, p. 7). Just as with their advertising and services, that way, retailers reduce customers’ shopping risks and help stimulate the demand for the producers’ and manufacturers’ goods (Ghosh 1994, p. 76 f; Levy, Weitz & Grewal 2018, p. 7). • While the previous retail functions are widely acknowledged in academic literature, the social function of retail remains a controversial issue. However, according to Lerchenmüller (2014, p. 45 f), this function is worth taking into consideration. Thus, by making shopping entertaining, retailers may provide customers with an alternative leisure activity. Also, retail may perform a social function by providing the customer with the opportunity to make personal contacts with other customers and/or the staff. This may be of particular importance for sections of the population with only limited contact opportunities, such as single, elderly people. Given all the previously described functions, retailers hold an important hinge function along distribution channels for consumer goods, as illustrated in Figure 3.1: Notwithstanding its important role in distribution channels, for a considerable time, retail has been assigned a “passive” role in economics, and marketing and retail researchers have long tried to explain what added value retailers provide in an economic system. From the interrelated functions described above, it becomes clear why retail nowadays is considered to play a decisive role in today’s specialized market economies, where competition tends to be imperfect and producers, manufacturers, and consumers hardly interact with each other directly: Provided they fulfil their functions properly, retailers help to bridge geographical and temporal gaps between production and consumption, and may thus reduce

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Information flow

Producer/ Manufacturer

Wholesaler

Retailer

Final consumer

Vertical integration Commodity flow

Figure 3.1 Retailers’ Hinge Function in the Distribution Channel for Consumer Goods. Source: Own, based on Ghosh (1994, p. 73)

transaction costs by performing procurement and sales in a more effective and efficient manner than producers, manufacturers, or consumers could (Lerchenmüller 2014, p. 38 f; Zentes, Morschett & Schramm-Klein 2017, p. 9).

3.2

Competition in Retail and Development of a Retail Strategy

As could be shown in chapter 2, the nature of competition is governed by the general economic principles of supply and demand. Nonetheless, competition in the retail industry features three specific characteristics that are worth being considered: • First, retailers can face competition from a variety of sources, whereas distinction is made between intratype and intertype retail competition. Here, intratype competition refers to direct competition between stores with the same format. The closer the stores’ locations, and the more similar their products and services, the greater the intensity of competition. In the case of intertype competition, there is competition among different types of retailers selling similar goods and services, as in the case of supermarkets and drugstores that both compete in the field of personal care products (Levy, Weitz & Grewal 2018, p. 20 f). • Second, in retail competition, large retail chains may coexist alongside small, independent businesses. As retailing does not necessarily depend on large production facilities or other high capital requirements, barriers to entry are

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29

comparably low, even for small and less resourceful businesses and entrepreneurs. This is also why the level of market concentration in retailing—say the share of total sales of an industry accounted by the four largest firms—tends to be lower compared to other industries (Ghosh 1994, p. 41 ff). • Third, non-online commodity retail competition is shaped by local market concentration: Thus, different than other industries, such as, for instance, the manufacturing sector, retailers compete for customers and sales on the local instead of the national level. In this context, the trade area is the geographical area a retailer draws its customers from (Ghosh 1994, p. 285). It is also for this reason that national concentration measures in the retail industry are not comparable with those of other industries with their regional or national markets. Nevertheless, aggregate concentration can be and is used as an indicator of changing structure and organization in the retail industry (Ghosh 1994, p. 45; Kaufmann 2002, p. 27 f). In order to survive in a competitive environment, just as any other businesses, retailers must create and sustain competitive advantage and differentiate themselves from their competitors. To this end, retailers develop and apply an individual retail strategy, which commonly comprises the following steps: As shown in Figure 3.2, customer analysis is the starting point and thus a fundamental step in developing a retail strategy. Here, a retailer analyzes customer expectations in order to identify potential viable market segments. Once the retailer has analyzed the market, it can select the target market, say one or more customer segments it wishes to serve. In order to make its venture feasible, the retailer must evaluate the market potential of each segment to make sure the target market indeed allows for the generation of adequate sales and profits. Here, segment size, defined by the number and purchasing power of customers, as well as the expected growth of the market segment, have to be taken into account. In order to evaluate the attractiveness of the selected market segment(s), the retailer will further have to gather information on the competitive environment in each market segment (Levy, Weitz & Grewal 2018, p. 123 f). As already explained above, in contrast to other industries, non-online retail business tends to exhibit a local market orientation, as retailers must attract customers from the local market areas, e.g. cities, towns, or even neighborhoods. Consequently, retailers need to be more concerned about the nature of local competition in individual markets than about the competition at a regional or even national level (Ghosh 1994, p. 44 f). Once the target market is selected, a retailer will have to define how to compete in the marketplace. To this end, a retailer has to choose a competitive position that allows the creation of a sustainable competitive advantage over other stores that cater to the same target market. Based on this decision, a retailer has to

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Figure 3.2 Steps in Developing a Retail Strategy. Source: Ghosh (1994, p. 150)

implement its strategy by selecting the correct retail mix of elements in order to satisfy the target market’s needs and expectations, and to achieve the desired differential advantage. In this context, among others, the assortment of merchandise, customer services, and pricing policy, as well as the store’s location and shopping atmosphere, are the most important retail mix elements. Here, retailers are in an everlasting quest to create and enhance value by increasing their offerings’ utility for the customer, while at the same time monitoring their operating costs in an effort to reduce the prices they have to charge. Finally, a retailer will periodically have to monitor its image with customers in order to make sure the customers’ perception of the store is indeed consistent with the applied retail strategy. The retailer will then possibly have to reconsider and adapt its retail strategy according to its findings (Ghosh 1994, p. 8 f; Levy, Weitz & Grewal 2018, p. 124 f).

4

Supermarkets and Modern Food Retail Management

While the food retail management practices previously described are nowadays applied as a matter of course, it took them a fairly long time to develop. All around the globe, food retail markets were originally of atomistic nature, and shaped by a multitude of individual, hardly competitive small vendors who run their ventures in quite a pragmatic and hands-on manner. In particular in the course of the past century, however, these traditional market structures were considerably shaken by innovative entrepreneurs and their new and more efficient management practices. Under the resulting increased competition, food retail markets’ atomistic structure successively made way to rather oligopolistic, consolidated market forms. Thus, even though small traditional businesses continued to coexist alongside large food retailers to a certain extent– a typical characteristic of (food) retail competition (see subchapter 3.2) –, the restructured markets were now significantly shaped by only a few strong and dominant players. From the author’s point of view, knowing the origins and developmental milestones of food retail management practices is an important precondition to the understanding of the functioning of today’s supermarkets, and the potential implications of their evolvement and expansion for food retail markets in the Global South. Against this background, the following subchapter sheds light on the origins and evolution of supermarkets in the United States—the cradle of worldwide supermarket expansion—as well as the revolutionary structural changes supermarkets brought to food retail management and food retail markets all around the world. Based on these preceding explanations, in the second subchapter a working definition of the terms “supermarket” and “modern food retail” will be elaborated for this thesis.

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_4

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4.1

4

Supermarkets and Modern Food Retail Management

The Origins and Developmental Milestones of Supermarkets

Until the 1920s,1 the food retail market in the United States was characterized by a polypolistic structure, and comprised a multitude of atomistic food retailers with negligible market share. Consumers were required to purchase their food through a wide array of wet markets, street fairs, grocery stores, and specialty shops, such as bakeries, fishmongers, or butcher shops (Markin 1963, p. 6; Appel 1972, p. 40). The typical grocery store’s layout was a counter-and-wall system where goods lined the walls behind a counter. A clerk served the individual customer by taking a particular commodity off the shelf, weighing or counting the required amount, and packaging the loose items before calculating and collecting the price to be paid (Zimmerman 1955, p. 9 f; Tedlow 1990, p. 230). The products offered in these stores were mainly undifferentiated commodities, and given the poor communication infrastructure and the only recently emerging role of national brands, merchandising and advertising were not yet a common practice to promote sales. Instead, consumers’ decisions were mainly made based on the vendor’s recommendations (Zimmerman 1955, p. 10; Tedlow 1990, p. 185). Food retailers purchased their goods on-spot from independent wholesalers who, in turn, had market relationships with independent producers, processors, and manufacturers. A thick network of middlemen along the supply chain served to overcome the severe logistical problems that existed given the deficient physical and organizational infrastructure (Appel 1972, p. 40; Tedlow 1990, p. 182 ff). The average grocery stores were tiny, and mainly family-owned and operated, which was also reflected in the commonly used term “mom-and-pop stores” (Levy & Weitz 1998, p. 33). As most customers went shopping on foot, food retail stores were located at walking distance from the customers’ residences. Business was managed in a very hands-on manner without any statistics or management principles applied (Zimmerman 1955, p. 9). Generally speaking, the pace of the food retail business was so slow that food retailers had to rely on a high margin, low turnover policy. In combination with the intricate distribution channels, this led to sizable markups and high food prices at the consumer level (Markin 1963, p. 6 f; Tedlow 1990, p. 230). In view of these characteristics, later sources describe the US food retail industry of that time as labor intensive, inefficient, and even “the most backward of all fields in retailing” (Appel 1972, p. 40). 1 For

a detailed description of the structure and development of the US food retail landscape prior to the early stages of the supermarket evolution in the 1920s, see Mayo (1993, p. 1ff).

4.1 The Origins and Developmental Milestones of Supermarkets

33

During the 1920s, the US food retail landscape changed significantly with the emergence of chain stores, or “efficiency stores” (Appel 1972, p. 41). Other than the small general and specialty stores, chain stores such as Kroger, Safeway, and above all, the Great Atlantic and Pacific Tea Company (A&P), followed a high volume and low prices policy by applying “high buying skills and low buying prices” (Markin 1963, p. 13). Chain stores used their buying power to reduce unit food costs by buying in bulk, and streamlining their supply chains: instead of relying on market relations with wholesalers, chain stores vertically integrated in the food distribution channels by taking over the wholesaler function and directly dealing with farmers or food manufacturers (Appel 1972, p. 41; Tedlow 1990, p. 182 ff). Whenever it appeared profitable, chain stores even performed a kind of vertical integration by taking over processing and manufacturing activities under their own company labels (Tedlow 1990, p. 182; Mayo 1993, p. 102). The establishment of long-term contracts with suppliers allowed chain stores to achieve more precise and more stable prices compared to on the spot transactions that were common practice among the other food retailers (Mayo 1993, p. 100). Chain stores further minimized time and transportation costs by establishing their own network of warehouses and delivery trucks, and by cutting out the middlemen along the distribution channel (Appel 1972, p. 41; Tedlow 1990, p. 182 ff). Following the example of the emerging mass production in the style of car manufacturer Henry Ford, chain stores not only streamlined their supply channels. Rather, chain store outlets themselves were “designed as a factory assembly line for consumption” (Mayo 1993, p. 86), which strove to maximize profits through design and management standardization. Standardized store layouts and product offerings, as well as a uniform lettering style for the company’s name, allowed chain stores to create a company image and to make people immediately recognize the venture on the road or in advertisements (Tedlow 1990, p. 193; Mayo 1993, p. 79 ff). In contrast to the small grocers’ hands-on manner of running their businesses, chain stores specifically applied management principles in order to make their operations more efficient. Company policies, standard procedures for managers and clerks, e.g. for stocking, processing inventory, or customer service, as well as continuous work objectives, were specified in order to further increase profits through efficiency enhancement. The principle of multiple store management reduced chain stores’ overhead costs compared to individual grocery stores, e.g. for transportation, insurance, and advertising (Mayo 1993, p. 78 ff). The cost savings that resulted from those innovations enabled the chain stores to not only lower prices for their customers, but also to reinvest some of their financial gains in the further improvement of their company management (Tedlow 1990, p. 182 ff; Mayo 1993, p. 100). Thus, chain store owners carried out

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careful studies to select appropriate store sites, and made significant investments in quality control and inventory management, which allowed them to offer their products at fresher, higher quality compared to smaller grocers, and to run out of stock less. While smaller grocers had to undertake a complex range of different tasks at the same time, chain stores subdivided functions and built expertise in various fields, e.g. in procurement, or accounting, which made their operations even more efficient (Tedlow 1990, p. 199 ff). Initially, chain stores focused only on dry groceries, as these allowed significant cost advantages through economies of scale in procurement and distribution. Over the course of time, the product assortment was further complemented by other product lines such as canned fruits and vegetables, and finally fresh fruits, vegetables, and meat (Manchester 1992, p. 29 f). That way, the diffusion of chain stores marked the beginnings of “mass retail distribution” (Mayo 1993, p. 77), which took place over the following decades. Despite the efficiencies achieved by chain stores’ design and management standardization, the traditional counter-and-wall system and its labor intensity proved to be inefficient for chain store owners who wanted to further reduce overhead costs while at the same time speed up the volume of trade by sustaining a high traffic volume of customers. This aspect of food retail management was further revolutionized when Clarence Saunders opened his patented Piggly Wiggly store in Memphis, Tennessee, in 1916 (Zimmerman 1955, p. 22; Mayo 1993, p. 89). Instead of queuing behind a counter, waiting to be served by a clerk, customers in Piggly Wiggly stores would enter the floor through a turnstile and pick up a shopping basket. They would then move along a circuitous one-way route, pass shelf by shelf, where the priced-out commodities were displayed, select their merchandise and then pay cash at the store exit before leaving the shop through another turnstile (Appel 1972, p. 42; Mayo 1993, p. 89). The revolutionary idea of selfservice gave customers the opportunity to directly inspect the items on sale, and to choose their purchases freely. That meant self-service decentralized the work process into many hands, as customers substituted their own work for clerks in the store. The turnstiles were both a security and laborsaving device, as they reduced the number of clerks required to police the store’s inventory. Overall, the introduction of self-service allowed the store owner to significantly cut labor costs and to increase the velocity of trade (Mayo 1993, p. 92). Although the food retailing industry in the United States had already witnessed some individual attempts with self-service before, given their wide impact, the Piggly Wiggly stores are commonly considered the first truly self-service shops. The Piggly Wiggly idea was

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35

developed into a large franchise2 business, and in the following years the business flourished. At the peak of its success, Piggly Wiggly counted a few thousand stores all over the United States.3 Not surprisingly, numerous imitators, such as Helpy-Selfy and Savey-Wavey emerged, which gave the concept of self-service in food retail an additional boost (Goldman 1975, p. 58). Several changes in US society helped chain stores to grow dramatically in the early twentieth century. Technological advances such as the railroad and the telegraph made regional transportation and communication more efficient, and allowed chain stores to extend their operations to a regional level (Mayo 1993, p. 104). Improving health standards and a large immigration movement led to a great increase in population, and flourishing urbanization provided chain stores with an ever-expanding market (Markin 1963, p. 47 ff; Mayo 1993, p. 92 f). Food retailers’ operations were also influenced by developments in the food production industry: with food manufacturers maximizing the diversity and volume of their products, they required food retailers to handle orders efficiently, and to increase the velocity of their sales. As a consequence, chain stores not only developed middle management positions that specialized in wholesale and retail functions, but also enlarged the size of their outlets in order to provide the amount and diversity of products food manufacturers wanted the retailers to sell (Mayo 1993, p. 132). By the middle of the 1920s, chain stores had become so powerful that they increasingly posed a serious threat to the independent system of grocery retailing and wholesaling. While some retailers and wholesalers responded to these developments by forming their own cooperative groups in order to create similar buying power, most independent retailers and wholesalers reacted with great resentment to chain stores’ rapid expansion and rising growth. As a consequence, an anti-chain movement ensued in the courts. However, despite some judicial success in the form of laws restricting chain activities, given chain stores’ economic superiority, in the end, independents were not able to defeat the chain stores (Zimmerman 1955, p. 5 f; Mayo 1993, p. 104 ff). 2 Franchising

is a contractual agreement between the franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchisor. That means the franchising ownership is attempting to combine the advantages of owner-managed businesses with efficiencies of centralized decision-making in the store operation (e.g. Levy & Weitz 1998, p. 55). 3 However, although the original Piggly Wiggly had a full self-service arrangement, many of the franchised stores applied a “duplex” arrangement of both a counter and self-service, as some upper-class customers perceived self-service as personally degrading (Goldman 1975, p. 58; Mayo 1993, p. 92).

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By the early 1930s, the United States had entered the Great Depression, and negative demand shocks led to further developments in food retailing. In this context, food retailer Michael Cullen is widely perceived as a major catalyst. In 1930, Cullen, a former branch manager for the Kroger Grocery and Baking Company, opened his first King Kullen store in a disused garage in Queens, New York (Zimmerman 1955, p. 32 ff; Mayo 1993, p. 140). Cullen’s stores were located in abandoned factories and warehouses, usually in low-rent districts on the fringe of thickly populated areas, and were equipped with the cheapest interior possible (Charvat 1961, p. 18; Appel 1972, p. 44). The full implementation of self-service and cash-and-carry further contributed to lower overhead costs. In order to enhance customers’ awareness and to attain the sales volume required, King Kullen heavily applied advertising, promotional activities, and loss leaders (Zimmerman 1955, p. 37 ff; Mayo 1993, p. 141 ff). New food manufacturing and processing techniques, and big food manufacturers’ national efforts to increase the brand and package advertisement of their products, provided an important foundation for the successful implementation of these strategies (Charvat 1961, p. 40 f; Markin 1963, p. 50). The company’s concept of adopting the principle of mass merchandising by selling high volumes at relatively low profit margins proved to be an immediate success in depression-era America. As a result, it did not take long until innovator King Kullen had imitators who tried to take the original idea to an even higher efficiency level. The most prominent and successful among these imitators was Big Bear, a venture whose first outlet was launched in Elisabeth, New Jersey, in 1932. Big Bear followed the tactic of attracting customers from a large catchment area through heavy advertising and a broad product range, including household goods, drugs, and even auto accessories, which would allow customers to serve all of their needs in only one single shopping trip (Zimmerman 1955, p. 39 ff; Mayo 1993, p. 141 ff). The phenomenal success of the so-called “cheapies” had a considerable impact on the food retail landscape, and small and independent grocery stores were dying from economic inefficiency. By essentially turning warehouses into stores, the cheapies took away the chain stores’ price advantage, and were able to sell merchandise at prices even below the wholesalers’ cost. As a consequence, store owners, in particular of chain stores, fought back against their new competitors just as independent retailers had fended off the chain stores a few years earlier. In cooperation with independent grocers, chain store owners pressured wholesalers and food manufacturers to refuse to supplying to cheapies, and demanded that newspapers exclude cheapies’ advertising (Zimmerman 1955, p. 44 ff). Additionally, under the influence of chain stores and independent grocers, some states and

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municipalities introduced punitive tax measures directly aimed at the cheapy format. However, this legislation did not persist long, and one by one, these measures were declared unconstitutional (Zimmerman 1955, p. 118). Furthermore, the consumers were unimpressed by these activities and continued to enjoy the cheapies’ comparatively low prices. In the end, during the late 1930s, chain stores—among them the leading chain store A&P—started to convert their stores into cheapies, or to open cheapies under a second name (Zimmerman 1955, p. 60 ff; Charvat 1961, p. 158ff). Hence, it can be stated that, whereas the cheapy was an innovation of independent grocers, the significant increase of cheapies in the late 1930s occurred when the chain stores joined the movement (Charvat 1961, p. 26). According to Appel (1972, p. 43), this marked the “revolutionary birth of the supermarket.” In the following years, supermarkets became widely accepted and adopted across the nation. With the rise in the national income, supermarkets improved and strengthened their techniques, and that meant rapid growth in both quantity and quality. Supermarkets were located in more sophisticated areas, and the warehouse approach of the cheapies was being replaced by a well-equipped store interior. The introduction of the gondola shelf system allowed supermarkets to efficiently stack goods within customers’ reach, and the replacement of shopping baskets with trolleys enabled customers to comfortably buy in bulk (Mayo 1993, p. 148 f). In 1937, the Super Market Institute, the world’s first trade association for supermarkets, was founded in New York with the goal of joining forces in order to promote the further diffusion and development of supermarkets through knowledge exchange and common public relations (Zimmerman 1955, p. 69 ff). In the following years, supermarket operators turned to seek new ideas and knowledge in order to improve and strengthen their techniques, among others through exchange visits of fellow operators in other cities (Zimmerman 1955, p. 117 f). In the meantime, store equipment and food manufacturers alike increasingly recognized the potential supermarkets provided to procure and sell their products at a mass scale. Consequently, manufacturers made strong efforts to work together closely with supermarket operators in order to better adjust their products to the needs of the growing supermarket industry (Zimmerman 1955, p. 117 f; Mayo 1993, p. 153). During the war years from 1942 to 1945, the food retail industry in the United States witnessed a slowdown and showed little, if any, expansion at all (Appel 1972, p. 48; Mayo 1993, p. 157). Nevertheless, given the many shortcomings of that period, supermarket owners were forced to develop various innovative sales techniques, which led to further refinement of the supermarket concept: in order to fill the shelves made empty by rationing, supermarkets expanded their product diversity by adding non-food departments such as household merchandise, drugs,

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liquor, or beauty products. Originally born out of necessity, this “scrambled merchandise”4 proved to be an additional asset, as it not only allowed supermarket owners to maintain economic stability, but also strengthened the supermarket’s image as a convenient one-stop shopping place (Zimmerman 1946, p. 385; Charvat 1961, p. 28). With canned goods being shipped to the troops overseas, and with tin being needed for the production of war goods, frozen foods, in particular fruits and vegetables, became more prevalent (Zimmerman 1955, p. 148; Mayo 1993, p. 161). This again led to the development and introduction of new store equipment, such as refrigeration facilities, which permitted both the visibility of the products, and the retention of the temperature required (Zimmerman 1946, p. 388; Mayo 1993, p. 159 ff). The most important result of wartime, however, was the unprecedented expansion of self-service. While self-service had formerly been common only in packaged items such as canned goods and boxed cereals, given the scarcity of a workforce due to war, supermarkets started experimenting with (partial) self-service in their meat, vegetable, and dairy departments. Unexpectedly, the expansion of self-service in these departments proved not only to be successful, but often even led to increased sales figures because of customers’ “impulse buying”5 (Zimmerman 1946, p. 385 f; Mayo 1993, p. 159). The broad application of self-service soon converted the customers to “educated buyers” (Zimmerman 1946, p. 323), who, on the one hand, desired information on the offered products, but no longer wanted to be influenced or persuaded by a clerk. Thus, the extension of self-service also had a significant impact on the food manufacturing industry: with clerks being replaced through self-service, the prepackaging of products gained significant importance. Food manufacturers were consequently not only required to package their products in an appealing, informative and preservative way, but also to develop correspondingly efficient packaging methods (Zimmerman 1946, p. 386 f). Shortly after World War II, supermarkets started their worldwide conquest. As Zimmerman (1955, p. 289), the founder of the US Super Market Institute, recalled from this period: “[m]any foreign visitors came to our stores eager to learn about the Super Market, of which they had read and heard so much. They were anxious to learn for themselves why it was so attractive to the American public and whether it would be feasible in 4 “Scrambled merchandise” refers to merchandise that is not typically associated with the store

type, such as clothing in a drugstore (Levy, Weitz & Grewal 2018, p. 546). buying” or “unplanned purchasing” refers to a buying decision that customers make on the spot for a product they originally did not intend to buy (Levy, Weitz & Grewal 2018, p. 541).

5 “Impulse

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their own countries. […] All of them left America deeply impressed – some determined to follow in our footsteps. They all realized, however, that they could not completely emulate our type and form of self-service or Super Market.”

However, as Zimmerman already wrote in 1955 (p. 158), given the high initial investment, the skilled labor and the large behind-the-scenes scenario required, “Super Market is big business.” Thus, as also becomes clear from Zimmerman’s quote above, the adaption of US-style modern food retail in other countries faced various challenges. Even in Western Europe, where supermarkets nowadays seem to be indispensable, the postwar environment with consumers’ low purchasing power and limited mobility, the absence of a packaging industry, the lack of refrigeration facilities, advertising and brand consciousness initially significantly hampered supermarket diffusion (Zimmerman 1955, p. 293 ff). In 1950, Paris witnessed the First International Congress on Food Distribution. In view of the great international interest in supermarkets, this congress with nearly 2,000 entrepreneurs and other experts from 22 countries was carried out at the suggestion of the Super Market Institute. The event laid the foundation for a series of follow-up events for international knowledge exchange among food retailers and manufacturers, and spurred worldwide awareness of new forms of food retail. In addition to the activities of the Super Market Institute, individual US food retail companies showed “major missionary effort in practically every country” (Zimmerman 1955, p. 291), e.g. by setting up a worldwide educational program for food retailers on self-service and other supermarket practices. As a result, whether in Algeria, the Philippines, New Zealand, or Germany6 , supermarkets came into vogue in both the eastern and the western hemisphere. Proponents of this development believed supermarkets make a significant contribution to the economic welfare of a nation, and bring advantages to all actors along the food distribution channel: hence, farmers would benefit from higher surpluses through shortened and more efficient distribution channels. On the level of processors and manufacturers, supermarkets would encourage large-scale food production at higher product quality and safety levels, combined with more efficient packaging methods, and thus greater preservation of products’ nutritive value and freshness. As a consequence, consumers, even in distant markets, would enjoy access to a great variety of safe and higher-quality food at affordable prices in a comfortable and time-saving shopping environment. Not least, supermarkets were expected to significantly contribute to the national economy by providing numerous (indirect) 6 For

a detailed description of the introduction of supermarkets to post-war Germany and respective knowledge-transfer from US to Germany, see Langer (2013).

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employment opportunities and an increase in consumers’ buying power through the economies of scale effected (Zimmerman 1955, p. 321 ff). In this period, when supermarkets in other countries were just about to emerge, supermarkets in the United States experienced tremendous growth and finally became the nation’s unchallenged food retail format. A flourishing postwar economy with full employment and high disposable incomes led to new consumer demands and shopping patterns (Zimmerman 1955, p. 140 ff; Mayo 1993, p. 162). Health and quality concerns gained significant importance in customers’ food choices (Manchester 1992, p. 11 ff; Mayo 1993, p. 207 f), and consumption shifted away from less expensive bulk foods such as potatoes and grain products toward costlier (leafy) vegetables, fresh fruits, meat, and dairy products. A dramatic rise in the ownership of private cars and refrigerators led to lower shopping frequency and a higher number of items bought per purchase (Charvat 1961, p. 34 ff). A significant increase in women working outside their homes led to rising demand for more processed, convenient and easy-to-prepare food, and time-saving shopping opportunities (Mayo 1993, p. 215; Manchester 1992, p. 9). Supermarket managers did not hesitate to adapt their retail strategies to these trends by building bigger stores with even larger and more diversified assortments. With families eating out more frequently, restaurants and fast food franchisers had become serious competitors to supermarkets. Supermarket operators counteracted this development by introducing salad bars, bakeries, and prepared takeout foods to their stores (Manchester 1992, p. 38; Mayo 1993, p. 215 ff). While supermarkets in the United States had formerly mainly focused on their low-price appeal, in the postwar period, supermarket managers started experimenting with store design and equipment in order to make their shops more appealing to their customers (Charvat 1961, p. 222 ff, Markin 1963, p. 115 f). Other than small grocery stores, which were oriented to the scale of the pedestrian, supermarkets were designed proportional to the automobile. As supermarkets were moved farther back from the street to provide parking facilities, customers were too far away to see the products displayed in the windows. Hence, supermarkets’ window frontages were used to announce special sales or to provide an inviting glance into the well-lighted interior. Steel and glass became prevalent in building design, and bright and soft colors were used to make the interior more appealing (Mayo 1993, p. 168 ff). Air conditioning, music and rest rooms were installed to encourage customers to extend the time of their shopping trip, and home economists provided shoppers with advice (Zimmerman 1955, p. 145; Mayo 1993, p. 174 ff). By adding kiddie corrals, snack bars and soda fountains, supermarkets endeavored to make their stores an entertaining place to shop for the whole family (Charvat 1961, p. 65).

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Based on the lessons learned during World War II, supermarket managers further developed and expanded self-service in their perishable lines, such as meat, dairy and, at a slower pace, fresh fruits and vegetables (Zimmerman 1655, p. 146 f). Supermarket managers learned to diversify their display techniques to further encourage customer buying, above all impulse buying (Mayo 1993, p. 201 f). The introduction of several devices, such as the magic eye door or mechanized cash registers allowed the reduction of labor costs, and an increase in trade velocity and volume (Zimmerman 1955, p. 152 ff; Mayo 1993, p. 174 ff). Supermarkets further introduced larger shopping carts with the goal of enticing customers to increase their purchases (Charvat 1961, p. 222 ff, Markin 1963, p. 115 f). Promotion and advertising became important tools to increase sales, and supermarkets heavily promoted festive events, such as grand openings, store anniversaries, and holiday promotions, as well as coupons and giveaways to draw customers’ attention (Charvat 1961, p. 65; Mayo 1993, p. 178 f). In order to fully exploit the potential of the above-described economic and societal trends, food retail expansion began a race into the flourishing suburbs, where purchasing power was higher and opportunity for growth was even greater (Markin 1963, p. 43 f; Mayo 1993, p. 162 f). While large independent supermarkets and supermarket chains had the necessary capital to invest in all of these activities and the further expansion of their ventures, the remaining small grocery stores turned out to be the losers in this development (Charvat 1961, p. 31 f; Mayo 1993, p. 162 f). Limited-line stores in all areas, from fresh meat, fruits and vegetables to bakery products and grocery items heavily felt the impact of the supermarkets. Similarly, in the non-food area, supermarkets became “a nightmare to other retailers such as drugstores, variety shops, and department stores” (Charvat 1961, p. 220). By the late 1950s, suburbia was saturated with supermarkets. As a consequence, food retailers began to apply a strategy of “acquire or expire” (Charvat 1961, p. 29) in order to sustain their competitive advantages, and to further expand their businesses. This merger movement followed a kind of domino-effect, with independent food retail stores being bought by smaller supermarket chains that again were occasionally bought by medium and large chains. That way, the US food retail sector saw increasing concentration, with fewer and more powerful supermarket chains controlling trade areas and sales. The wave of mergers eventually slowed down in the course of government taking legal action against several supermarket chains in order to counteract the food retail industry’s tendency toward monopoly (Charvat 1961, p. 179 ff; Mayo 1993, p. 183). In addition to that, the supermarket sector was shaken by several public food scandals, which challenged the supermarkets’ role as self-appointed guardians of food quality and

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safety. As a consequence, some customers formed their own food co-ops or switched to farmers’ markets. In parallel, small gourmet shops and health food stores emerged to satisfy in particular the affluent consumers’ demand for safe, highquality food. It did not take long until supermarkets reacted to these developments by putting even more emphasis on the quality and safety of the food on their shelves (Mayo 1993, p. 209 ff). In the mid-1960s it became clear that food retailers “[…] could not sustain the conventional supermarkets as an unchanging formula for maximizing profits” (Mayo 1993, p. 215), and entrepreneurs had to find new retail strategies to further attract consumers (Manchester 1992, p. 135). The supermarket boom finally abated, and several new store formats emerged over the following decades. In this context, superette stores, above all 7-Eleven, emerged as the solution to the problem that customers who only bought a few items did not enjoy the long drive to a supermarket and the long lines at the checkout stand. Superettes filled that market niche by offering only narrow product lines, and by emphasizing locational convenience in the immediate vicinity to the customers’ homes (Mayo 1993, p. 205 ff). The 1960s also marked the beginnings of the discount movement, which was flourishing with the inflationary pressures of the United States economy at the end of the decade. Discount store operators strove to capture sales in a saturated, supermarket-dominated market by eliminating promotional techniques and by lowering the total number of food items sold at the stores. That meant: “[t]he discount movement was a return to economic premises of supermarkets in the early postwar era, which emphasized sales volume and holding down overhead costs” (Mayo 1993, p. 212).

During the recession of the 1970s, warehouse stores harkened back to the strategies applied by earlier versions of the supermarket: just as King Kullen or Big Bear in former times, warehouse stores deemphasized service, quality design and atmosphere, and simply focused on low food prices (Manchester 1992, p. 20 f; Mayo 1993, p. 212 f). Finally, wholesale club stores, a retail-wholesale hybrid, provided membership card holders with general merchandise, as well as a grocery line dedicated to large sizes and bulk sales (Manchester 1992, p. 22). The 1970s also came along with technology becoming a driving force in food retailing. In this regard, the most significant innovation was the introduction of the Uniform Pricing Code (UPC), a computer code that was placed on each packaged product and scanned at the checkout. Besides being a tremendous labor-saving device, the UPC also enabled store management to make exact estimates as to when and how

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much of an item was needed, and thus to increase sales efficiency within a given space (Mayo 1993, p. 203 f). The wide application of the computer allowed the efficient operation of a large number of supermarkets under one central management group, facilitated horizontal and vertical integration along the distribution channel, and made an additional large contribution to the high degree of concentration of supermarkets’ purchasing power (Food and Agricultural Organization of the United Nations 1973, p. 14). The 1980s and the 1990s witnessed the emergence of huge food retail formats, especially in the form of hypermarkets and supercenters. Originally developed in France by the French food retail chain Carrefour in 1963 (Burt 1986, p. 54), hypermarkets consolidated the superstore and the discount store in one warehouse like building. In 1987, the first US hypermarket opened in Dallas under the flag of Wal-Mart and Cullum (Levy & Weitz 1998, p. 46). However, given hypermarkets’ meager success in the United States,7 they were soon replaced by a smaller version, namely the supercenters8 (Levy & Weitz 1998, p. 46 f). Overall, the growth of these “big box” (Levy, Weitz & Grewal 2018, p. 41) food retailing formats led to an erosion of market share from other food retailers, and the food retail industry underwent considerable mergers and acquisitions, leading to even fewer sellers, and hence, a more concentrated market (Stiegert & Hovhannisyan 2009, p. 135 ff). In view of steep competition in the food retail sector, retailers further increasingly applied a mixed strategy of store formats in order to better tailor their product assortments and services to specific consumer segments (Mayo 1993, p. 222; Kaufmann 2002, p. 25). From the middle of the 1990s onward, slow population growth and competition, e.g. with gas stations, liquor stores, or (fast food) restaurants, slowed down food retailers’ sales growth. At the same time, US food retailing faced considerable investment and acquisition from overseas ventures. In view of this situation, large US food retailers chose to seek growth opportunities by taking over smaller competitors, which led to a sharp rise in mergers and acquisition and thus spurred the consolidation of the US retail food sector. At the same time, US food retail firms sought investment opportunities in foreign food retail (Kaufmann 2002, p. 22 ff).

7 While

hypermarkets in France were built in the outskirts of metropolitan areas in order to attract customers without violating strict land use laws, US consumers’ response to this food retail format was rather weak as, given much less restrictive land use laws, US consumers already found a vast array of shopping opportunities elsewhere (Levy & Weitz 1998, p. 46). 8 Despite that, the differentiation between hypermarkets and supercenters is often very blurred, or both terms are applied in a synonymous manner.

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In recent years, growing consumer demand for natural, organic, and local products has been reflected in the emergence of natural and organic supermarket chains, and in conventional supermarket chains introducing an additional natural and organic department (Kaufmann 2002, p. 25 f; Duff & Phelps 2016, p. 3 ff). The emergence of the internet allowed supermarkets to operate with greater flexibility, efficiency, and lower transaction costs in supplier communication (Kaufmann 2002, p. 26 ff), and provided supermarkets with an additional retail channel: thus, with more consumers being online, in addition to emerging onlineshops, some originally store-based food retailers made additional investments in their own online ordering and delivery services (Zentes, Morschett & SchrammKlein 2017, p. 93; Levy, Weitz & Grewal 2018, p. 69). In parallel, food retailers continuously introduced innovations and new technologies to make shopping at their outlets even more convenient and efficient. Here, providing self-checkout lanes to speed up the checkout process for smaller purchases is just one among many examples (Kaufmann 2002, p. 30). Overall, today’s supermarkets—and in particular transnational food retail chains—are seen to exert considerable power, not only along their supply chains, but also on the political and not least on the consumer level (Fuchs & Clapp 2009, p. 285). Dixon (2007, p. 31) even went so far to say that: “[b]y guiding consumers towards an idea of ‘how to live the good life,’ they [the supermarkets] shape individual lifestyles and consumer cultures as surely as the mass media, the education system and the church.”

However, supermarkets’ power—not only in the United States—is a two-edged sword: As earlier stages in supermarket history have already shown, supermarkets tend to be under the close surveillance of different interest groups, be it competitors, customers, or the government. It is therefore not surprising that supermarkets pay close attention to their stakeholders’ expectations and work hard to be perceived as “good corporate citizens” that take responsibility for the social, economic and environmental consequences of their actions (Altenburg et al. 2016, p. 55; Levy, Weitz & Grewal 2018, p. 11 ff).

4.2

Approaching the Terms “Supermarket” and “Modern Food Retail”

From the above-outlined history of supermarkets, it is becoming clear what Markin (1963, p. 9) stated already more than 50 years ago:

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“The supermarket did not bloom as a full-grown and mature institution but evolved almost as a series of separate, distinct concepts. In each step, a new element was substituted for an old one. By gradually changing various elements in the traditional grocery store format, entrepreneuring retailers created a successive series of intermediate formats serving as the antecedent forms of the supermarket and its characteristics as we know them today.”

However, as more recent and current developments show, supermarkets’ evolutionary process is still in progress. This is not surprising, as the food retail sector can be a very competitive and dynamic environment where survival and growth remain an ongoing challenge and require constant adaption to competitors’ activities and customer preferences, and respective innovations in retail strategy. In view of the many evolutionary stages and the great variety of retail strategies and resulting store formats, defining the term “supermarket” has been a challenging task ever since (e.g. Zimmerman 1955, p. 18; Mayo 1993, p. 117). To make it even more complex, the term “supermarket” is often applied to a whole concept of food retail, but is simultaneously used to denote one food retail format among many (Humphrey 2007, p. 433). With food retailers synthesizing successful elements of different food retail formats, the distinction between food retail formats is being further blurred. Nevertheless, definitions9 referring to supermarkets as broad food retail concept bear common characteristics, above all: • the self-service mode of operation, including a payment point or checkout at the exit, • a full-line product assortment, comprising all major food lines (groceries, dairy, fresh vegetables, fruits, and meat) as well as various non-food products, • a large physical scale and a large sales volume compared to grocery stores and other small food retailers, • the application of a mass-merchandising strategy, i.e. low profit margins per item and high turnover, • a reduction in the costs of operation and an increase in productivity, mostly through the substitution of capital for labor, • the generation of economies of scale in various functions, e.g. procurement, inventory handling, or physical distribution.

9 E.g.

Goldman (1974b, p. 56); Vorley & Fox (2004, p. 12), Burch & Lawrence (2005, p. 2f), Humphrey (2007, p. 440).

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In the context of this thesis, a “supermarket” will thus be considered any food retail venture that complies with the above-listed features. Specific supermarket formats will only be differentiated in cases where this is explicitly relevant. Some sources consider the chain store characteristic as another core feature of supermarkets (e.g. Burch & Lawrence 2005, p. 2 f). However, as history has shown, independent stores have also made important contributions to the development of the supermarket industry, as they functioned as influential innovators whose successful practices were soon imitated by other competitors. For this reason, independent food retail stores complying with the above-listed features will be considered in this thesis as supermarkets as well. Finding a non-judgmental term to distinguish supermarkets from other food retail formats is challenging, but necessary for the purpose of this thesis. To this end, some studies (e.g. Joseph et al. 2008; Uttam & Kumar 2013, p. 3) distinguish “organized retail” and “unorganized retail.” In this context, organized retail refers to licensed and registered food retailers, such as corporate-backed hypermarkets and food retail chains, as well as privately owned large food retail stores. Conversely, unorganized retail comprises informal formats of low-cost food retailing, such as small grocery stores, wet markets, and street vending. However, in light of her own as well as her fellow researchers’ experiences (Etzold 2013; Keck 2016) with food wholesaling and retailing in Dhaka, the author of this thesis agrees with Paddison, Findlay & Dawson (1990, p. 3) that: “[…] the apparent chaos of the urban marketplace in less developed countries is more apparent than real.”

Therefore, the author finds the terms “organized” and “unorganized” misleading, as they may implicitly assume food retail formats other than licensed and registered ventures to lack organization. Similarly, the widely-used term “traditional food retail” in contrast to “modern food retail” should be applied with caution, as the term “traditional” may imply backwardness and inefficiency (Goldman, Krider & Ramaswami 1999, p. 129). Furthermore, the perception of what is “modern” highly depends on a contemporary understanding, which leads to the difficulty of how to clearly distinguish “modern” and “traditional” modes of food retail. Bearing this in mind, the author nevertheless henceforth applies the terms “traditional” and “modern.” However, this is not done in a judgmental fashion, but rather as a means to distinguish between long-established modes of food retail, such as wet markets, small-scale grocery stores, or street vending, and more recent—“modern”—modes of food retail, in terms of supermarkets as characterized above.

5

Research Waves on Modern Food Retail in the Global South

The (potential) impact of supermarkets on the structure of food retail markets, and the corresponding development relevant implications for actor groups along the affected food distribution channels in the Global South have been generating the interest of researchers, policymakers, and development practitioners for already several decades now. In this context, two major research waves seem to stand out: a research wave on the role of modern food retail in economic development, which began in the early 1950s, and a research wave on the rapid rise of supermarkets in the Global South, which emerged in the early 2000s. At a first glance, due to its timeliness, the second and thus more recent research wave in particular seems to be of relevance for this thesis, as its results to some extent represent the state of research on the subject matter. With closer examination, however, it becomes clear that the first research wave may likewise contribute meaningful, relevant knowledge for this thesis. First, the diffusion of modern food retail in Bangladesh and its capital city Dhaka appears to still be in its beginning stages. With the first research wave focusing on country settings that were likewise at this early stage in the World War II era, the wave’s findings might also be of interest for the analysis of the specific case of Dhaka. Furthermore, when examining the publications of the second research wave, the author found that the first wave’s findings were taken up and reported in only a very simplified, and sometimes even distorted form. For these reasons, in the following subchapters based on the respective primary literature and original publications, the research interests, underlying assumptions and findings of both research waves will be depicted. That way, the author strives for the identification of influencing factors and mechanisms of action that may also be of relevance when studying the potential structural changes in Dhaka’s food retail market under the influence of emerging modern food retail. Against the

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_5

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background of her own research interests (see subchapter 1.2), the author thereby pays special attention to the following questions: • Why and how did modern food retail in countries of the Global South emerge? • Which factors promoted or hindered the evolution of modern food retail? • What impact did/does modern food retail have on traditional food retail formats? However, before turning to the description of the two above-named major research waves, a short remark will address the difficulties of going along with the analysis of modern food retail’s impact on traditional food retail: Generally speaking, the penetration of modern food retail is measured with the market share of modern food retail in total food retail sales (Traill 2006, p. 165). However, the use of modern food retail’s market share as an indicator also goes along with various pitfalls: first, as already became clear in the previous chapter, given the multitude of formats, modern165). However, the use of modern food retail’s market share as an indicator also goes along with variou food retail has many forms of appearance. Thus, the size of modern food retail’s market share is always on the definition of modern food retail used as a basis. Second, not every country has agencies that collect accurate data on food retail. But even in the other case, obtaining valid data on the market sdependenthare of—often informal—traditional food retail may be a challenging task (Cadilhon et al. 2006, p. 34; Gaiha & Thapa 2008, p. 249). Not least, the determination of the market share may also be influenced by different methodologies of data collection (McCullough, Pingali & Stamoulis 2008, p. 15). It is for these reasons that respective data and cross-country comparisons should be handled with the necessary caution and be rather considered as approximations (Traill 2006, p. 165). Bearing these aspects in mind, in the following subchapters, the author will turn to the description of the two major research waves on the emergence and diffusion of modern food retail in the Global South, and its structural impact on the local food retail markets.

5.1

Research Wave on the Role of Modern Food Retail in Economic Development

Following World War II, a surge of interest in what today is referred to as development cooperation set in. It is in this context that the issue of modern food retail in countries of the Global South received considerable scientific attention, with

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researchers such as economist Holton (1953, p. 344) coming to the conclusion that: “[…] the role of commodity retail in the economic growth of preindustrial areas has been almost completely ignored in the growing body of literature devoted to the nascent field of the economic development of underdeveloped countries.”

Based on observations made in Puerto Rican food distribution channels, Holton and colleagues acknowledged the importance of development programs, e.g. in the industrial and in the agricultural sector. At the same time, the researchers requested these programs not to neglect the importance of the distributive sector as a decisive link between production and final consumption. Hence, according to Holton and colleagues, development programs striving for expansion in the agricultural or industrial sector would also require appropriate correlative changes in the distributive sector to be truly fruitful. Under certain circumstances, the researchers further argued that the distributive sector could even “[…] be a leading sector in economic development, in the sense that alterations in this sector can change demand and cost functions in agriculture and manufacturing so as to encourage their expansion” (Collins & Holton 1963, p. 123).

The above-described considerations soon found their way onto the agendas of researchers, development practitioners, and policymakers, and the contribution of food distribution to the economic development of countries in the Global South became a widely-discussed topic of interest: in 1965, for instance, on behalf of the US Agency for International Development (USAID), Michigan State University set up a research group to conduct a contract research program on food distribution in Latin American countries. The overall goal of the program was to describe and analyze the food distribution systems of selected regions in Latin America, with the objective of providing countries of the Global South with empirically based and theoretically sound strategies for the design of improved food distribution systems. Furthermore, the studies were supposed to contribute to a better understanding of the role of coordination processes along distribution channels in economic development (e.g. Riley et al. 1970a, p. iii). Starting with a pilot study on the food distribution system in Puerto Rico (Riley et al. 1970a), further studies followed on La Paz in Bolivia (Slater et al. 1969a), Northeast Brazil (Slater et al. 1969b), and Cali in Colombia (Riley et al. 1970b).

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A few years later, the role of food distribution in economic development also aroused the interest of the Food and Agriculture Organization of the United Nations (FAO). In 1973, the FAO carried out a “Technical Conference on the Development of Food Marketing Systems in Large Urban Areas in Latin America,”1 with the aim of analyzing the situation and trends of food distribution in large Latin American cities, and to formulate strategies and plans for the adjustment of local food distribution to present and future requirements of rapidly expanding urban areas (Food and Agricultural Organization of the United Nations 1973, p. iii ff). Two years later, in 1975, the FAO organized a similar event, this time on the “Development of Food Marketing Systems in Large Urban Areas in Asia”2 (Food and Agricultural Organization of the United Nations 1975, p. i ff).3

5.1.1

Presence and Diffusion of Modern Food Retail

The analysis of the local food distribution systems in the above-named regions revealed a picture very similar to food distribution prior to the evolution and dominance of modern food retail in the United States (see subchapter 4.1): the cities under study featured predominantly atomistic food retail markets that were shaped by a multitude of small entrepreneurs such as street vendors, stationary and moving street markets, wet markets, and small-scale grocery stores. Most of the food retailers tended to be self-financed individual or family businesses with small inventories and narrow—often even single product line—assortments of undifferentiated commodities. Food retail mostly took place on the basis of low sales volumes and was mainly directed toward a small customer base from the immediate neighborhood. Food retailers were involved in highly-fragmented, atomistic distribution channels, which consisted of a large number of small wholesalers who operated on a small scale and with high specialization in a specific

1 Namely

Caracas (Venezuela), Buenos Aires (Argentina), Mexico City (Mexico), Recife, Rio de Janeiro and Sao Paulo (Brazil), Bogota and Cali (Colombia), Lima (Peru), and La Paz (Bolivia). 2 Namely Manila (Philippines), Kuala Lumpur (Malaysia), Bangkok (Thailand), Djakarta (Indonesia), Colombo (Sri Lanka), New Delhi and Bombay (today Mumbai) (India), and Dacca (today Dhaka) (Bangladesh). 3 In addition to the above-named research programs and conferences, several individual researchers carried out research on food distribution and food retail in countries of the Global South, see e.g. Bennett (1966) for the case of Chile; Goldman (1974b) for the case of Israel; Alawi (1986) for the case of Saudi Arabia; Zain & Rejab (1989) for the case of Malaysia.

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product category (Food and Agricultural Organization of the United Nations 1973, p. 3 ff; Food and Agricultural Organization of the United Nations 1975, p. 22 ff). Notwithstanding the dominance of small traditional food retailers, most of the cities under study already featured food retail formats with typical characteristics of supermarkets such as self-service, larger shop size and more product variety, as well as a higher average sales volume (Food and Agricultural Organization of the United Nations 1973, p. 3 ff; Food and Agricultural Organization of the United Nations 1975, p. 22 ff). While these ventures were predominantly privatelyowned, in several Latin American countries, some of these food retailers were government-run supermarkets that had been founded in the course of governmental development programs with the aim of enhancing the efficiency of local food distribution and thus lower food prices, in particular for low-income consumers (Food and Agricultural Organization of the United Nations 1973, p. 40). Generally speaking, the presence and the velocity of growth of modern food retail formats roughly correlated with the economic development and average per capita income of the respective city under study. In some Latin American cities with comparably high per capita incomes, e.g. San Juan, Caracas, and Mexico City, modern food retail was found to be expanding rapidly, and to have already reached considerable market shares of 40 to 50 percent (Food and Agricultural Organization of the United Nations 1973, p. 7 ff). In some cities, e.g. Mexico City, several supermarkets even already operated profitably in middle- and lowincome areas (Food and Agricultural Organization of the United Nations 1973, p. 9 ff). However, in the vast majority of the cities studied, modern food retail only served the small niche of high(er)-income local consumers and affluent expatriates, and the outlets were located accordingly. In cities with the lowest per capita income, among them Bangladesh’s capital city Dhaka, supermarkets had not yet even emerged (Food and Agricultural Organization of the United Nations 1973, p. 6 ff; Food and Agricultural Organization of the United Nations 1975, p. 22 ff). Overall, the existence and diffusion of modern food retail was found to depend on various factors on both the supply and the demand side. These factors will be described in the following subchapters.

5.1.1.1 Influence Factors on Modern Food Retail Diffusion on the Supply Side On the supply side, the highly fragmented and long food distribution channels with their atomistic wholesalers were found to make full-line supermarket product procurement intricate and very time consuming. The common practice of on-spot transactions and the lack of quality and/or safety standards made it difficult and risky for supermarkets to obtain consistent supplies in the desired quality

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and on agreed-upon prices at the required time, in particular in the category of perishable products. Because of the wholesalers’ small scale, supermarkets could not make the volume purchases needed that had provided modern food retail with such decisive competitive advantages elsewhere (see subchapter 4.1). In addition to various deficiencies in the general infrastructure in the regions under study, e.g. regarding reliable electricity supply and sound transport routes, the lack of food retail-specific infrastructure such as warehouses, storage facilities, and closed cold chains further impeded supermarkets’ efficient procurement. However, all of these difficulties notwithstanding, in the absence of an alternative, supermarkets had to procure through the same supply system as traditional food retailers. As a consequence, hardly any of the existing supermarkets were found to be able to establish a full-line product assortment. Instead, supermarkets rather focused on dry, processed, canned, and packaged goods, which they were able to acquire directly from manufacturers. Fresh meat, vegetables, and fruits, if any, were offered at only a comparably small scale and variety (Riley et al. 1970b, p. 41 ff; Food and Agricultural Organization of the United Nations 1973, p. 11). In some cases, where domestic food processing and production had not yet adapted to the new food habits of mostly higher-income customers, supermarkets had to retreat from imported and thus more expensive items (Food and Agricultural Organization of the United Nations 1975, p. 22). As the local packaging industry was—if at all—only just about to develop, and with suppliers not performing functions such as product sorting or grading, modern food retailers had to carry out these tasks themselves to make sure their products were compatible with their principle of self-service. Nevertheless, with branding and advertising still being in their infancy, supermarkets could hardly exploit the advantages of product standardization and self-service, which had contributed so decisively to modern food retailers’ efficiency in the United States and elsewhere (see subchapter 4.1). Instead, retail transactions still required considerable personal communication between customer and retailer, as customers had yet to be provided with product information, advice and suggestions. With high taxes on imported store equipment, as well as substantial overhead costs, e.g. for skilled staff, air conditioning, and facility maintenance, modern food retail was a very costly and resource intensive business, which made it difficult for many modern food retailers to survive in a predominantly low-income environment. In addition to the last-named aspect, the as yet limited knowledge of modern food retail management practices posed decisive barriers to entry for entrepreneurs willing to enter the business (Slater et al. 1969b p. 6–7; Food and Agricultural Organization of the United Nations 1975, p. 26 f).

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5.1.1.2 Influence Factors on Modern Food Retail Diffusion on the Demand Side As already outlined above, the presence of modern food retail in the cities under study was found to be highest in cities with comparably high average per capita incomes. Here, just as in former times in the United States and elsewhere, economic development and increasing per capita income had led to a change in diet patterns and shopping habits among the population: customers had shifted away from buying mainly basic, starchy food, toward the consumption of more high protein food (e.g. meat, milk, or eggs), fruits and vegetables, as well as packaged and processed food. Quality and safety had become important and much-appreciated food attributes. With rising employment rates and women entering the workforce outside their homes, customers had increasingly sought convenient shopping facilities that allowed them to reduce the opportunity cost of time. The rising ownership of cars and household refrigerators had stimulated a lower shopping frequency, but with a higher purchase value per shopping trip. In such settings, modern food retailers with their sophisticated one-stop shopping environment and product variety, had managed to achieve considerable competitive advantages compared to traditional food retailers (Food and Agricultural Organization of the United Nations 1973, p. 33; Food and Agricultural Organization of the United Nations 1975, p. 22). In contrast, supermarkets’ appeal toward less affluent consumers—the vast majority of the population in the cities under study—was found to be extremely low. Other than high(er)-income consumers, out of necessity, low-income consumers were found to put price before other aspects such as product variety, safety, or quality in their shopping decisions. Given the little money they had available, low-income consumers concentrated their demand on major staples, and showed a strong tendency toward purchasing food very frequently, generally daily, for immediate use and in small amounts at low average value. Lack of refrigeration capacity further encouraged the high frequency of food purchases (Slater et al. 1969a, p. 44 ff; Riley et al. 1970b, p. 56). Not surprising, low-income consumers were thus found to hardly show any interest in the supermarkets’ comparably sophisticated shopping atmosphere, and the variety of the often more expensive packaged, processed, or imported items offered there (Food and Agricultural Organization of the United Nations 1973, p. 7; Food and Agricultural Organization of the United Nations 1975, p. 3). Instead, less affluent customers preferred to shop at traditional food retailers, where they could choose the exact amount, size, or quality of a given product according to their needs and budget. The small traditional food retailers further showed a decisive locational advantage compared to the larger supermarkets that were often situated at the fringe of a city. In

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view of deficient public transportation and often not owning their own car, lowincome consumers strongly preferred to buy their food from the small retailers that were located in their neighborhood within easy walking distance (Food and Agricultural Organization of the United Nations 1973, p. 12; Food and Agricultural Organization of the United Nations 1975, p. 22). In some cases, traditional food retail formats also fulfilled a certain social function, as they served as places of encounters and social interaction. Strong and trusting customer-retailer relationships, the availability of credit, or the allowance to pay at the end of the month further strengthened customer loyalty with traditional food retailers (Slater et al. 1969a p. 46; Slater et al. 1969b, p. 12–3 f). As a consequence, traditional food retailers such as wet markets and small neighborhood grocery stores continued to be an important, in most cases even the only source of food for low-income consumers (Riley et al. 1970a, p. 78). In the case of perishable food such as fresh vegetables and fruits, even high(er)income customers showed a preference for traditional food retail formats such as wet markets, as they perceived perishable products there as fresher and of higher quality compared to those offered in supermarkets. For that reason, high(er)income consumers were found to systematically divide their food purchases between traditional retailers for fresh food, and supermarkets for other purchases (Food and Agricultural Organization of the United Nations 1973, p. 9 ff; Food and Agricultural Organization of the United Nations 1975, p. 22). Furthermore, given the proximity to their customers’ homes, wet markets and neighborhood grocery stores served high(er)-income consumers for “fill-in purchases” (Slater et al. 1969b, p. 12-3 f) in addition to the major shopping trips to the more far away supermarkets.

5.1.2

Impact of Modern Food Retail on Traditional Food Retail

As supermarkets—where they existed at all—predominantly only served the small niche of high(er)-income consumers, their impact on traditional food retail in the cities under study was found to be conceivably small (Food and Agricultural Organization of the United Nations 1973, p. 3 ff; Food and Agricultural Organization of the United Nations 1975, p. 22 ff). Furthermore, other than their larger counterparts, small traditional food retailers were neither sensitive to competitive changes, nor willing to take competitive measures themselves. Or as Slater et al. (1969b p. 5–57) concluded,

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“[..] the atomistic retailer is a relatively inert market operator who does little reacting or decision-making that influences his economic environment. The atomistic retailers do not seem to realize that their traditional system is in jeopardy from competitive changes. This lack of realism reinforces the notion of these retailers as dependent decision-takers.”

Given the comparably modest capital requirement and with the absence of alternative employment opportunities, food retail on a small scale was found to be an attractive venture in the cities under study, with only low barriers to entry. The low levels of operation, however, did not provide the scope for anything other than minimal reinvestment, and small food retailers barely had access to affordable credit. Furthermore, small food retailers tended to have relatively low levels of formal education and were hardly aware of nor had knowledge of modern food retail management practices. Finally, small food retailers were found to be too mistrustful and therefore reluctant to delegate responsibility to other people outside their family, which set narrow boundaries for the expansion of their ventures. In view of all of the uncertainties, risks and barriers that accompanied business expansion and modification, most traditional food retailers thus preferred the status quo of their ventures as soon as they had achieved a satisfactory standard of living (Riley et al. 1970b, p. 352 ff; Food and Agricultural Organization of the United Nations 1975, p. 2). Thus, small traditional food retailers had neither sufficient cause, nor a sense of their larger modern competitors, nor were they interested in expanding and “modernizing” their ventures of their own accord.

5.1.3

Modern Food Retail as Component of Economic Development Programs

In accordance with Holton’s considerations outlined at the beginning of this chapter, the researchers and experts involved in the above-cited studies and conferences came to the conclusion that efficient food distribution could indeed be an important factor in social and economic development processes, and of great importance for supplying food at reasonable prices, in particular to urban low-income consumers (Food and Agricultural Organization of the United Nations 1973, p. 3 f; Food and Agricultural Organization of the United Nations 1975, p. 26). In view of the studies’ results, however, it was concluded that the rural-urban food distribution channels of the regions under study were too long, fragmented, atomistic, and poorly coordinated to be efficient. In view of the researchers, this not only resulted in a poor alignment of food production with

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consumer demands, but also forced members of the food distribution channel to operate with greater risks and with low returns for their extensive labor (Slater et al. 1969b, p. 5–75; Riley et al. 1970a, p. 282). On the product level, the inefficient food distribution channels were believed to lead to high levels of spoilage and post-harvest losses, low food quality as well as unsanitary conditions in product handling (Riley et al. 1970b, p. 352). Consumers in turn were found to be faced with high markups, as food had to pass through several stages that added no value before reaching the end of the supply channel. The researchers further argued that consumers were faced with unreasonable amounts of shopping time, as they had to divide their purchases among many small vendors that specialized in a specific product line (Food and Agricultural Organization of the United Nations 1975, p. 25). In view of these findings and witnessing the trend toward increasing urbanization—in particular because of migration of poor people from rural areas—the researchers expressed serious doubts as to whether the prevalent food distribution systems in the cities and regions under study were able to provide adequate food supplies at stable prices to a rapidly growing population. These concerns were in particular expressed for the vast majority of the population, the low-income consumers, who were seen to spend more than half of their income on food (Food and Agricultural Organization of the United Nations 1973, p. 3 ff; Food and Agricultural Organization of the United Nations 1975, p. 22 ff). Despite their comparably small market share and their characteristics being “far from the ideal” (Slater et al. 1969b, p. 5–56), the researchers found that supermarkets in some of the regions under study had already achieved desirable results, e.g. a reduction in food prices, in particular for processed food, or acertain enhancement of product quality and safety (Slater et al. 1969b p. 6–2; Riley et al. 1970a, p. 107). Against this background, the researchers considered supermarkets an efficient form of food retail and believed modern food retailers to be important change agents toward efficiency improvements in store management and along food distribution channels. With growing diffusion and increasing market power, in the long run, supermarkets were expected to spur a change from formerly atomistic to oligopolistic food retail markets, which, in conjunction with modern food retailers’ higher market and buying power, would lead to efficiencyrelevant changes in food distribution channels, and lower food prices even for low-income consumers (Food and Agricultural Organization of the United Nations 1973, p. 32 f; Food and Agricultural Organization of the United Nations 1975, p. 26 f). Interestingly, this line of argumentation shows various strong parallels to the arguments that were presented in the course of the “missionary efforts” of the US Super Market Institute in the years following World War II. However, the author of this thesis did not find any hints of a direct link between the activities

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of the US Super Market Institute and the recommendations that were made in the studies and at the conferences cited here. At the same time, the researchers acknowledged that the advantages of supermarkets had to this point been far from fully exploited, and that supermarkets were not (yet) the appropriate food retail format to supply low-income consumers (Food and Agricultural Organization of the United Nations 1973, p. 33; Food and Agricultural Organization of the United Nations 1975, p. 26). In view of the numerous constraints toward the modernization of the food distribution channels, the researchers thus called for public actions and reforms with the goal of stimulating and accelerating the modernization efforts of individual food retailers. Based on the lessons learned from the rather unsuccessful former food retail modernization programs in some Latin American countries, the researchers also came to the conclusion that subsidies were not the adequate means to spur the desired efficiency improvements in food distribution channels. Instead, the researchers considered enhanced competition as an important driver for change. Acknowledging food distribution as a complex set of interrelated activities, the researchers called for coordinated and integrated approaches, with rural-urban reforms at all levels along the food distribution channel. Not least, the researchers strongly recommended that any reform program carry out thorough feasibility studies for each individual case and to make sure the specific characteristics of a region would be taken into account (Food and Agricultural Organization of the United Nations 1973, p. 33 ff). In order to strengthen the competitiveness of existing modern food retailers, and with the goal of encouraging the entry of new large-scale and efficiencyoriented entrepreneurs, the researchers suggested training programs in modern food retail methods as well as the introduction of special credit lines for entrepreneurs willing to expand their ventures or to enter the modern food retail business (Slater et al. 1969a, p. 227; Food and Agricultural Organization of the United Nations 1975, p. 26). Acknowledging that modernization of the food retail sector would require concurrent changes in the wholesale sector, the researchers further recommended that governments actively promote cooperation and integration in the retail-wholesale sector. To this end, the researchers suggested the establishment of large-volume, broad-line food wholesalers, which should supply supermarkets with food products corresponding to their specific needs. The increased scale of operations on the wholesale and the retail level, as well as enhanced efficiency through the improved coordination of the wholesaling-retailing operation were expected to result in higher economies of scale and thus lower food handling costs (Slater et al. 1969a, p. 227 ff; Riley et al. 1970b, p. 353 f). The

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researchers further called for the government-supported facilitation of coordination between urban wholesalers and rural assemblers, e.g. through an improved market information system, the enforcement of trading regulations, or the development and promotion of suitable grading and packaging standards (Food and Agricultural Organization of the United Nations 1973, p. 33). Even though the researchers considered supermarkets as important change agents toward a more modern and thus more efficient food distribution system, they concurrently acknowledged the importance of small- and medium-sized food retailers, in particular for low-income consumers. It was thus suggested that smalland medium-sized food retail stores and wet market vendors should be stimulated to also apply the concept of high volume, low margin selling. At the same time, the researchers emphasized that this should happen in a way that is compatible with the requirements of the lower-income segments, e.g. in terms of store format, product assortment and quality, as well as package size. To this end, the researchers recommended the establishment of food retailer cooperatives with the goal of allowing small and medium food retailers to benefit from common store management, and centralized procurement from affiliated wholesalers (Food and Agricultural Organization of the United Nations 1973, p. 30 ff; Food and Agricultural Organization of the United Nations 1975, p. 22 ff). Starting with an emphasis on basic food items such as grains or edible oils, these cooperatives were expected to also tackle the more challenging category of perishable products later on. Just as in the case of the promotion program for supermarkets, the researchers recommended supporting the suggested cooperatives with appropriate credits for equipment and facilities, with tax advantages as well as with training programs, e.g. on advanced store management and design, or warehouse operation methods (Slater et al. 1969b, p. 12–7 f; Riley et al. 1970a, p. 274). Being well aware of the small retailers’ general reluctance toward change, the best time to introduce these measures was expected to be at the point when competitive pressure from the emerging supermarkets would give traditional food retailers no other option than to react (Slater et al. 1969a, p. 225; Slater et al. 1969b, p. 1–11). In order to avoid critical labor displacement as an undesired effect of the reforms’ impacts, some researchers proposed a phased realization of the recommended reforms, and the development of training programs that would assist workers in relocating to other jobs (Slater et al. 1969a, p. 241; Riley et al. 1970a, p. 281). In addition to the activities on the entrepreneurial level, some researchers suggested public consumer information and education programs with the goal of encouraging a consumer shift toward more modern food shopping practices (Slater et al. 1969b, p. 4–39 f; Riley et al. 1970b, p. 362). In the case of Recife,

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Slater et al. (1969b, p. 12–7 f) even proposed the integration of basic instruction on nutrition and food buying into school curricula. Not least, the researchers emphasized that the success of the proposed reforms would highly depend on appropriate governmental regulations on-site. Thus, the researchers recommended the careful revision of laws and regulations and, if appropriate, respective amendments in order to facilitate the modernization of food distribution (Slater et al. 1969a, p. 241; Riley et al. 1970b, p. 360 f). While the researchers involved in the above-cited studies and conferences were quite optimistic regarding the usefulness and prospects of the recommended food distribution modernization programs, authors of later studies were more critical of the above-described recommendations. Based on the examination of studies on the food retail systems of countries in Latin America and the Middle East, Kaynak (1981, p. 88), for instance, concluded that “[i]t seems that these countries, like most other developing countries, are not ready for food distributive innovations of the West.”

In view of supermarkets in the Global South mainly catering to high-income consumers, other voices, such as Meissner (1978, p. 15), criticized that by promoting the development of supermarkets, “[…] an institution which in North America caters adequately to the basic needs of the masses becomes exclusive, bringing the benefits of mass marketing to those who least need them.”

Given low-income consumers’ “low outreach” (Goldman 1974a, p. 8), say their above-described constraints toward shopping at modern food retailers, some researchers further argued that traditional food retail was much better adapted to low-income consumers’ particular needs than modern food retail formats (e.g. Kaynak & Cavusgil 1982, p. 262; Ortiz-Buonofina 1987). While plenty of scientific articles and studies discussed the pros and cons of food distribution modernization programs in the World War II period from a rather theoretical point of view, the author of this thesis is not aware of any comparative historical study on the actual implementation and effects of such programs. She thus agrees with Savitt (1990, p. 21) that the available scientific publications only provide “snapshot glimpses of conditions at a given time,” while the assumption that the outcome of food distribution modernization programs might considerably contribute to a country’s economic development has remained unproven for the past several decades.

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Research Waves on Modern Food Retail in the Global South

Research Wave on “The Rapid Rise of Supermarkets in Developing Countries”4

In the early 2000s, the issue of modern food retail in countries of the Global South found its way back onto the research agenda: back then, Reardon & Berdegué (2002, p. 373) for the first time described a remarkable diffusion of modern food retail in Latin America, and in particular, the region’s “leading 6,” namely Argentina, Brazil, Chile, Colombia, Costa Rica, and Mexico. One year later, a publication followed discussing “The rise of supermarkets in Africa, Asia, and Latin America” (Reardon et al. 2003). From this time onward, the second major research wave on modern food retail in the Global South was triggered by scholars observing that, “[s]harply contrary to the predictions in the pre-‘take-off’ literature,5 supermarket development [in the Global South] abruptly and spectacularly took off in the early to mid-1990s” (Reardon, Henson & Berdegué 2007, p. 401).

In view of this development, researchers also spoke of a “supermarket6 revolution in developing countries” (Reardon & Hopkins 2006, p. 522), which they believed to be a “sudden and large ‘shock’” (ibid. p. 524) to the local food distribution systems. Against this background the question was raised, “who gains and who loses from the supermarket revolution” (Timmer 2008, p. 743), and researchers, policymakers, and development practitioners alike became alert to the developmental implications of expanding modern food retail in the economies of the Global South. The spectrum of issues investigated and discussed in this context ranged from potential “modern-day David versus Goliath stories” (Mutebi & Ansari 2008, p. 2690) between traditional and modern food retailers to the impact of modern food retailers’ procurement practices on local (smallholder) farmers and agricultural development (e.g. Gaiha & Thapa 2007; Emongor & Kirsten 2009); modern food retail’s influence on food prices, quality, and safety (e.g. Reardon & Hopkins 2006; Lee, Gereffi & Beauvais 2012); the possible exclusion of lowerincome consumers from potential benefits of modern food retail (e.g. Hawkes 4 The

title of this subchapter is borrowed from an eponymous scientific paper by Reardon, Timmer & Berdegué (2004). 5 Here, the term “pre-‘take-off’ literature” refers to studies that were carried out on food distribution and retail in countries of the Global South from the 1950s to 1980s (Reardon, Henson & Berdegué 2007, p. 401), and which were partly cited in subchapter 5.1. 6 In this context, Reardon and colleagues apply the term “supermarket” as a collective term for all kinds of modern food retail formats (e.g. Reardon, Henson & Berdegué 2007, p. 400).

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2008; Timmer 2009); or modern food retail’s dietary implications and impact on public health (e.g. Asfaw 2008; Kelly et al. 2015). The only small number of recent publications on the subject matter, however, suggests that—after one decade of extensive research and corresponding publications—the second research wave has already passed its zenith. While development practitioners still emphasize the developmental importance of modern food retail in countries of the Global South, and therefore call for further investigation and research on the subject matter (e.g. Altenburg et al. 2016, p. 59 ff), corresponding current scientific literature is quite scant and has so far mainly seemed to focus on under-researched sub-Sahara African countries (e.g. Battersby 2017; das Nair, Chisoro & Ziba 2018). Nonetheless, just as in the case of the first major research wave on the role of food distribution in economic development, the findings of this second major research wave may provide important indications for the examination of supermarket evolvement and the corresponding structural changes in Dhaka’s food retail market. For this reason, the key findings of the second research wave shall subsequently be depicted.

5.2.1

Diffusion Patterns of Modern Food Retail

When describing the emergence and development of modern food retail in the Global South from the early 1990s onward, researchers and development practitioners alike tend to refer to waves of geographical diffusion as observed and described for the first time by Reardon et al. (2003, p. 1142): “The overall image is of waves of diffusion rolling along. The first wave reached major cities in the larger or richer countries of Latin America. The second wave hit in East/Southeast Asia; the third in small or poorer countries of Latin America and Asia including, for example, Central America and Southern, then Eastern Africa. […] The fourth wave, just starting now, is hitting South Asia.”

However, when comparing the above quote with Reardon and colleagues’ multiple follow-up publications on the emergence and expansion of modern food retail in the Global South, inconsistencies regarding the description of geographical diffusion waves become evident: depending on the publication at hand, the indicated number of geographical waves ranges between three and four. While some publications only speak of three geographical diffusion waves (e.g. Reardon 2005, p. 2), other publications vaguely point to a development that could be considered

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a potentially emerging fourth wave (e.g. Reardon & Gulati 2008, p. 5; Reardon, Timmer & Minten 2012, p. 12332), and still other sources, such as the abovecited, explicitly describe a fourth emerging wave (see also e.g. Reardon, Henson & Berdegué 2007, p. 404). As a consequence, the assignments of countries or regions to a specific wave of geographical diffusion are not consistent between the numerous publications. However, these inconsistencies are neither addressed, nor discussed or explained in any, not even the most recent of the cited references. In this light, the author of this thesis refrains from her original plan to describe the waves of geographic diffusion in every detail, and will instead highlight the most important trends in supermarkets’ diffusion over geographical regions and countries. Notwithstanding the inconsistencies between the individual publications, Reardon and colleagues’ core findings can thus be summarized as follows: from the early 1990s onward, numerous countries in the Global South witnessed a remarkable rise of supermarkets, whereas the diffusion of modern food retail occurred at a different pace over regions and countries. In so-called first-wave countries, among them many Latin American countries that had already been at the center of attention in the course of the previously described first research wave, supermarkets’ average market in total food retail share rose from initially roughly 10–20 percent to 50–60 percent within only ten years. Comparing this development to modern food retail’s 75–80 percent market share in the US and Western Europe in the early 2000s, Reardon and colleagues came to the conclusion that first-wave countries had witnessed a diffusion of modern food retail in a single decade that had taken some five decades elsewhere (e.g. Reardon 2005, p. 2; Reardon & Gulati 2008, p. 5). The next geographical wave of supermarket diffusion occurred in the mid- to late-1990s. Here, supermarkets’ average market share in their respective countries rose from 5–10 percent originally to 30–50 percent in ten years (e.g. Reardon & Berdegué 2006, p. 4; Reardon & Gulati 2008, p. 5). The latest diffusion wave emerged in the early 2000s, and hit, among other countries, Bangladesh. While Reardon and colleagues do not provide any figures on modern food retail’s market shares in countries of this wave, they assume the last wave described thus far to have developed quite slowly compared to the previous ones (e.g. Reardon & Berdegué 2006, p. 35; Reardon, Henson & Berdegué 2007, p. 404). In addition to the above-described geographical patterns of modern food retail diffusion, Reardon and colleagues distinguish further diffusion patterns within a country, namely diffusion waves over space, over consumer segments, and over

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product categories.7 These diffusion patterns will be described in the following subchapters.

5.2.1.1 Modern Food Retail Diffusion Over Space Within a Country Supermarkets’ geographic diffusion within a country was reflected by modern food retailers’ tendency to seek the highest profit per amount of capital invested by entering a country’s “major foci of consumption” (Paddison, Findlay & Dawson 1990, p. 8), say rapidly growing bigger cities that provided access to dense concentrations of relatively affluent local and foreign consumers with receptiveness toward new forms of food retail and shopping practices. With increasing competition and saturation in these initial market niches, modern food retailers then gradually expanded their operations into intermediate and small cities, and finally even into small towns in rural areas (e.g. Reardon, Timmer & Berdegué 2004, p. 172 f). This “domino effect” (Reardon, Henson & Berdegué 2007, p. 406) was often accelerated by transnational supermarket chains acquiring or joint venturing at first large, and later on smaller domestic supermarket chains.

5.2.1.2 Modern Food Retail Diffusion Over Customer Segments The diffusion of modern food retail over consumer segments usually started in the segment of high-income customers. High-income customers not only tended to value product variety, quality and safety, as well as a convenient and service-oriented one-stop shopping environment—unlike low(er)-income consumers, they could also afford to pay for these additional assets (Minten & Reardon 2008, p. 488; Schipmann & Qaim 2011, p. 350 ff). Supermarkets thus made great efforts to best serve affluent consumers’ (rising) demands by combining a broad product assortment with multi-faceted service in an appealing shopping atmosphere (Isaacs et al. 2010, p. 424). However, just as already in the past, this retail strategy did not necessarily correspond with the needs and shopping habits of low(er)-income consumers. Thus, traditional food retailers with their lower overhead costs and their focus on cheaper basic local food showed a decisive price competitiveness compared to supermarkets, and were better prepared to fulfill

7 For

country examples of these diffusion patterns, see Faiguenbaum, Berdegué & Reardon (2002) for Chile; Weatherspoon & Reardon (2003) for South Africa and Kenya; Codron et al. (2004) for Morocco and Turkey; Dries, Reardon & Swinnen (2004) for Central & Eastern Europe; Farina, Nunes & Monteiro (2005) for Brazil; Ho (2005) for Hong Kong; Balsevich et al. (2007) for Central America; Bi et al. (2007) for China; Biénabe et al. (2007) for South Africa; Mutebi (2007) for Indonesia; Wiboonponse & Sriboonchitta (2007) for Thailand; Zamora (2007) for Ecuador; Meijer et al. (2008) for Honduras.

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low(er)-income consumers’ demand for nearby shopping facilities with comparably cheap basic food items at small amounts (Vorley, Fearne & Ray 2007, p. 194; Maruyama & Le Trung 2007, p. 21). Over time and with mounting competition, however, modern food retailers increasingly directed their efforts at untapping the market segments of the (lower) middle-class, and finally the segment of the urban poor (e.g. Weatherspoon & Reardon 2003, p. 333). Supermarkets’ procurement system modernization efforts (see subchapter 5.2.2.3) as well as store format diversification (see subchapter 5.2.3) were important preconditions for the realization of these steps.

5.2.1.3 Modern Food Retail Diffusion Over Product Categories Regarding modern food retail’s diffusion over product categories, Reardon and colleagues observed patterns similar to those in earlier development stages of supermarkets in the United States: thus, modern food retailers initially tended to gain ground in the categories of non-food and processed food, e.g. bread, rice, or corn flour, and packaged or canned items like edible oil, noodles, beverages, snacks, and condiments. Modern food retailers found processed items not only comparably easy and low-risk to store and handle, it also made up the major proportion of consumers’ food expenditures and was thus the most profitable product category. Not least, the establishment of direct relationships with major processors and producers, along with the possibility of buying in bulk, allowed supermarkets to achieve the required economies of scale to offer products at competitive prices. Following processed food, modern food retailers usually captured the category of semi-processed food, such as dairy products or meat. Given the difficulties, risks and uncertainties associated with the procurement and stocking of fresh products, the spread of the category of perishables was the by far slowest wave. Here, it took modern food retailers much longer to establish procurement systems that also allowed them to handle perishables in a profitable way (Reardon, Henson & Berdegué 2007, p. 419). In some cases, unpredictable events further promoted modern food retail’s diffusion over a specific product category. Phan & Reardon (2007), for instance, point to the outbreak of bird flu in Vietnam in 2003, which made consumers switch to modern food retailers, as those were perceived as more capable of guaranteeing food safety for eggs and poultry compared to their traditional competitors.

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Drivers for the Diffusion of Modern Food Retail

In trying to explain the considerable diffusion of supermarkets in the Global South from the early 1990s onward, Reardon and colleagues applied a framework of determinants to the demand and the supply side. In this context, the researchers claimed that, “the little growth [of supermarkets in the Global South] that was observed [in the course of the first major research wave] was attributed to ‘demand side’ factors such as rising incomes, urbanization and the rising opportunity costs of women’s time to shop. […] The post-‘take-off’ literature8 points to additional factors that are of importance to supermarket diffusion” (Reardon, Henson & Berdegué 2007, p. 401 f).

This statement, however, may be quite misleading to readers who are not familiar with the original publications on the findings of the first major research wave on modern food retail in the Global South: thus, as shown in subchapter 5.1, researchers of the first major research wave by no means only described factors on the demand side. On the contrary, they identified complementary factors instead, both on the demand and the supply side, which were found to have a decisive, and predominantly mitigating impact on the emergence and expansion of modern food retail in the Global South in the era after World War II. Nonetheless, researchers of the second major research wave identified additional factors on both the demand and the supply side that had considerable—and this time promoting—impact on the expansion of supermarkets in the Global South from the early 1990s onward. These factors will be described in the following subchapters.

5.2.2.1 Consumer Demand for Modern Food Retail The identified demand-side factors that favored the diffusion of modern food retail in the Global South featured various “usual suspects” that have already played a decisive role in the emergence of supermarkets elsewhere (see subchapters 5.1 and 5.2). Thus, economic development in conjunction with growth in real mean per capita income led to the rapid rise of a middle-class, and corresponding changing consumer preferences: thus, customers attached more importance to food quality and safety, and showed an increasing demand for packaged and processed food as

8 Here,

“post-‘take-off’ literature” refers to studies that were carried out in the course of the second major research wave on the “rapid rise of supermarkets” in countries of the Global South from the early 2000s onward (Reardon, Henson & Berdegué 2007, p. 402).

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well as non-staples, above all perishables (Reardon & Berdegué 2002, p. 376; Pingali 2007, p. 281 ff). With women entering professional life outside their homes, and with family members travelling greater distances between their homes and workplaces, consumers sought convenient and time-saving forms of shopping and cooking (Reardon et al. 2003, p. 1141). Rapid growth in the ownership of refrigerators from the 1990s onward made it easier to store fresh food and induced a shift from small-scale daily shopping to weekly or even monthly shopping on a large scale. An increasing number of motor vehicle owners together with better road and public transport infrastructure opened the way to larger volume food shopping at more distant locations (Faiguenbaum, Berdegué & Reardon 2002, p. 461; Koç et al. 2008, p. 16). Chen, Shepherd & da Silva (2005, p. 9) further highlighted the westernization of lifestyles, in particular among the young people, which evoked the demand for new products and shopping experiences. This trend was reinforced by an increasing number of people travelling abroad who, once they had returned back to their home countries, sought the products and food retail services they had experienced elsewhere (Reardon, Henson & Berdegué 2007, p. 406). Modern food retailers in the Global South served all of those needs by offering a convenient and service-oriented one-stop shopping environment with a broad product assortment, including a variety of processed foods and easy-to-prepare meals (Faiguenbaum, Berdegué & Reardon 2002, p. 461). Thereby, rapid urbanization provided modern food retailers with important entry gateways to densely populated areas with a relatively high proportion of comparably affluent consumers that were amenable to new forms of food retail (e.g. Reardon & Berdegué 2002, p. 376).

5.2.2.2 Trade Liberalization and Foreign Direct Investment As became clear from the previous chapters, supermarkets in countries of the Global South were not a completely new phenomenon in the early 1990s. On the contrary, the early beginnings of “supermarketization” could already be observed shortly after World War II. At the beginnings of the 1980s, many of these early ventures, most of them domestic, experienced a first considerable boost on the supply side: trade liberalization in several countries of the Global South facilitated the import of food and non-food products and allowed modern food retailers to broaden and deepen their product assortments. In combination with significant economies of scale, supermarkets that way achieved considerable advantages, in particular over small traditional grocery stores. On the demand side, trade liberalization led to an increase in the ownership of cars and refrigerators, which played into the hands of modern food retailers’ one-stop shopping strategy, as consumers felt encouraged to buy larger amounts of food in fewer shopping trips (Reardon

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& Berdegué 2002, p. 376). In the case of transition countries, the breakdown of a centrally planned economy in conjunction with the allowance for privatization prepared the ground for the emergence and further development of a modern food retail sector (Dries, Reardon & Swinnen 2004, p. 530 f; Bi et al. 2007, p. 113). However, it was not before the early 1990s that the “rather ‘sleepy’ domestic retail industry” (Reardon et al. 2003, p. 1143) was shaken by what Reardon and colleagues identified as one of the primary drivers of the “supermarket revolution” in the Global South: a surge of foreign direct investments from transnational supermarket chains (Reardon, Henson & Berdegué 2007, p. 402 ff). Pushed by their contested, increasingly consolidated and saturated home markets, and pulled by the above-described improvement of demand-side drivers, foreign food retail chains, above all from Western Europe and the US, sought growth opportunities in the developing markets of the Global South (Hawkes 2008, p. 664). The inclusion of (partial) retail FDI liberalization in bilateral and multilateral trade agreements and structural adjustment programs throughout the 1990s provided those ventures the necessary gateways (Coe & Wrigley 2007, p. 341). Constraints on retail FDI also explain why countries such as China, India, and Russia were not assigned to Reardon and colleagues’ “first-wave countries,” even though many important driving forces such as rapid urbanization, improved infrastructure, and an emerging middle-class were already in place (Reardon, Henson & Berdegué 2007, p. 404). Besides pure greenfield investments, transnational food retailers applied different strategies to enter the emerging markets in the Global South. Franchise arrangements with domestic food retailers, for instance, served as regulatory loopholes in countries with tighter regulatory controls on the activities of foreign retailers (Coe & Wrigley 2007, p. 341). Joint ventures and franchise agreements with domestic food retailers, or the acquisition of domestic players provided foreign investors with valuable knowledge of the local food retail markets, their distribution channels, and customers. These strategies further helped foreign investors to reduce the risks associated with operations in low-income environments, and to achieve organizational legitimacy in the host society and economy. Not least, these strategies opened access to key policymakers as well as often scarce, well-positioned store locations in metropolitan regions (Farina, Nunes & Monteiro 2005, p. 134; Coe & Wrigley 2007, p. 352). In many cases, in anticipation of the entry of transnational competitors, domestic food retail chains had already invested substantially in their further development, and successfully emulated or imitated the best practices and organizational innovations of foreign food retail transnationals in order to foster their own competitiveness. That way, in particular larger domestic food retailers had managed to occupy retail territory, to grasp first mover advantages, and to obtain

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scarce realty (Reardon, Henson & Berdegué 2007, p. 404 f). Taken together with these “second mover” competitive responses by domestic retail chains, the deluge of FDI led to the considerable growth and consolidation of modern food retail in many countries of the Global South, and corresponding structural changes in the local food retail markets from formerly atomistic to oligopolistic market forms (Coe & Wrigley 2007, p. 341 f). Even though particular attention is usually paid here to the dominant pattern of FDI of transnational retail operators from Western Europe (e.g. Tesco, Carrefour, Metro, and Ahold) and the US (above all WalMart) in this context, the existence and important role of often under-researched and rather underestimated “regional transnationals” (Belik & Rocha dos Santos 2002, p. 519) should by no means be neglected (Coe & Wrigley 2007, p. 342 f; Reardon & Gulati 2008 p. 9). A striking example for the latter is the remarkable growth of domestic modern food retail chains in Chile (Cencosud 2014, n.p.), South Africa (Weatherspoon & Reardon 2003; Dakora 2012), and Kenya (Neven et al. 2009; Dihel 2011, p. 5), and their eager investment (plans) in and competition for (supra)regional markets.

5.2.2.3 Modernization of Procurement Systems With mounting competition in the emerging modern food retail sector, the reduction of purchase and transaction costs in combination with an increase in product diversity, quality and safety, became supermarkets’ ever more important competitive strategies in order to penetrate the mass market, and to hold on to and deepen the market segment of high(er)-income customers (Reardon, Timmer & Berdegué 2004, p. 173; McCullough, Pingali & Stamoulis 2008, p. 15 f). However, similar to modern food retailers in the past, supermarkets in countries of the Global South faced various difficulties in meeting these objectives: domestic traditional food distribution channels tended to be multilevel and very fragmented, and involved numerous wholesalers or middlemen, many of them small in scale and offering only minimal product lines (McCollough, Pingali & Stamoulis 2008, p. 17). As traditional wholesalers aggregated products across many producers and qualities (Dries, Reardon & Swinnen 2004, p. 547 f), difficulties with time delivery, volatile prices, inconsistent volumes and product quality were common (Reardon 2005, p. 13). Poor institutional and public physical infrastructure, such as a lack of product quality and safety standards, intricate transportation routes, or the absence of continuous cold chains presented further challenges for supermarkets’ procurement, in particular in the category of perishable goods (Reardon et al. 2003, p. 1144). Consequently, modern food retailers’ procurement via traditional supply channels tended to go along with risks, uncertainties, and high transaction costs (Boselie, Henson & Weatherspoon 2003, p. 1156). In order to close the gap

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between their particular needs and the actual supply, with increasing expansion and competition, transnational and leading domestic supermarket chains started to construct procurement systems parallel to and outside of the traditional food supply channels, and to modernize these based on the following key components.9 Centralized Procurement via Distribution Centers With a growing number of stores, supermarket chains typically tended to shift from the traditional mode of fragmented, per-store procurement on a daily basis to centralized procurement via distribution centers, to which suppliers were required to organize their deliveries. Each distribution center had responsibility for a particular range of products (e.g. perishable goods, or pre-processed and packaged products), and served several stores in a given zone or district, or even a whole country (Coe & Hess 2005, p. 464; Vorley, Fearne & Ray 2007, p. 196). In some cases, a regional set of distribution centers even allowed coordinated procurement over a set of countries in one region (Reardon et al. 2007, p. 412). Distribution centers not only served as collection points for products, but were also an integral part of a supermarket chain’s strategy of moving value-adding activities back down the supply channel: in the product category of perishables, for instance, distribution centers served as places where produce was graded, cleaned, packaged, labeled, and priced, or where value-added products such as stir-fry mixes, prewashed salads, or microwaveable vegetables were assembled and batched for delivery to the stores (Boselie, Henson & Weatherspoon 2003, p. 1156 f; Coe & Hess 2005, p. 464 f). Even though the centralization of procurement led to increasing transportation costs, this enabled supermarkets to purchase at mass scale, provided them with stronger bargaining power with suppliers, and allowed them to substantially reduce coordination and other transaction costs as well as congestion diseconomies (Reardon 2005, p. 14). In all, compared to per-store procurement, centralized procurement via distribution centers offered the potential for distribution system 9 For

country case studies on the described changes in procurement channels, see Belik & Rocha dos Santos (2002) for the MERCOSUR; Boselie, Henson & Weatherspoon (2003) for a selection of Asian and African countries; Reardon et al. (2003) comparatively across Asia, Africa, and Latin America; Weatherspoon & Reardon (2003) for South Africa; Codron et al. (2004) for Morocco and Turkey; Dries, Reardon & Swinnen (2004) for Central and Eastern Europe; Coe & Hess (2005) for East Asia; Farina, Nunes & Monteiro (2005) for Brazil; Balsevich et al. (2007) for Central America; Bi et al. (2007) and Hu et al. (2004) for China and Shanghai respectively; Durand (2007) for Mexico; Hernández, Reardon & Berdegué (2007) for Guatemala; Nyoro, Ariga & Ngugi (2007) for Kenya; Tam (2007) for Vietnam; Wiboonponse & Sriboonchitta (2007) for Thailand; Zamora (2007) for Ecuador; Franz (2013) for India.

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efficiency increases and the reduction of the administrative support required (Coe & Hess 2005, p. 464). Specialized Wholesalers and Preferred Suppliers In many cases the establishment of distribution centers went along with the rationalization of a supermarket’s supply chain and the elimination of middlemen that, from a modern food retailer’s point of view, did not create any added value. Thus, instead of further relying on spot market relations and procurement from traditional wholesale markets, supermarkets tended to gradually shift toward the use of specialized wholesalers and preferred suppliers, which were dedicated to modern food retailers as their main clients and therefore willing and capable of meeting supermarkets’ specific needs (Boselie, Henson & Weatherspoon 2003, p. 1156; Coe & Hess 2005, p. 465 ff). By establishing these direct, relatively stable relationships with comparably few selected suppliers, supermarkets not only strived to reduce the transaction, coordination and search costs of their procurement activities, but also to assure their suppliers’ responsiveness to timing, quantity, and food safety and quality requirements. In streamlining their supply chains, supermarkets also achieved considerable price reductions, as products had to pass fewer stages on their way from producer to consumer (Reardon, Timmer & Berdegué 2004, p. 175; Coe & Hess 2005, p. 465 f). Figure 5.1 shows in a stylized form how this procedure also led to concentration processes among producers, intermediaries, processors and wholesalers in the food distribution channel: Producers

Intermediaries

Processors

Wholealers and retailers

Consumers

Traditional atomized distribution channel Supermarket-led distribution channel

Figure 5.1 Modern Food Retail-Induced Main Changes in the Distribution Channel. Source: Altenburg et al. (2016, p. 19, modified)

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In the course of the shift to specialized wholesalers and preferred suppliers, quasi-formal and formal contracts emerged as important instruments to coordinate the relationship between actors along the distribution channel (Reardon et al. 2003, p. 1145; Hammoudi, Hoffmann & Surry 2009, p. 472). These contracts, often enforced by a specialized wholesaler managing a preferred supplier system on behalf of a supermarket chain, assured supermarkets that products were delivered on time and with the desired attributes (Reardon et al. 2003, p. 1145). On the side of the supplier, contracts guaranteed a secured market—at least as long as the buyer’s requirements were accomplished—and therefore served as incentives to commit to the buyer, and, over time, to further invest in physical and/or human assets specific to the buyer’s requirements (Reardon, Timmer, Berdegué 2004, p. 176). Additionally, contracts also had a signaling effect toward potential new clients, as they proved a supplier’s creditworthiness and capacity to meet exigent customer demands (Vorley, Fearne & Ray 2007, p. 198). While contracting and direct relationships with suppliers had already been quite common in some product categories, e.g. with manufacturers of private label processed products, it was particularly in product categories such as fresh produce where these changes represented a significant altering of the supply network structure. Here, the emergence of supermarkets in the Global South led to a relative formalization of formerly extremely informal procedures (Reardon et al. 2003, p. 1145; Coe & Hess 2005, p. 466 f). In some cases, this process was further promoted by governmental programs and regulations: Kaliappan et al. (2009, p. 228 ff), for instance, describe the case of Malaysia where the government not only required foreign hypermarkets to reserve at least 30 percent of shelf space for locally manufactured products, but also introduced several programs to promote domestic ventures as suppliers for supermarkets, and even the export market. Best-Practice Logistical Technology In order to defray some of the extra transportation costs accompanying procurement centralization, supermarket chains also tended to adopt, or required their suppliers to adopt, best-practice logistical technology in order to secure an almost frictionless logistical interface with their warehouses and distribution centers (Reardon, Timmer & Berdegué 2004 p. 176; Coe & Hess 2005, p. 465 f). These technologies were generated by the supermarkets’ own firms or via joint ventures with global transnational logistics firms (e.g. Reardon et al. 2003, p. 1145). The introduction of sophisticated logistical technologies led to the sudden creation of a “dualistic system between the haves and have-nots of these services” (Dries, Reardon & Swinnen 2004, p. 548). This further accelerated the consolidation process in modern food retail, as leading supermarket chains, compared to their

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weaker competitors, became even more competitive because of the significant cost reductions in their procurement processes. Implementation of Private Standards The implementation of the above-described measures finally prepared the necessary ground for the introduction of private standards along the food distribution channel (Reardon, Timmer & Berdegué 2004, p. 173). In this context, standards can be understood as a “collection of technical specifications, terms, definitions, and principles of classification and labeling” (Reardon & Farina 2002, p. 414), which are formulated and/or implemented by public or private entities (Reardon 2006, p. 83). Standards can pertain either to a product or a process: in the first case, standards specify the characteristics a product is expected to have when it reaches a certain point in the distribution channel, e.g. in regard to quality (like appearance, cleanliness, taste) or safety (like pesticide or artificial hormone residue, microbial presence) (Lee, Gereffi & Beauvais 2012, p. 12327). Process standards in turn specify the characteristics that the processes—be it the production of the raw product, the processing into intermediate or final goods, or sale—are expected to have (Reardon et al. 1999, p. 423). For instance, process standards may refer to a product’s traceability, or social and environmental issues such as ethical trade or animal welfare (Lee, Gereffi & Beauvais 2012, p. 12327). In many countries considered in the second major research wave on modern food retail in the Global South, public standards, such as regulations for food safety, tended to be scant. Where existent, the (full) implementation of public standards was aggravated by a lack of administrative capacity, as well as the informal and atomized nature of food distribution systems. On the consumer level, out of necessity, price was found to often be put before other product attributes, and product quality and safety tended not to be a much-debated issue. Consequently, traditional food retail in countries of the Global South usually operated with little or no use of certification and/or quality and safety standards, and even less with social or environmental standards (Coe & Hess 2005, p. 468; Reardon, Henson & Gulati 2010, p. 123). In such setting, modern food retailers strived to implement private standards for several reasons: • First, private standards served as key tools to coordinate processes along distribution channels, and to manage food quality, safety, and various intangible attributes (Vorley & Fox 2004, p. 12; Fulponi 2007, p. 5). Without being directly involved in the upstream segments of the distribution channels, private standards not only allowed modern food retailers to dictate which foods

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could be sold on their shelves, but also how and by whom they could be produced (Konefal, Mascarenhas & Hatanaka 2005, p. 293; Freidberg 2007, p. 321). Even though literature often employs the terms “private standard” and “voluntary standard” interchangeably, it is for this reason that compliance with private standards can be de facto mandatory for suppliers as it functions as a barrier to entry to a specific market (Vorley & Fox 2004, p. 12; Henson & Humphrey 2010, p. 1630). • Second, private standards communicated credible information on the nature of products and the conditions under which they were produced, processed, and transported (Henson & Humphrey 2010, p. 1633 f). In country contexts where public standards were low, not enforced, or distrusted, private standards that way served as strategic instruments of product differentiation and “competitive arms” (Reardon, Timmer & Berdegué 2004, p. 177)—above all against (informal) traditional food retailers. • Not least, because of their size and visibility through trademarks, modern food retailers tended to be under greater public and governmental scrutiny compared to traditional (informal) food retailers. In this light, the enforcement of private standards demonstrated care for stakeholders’ expectations and were an important measure to mitigate reputational risks (Henson & Reardon 2005, p. 243 f). While the implementation and fulfillment of private standards had already been a common practice along many distributions channels for food export from countries of the Global South to the Global North (Maertens & Swinnen 2009, p. 161; Narrod et al. 2009, p. 9), with the arrival of transnational supermarket chains, the implementation of standards also gained momentum in domestic food distribution channels in the Global South (Reardon, Timmer & Berdegué 2004, p. 177; Coe & Hess 2005, p. 468). As a consequence, a gradual convergence of the formerly strictly separated domestic market and the export market could be observed (Reardon et al. 2003, p. 1145; Nyoro, Ariga & Ngui 2007, p. 166). Potential and Limitations of Procurement System Modernization In sum, the above-described modernization of procurement systems allowed supermarkets to substantially reduce their transaction costs and to achieve considerable efficiency gains. By passing some of the cost savings on to the consumers through lower food prices, and by reinvesting their profits in new stores and further efficiency measures, supermarkets achieved and strengthened their competitiveness compared to traditional food retailers. This paved the way for supermarkets’ conversion from niche players directed at affluent customer

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segments to mass markets that increasingly even conquered the segment of the urban poor (Coe & Wrigley 2007, p. 349; Reardon, Henson & Berdegué 2007, p. 402 f). However, depending on the specific region or country, procurement system modernization was very contextual, and thus showed considerable variety in terms of extent, and impact (Reardon, Henson & Berdegué 2007, p. 410 f): • First, procurement system modernization was more likely to occur in a competitive environment, where increases in food quality, safety, and product diversity as well as the reduction of product and transaction costs had become central competitive factors. It is therefore not surprising that efforts to modernize the procurement system tended to be strongest in countries of the early supermarket distribution waves, which had already reached a considerable level of competition in their food retail markets. • Second, the extent of procurement system modernization further depended on a food retailer’s capacity to actually manage the required changes. Having the necessary personnel, the financial resources and know-how, transnational chains tended to be the first to change the “rules of the game” by applying respective approaches and technologies (Reardon, Timmer & Berdegué 2004, p. 174). With increasing competitive pressure, larger domestic chains followed suit as soon as their capacities permitted. Second and third tier modern food retailers, in particular domestic zone-specific supermarket chains and independent outlets, generally continued to depend on the traditional procurement system and adapted, if at all, with a significant lag. In some cases, small- and medium-sized players that lacked the capacity to make the changes on their own participated in inter-chain collective arrangements, e.g. by forming a holding company or a “buying consortium” (Hu et al. 2004, p. 573). Other players, however, found themselves losing their competitiveness to early adopters, and then became targets for mergers and acquisitions by more powerful players (Reardon, Timmer & Berdegué 2004, p. 174). Among the remaining players, a circle of innovation, imitation and adaption could be observed, which pressed forward ever more technological changes in procurement systems (Reardon, Henson & Berdegué 2007, p. 411). • Third, there were also cases where even powerful supermarket chains had to cut back their ambitious plans to modernize their procurement systems—or at least they had to strip down the procurement procedures and technologies they were used to from operations in their home countries. In some cases, this was due to the lack of necessary basic on-site infrastructure, such as sound transportation routes, continuous cold chains, or reliable electricity supply (Goldman 2000, p. 8; Franz 2013, p. 136 ff). In other cases, in particular at early stages of

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supermarket diffusion, modern food retailers found themselves too small and their purchasing power too low to bypass traditional wholesalers and middlemen. Modern food retailers then had to (provisionally) procure their products from traditional wholesalers, or even from traditional food retailers (Goldman, Krider & Ramaswami 1999, p. 134). • Fourth and not least, the implementation of procurement system modernization strategies did not always occur simultaneously over all product (sub-)categories. Generally speaking, supermarkets tended to at first focus on the comparably easy-to-handle category of non-foods and processed food before tackling semi-processed products, and finally, the most challenging category of perishable products (Goldman, Krider & Ramaswami 1999, p. 135; Reardon, Henson & Berdegué 2007, p. 411).

5.2.3

Impact of Modern Food Retail on Traditional Food Retail

As became clear from previous chapters, the emergence and expansion of supermarkets in the Global South usually had roots in the small segments of affluent domestic consumers and expatriates, while traditional food retailers continued to cater to the vast majority of the population: low(er)-income consumers. With supermarkets and traditional food retailers initially serving different consumer segments, they hardly entered into direct competition. It is therefore not surprising that, in the early stages of supermarket diffusion, the impact of modern food retail on traditional food retailers was hardly felt, if at all, and that the respective food retail markets continued to be primarily atomistic in nature. With modern food retailers’ increasing efforts to also conquer the middleand even low-income consumer segments, however, the situation changed significantly. Supermarkets and traditional food retailers increasingly became competitors, and prices, product quality and safety, as well as shopping convenience, emerged as the most contested fields in the battle for consumers (Reardon & Hopkins 2006, p. 527 ff). Here, the modernization of procurement systems became one of the modern food retailers’ most important strategies to win this battle: the resulting lower procurement costs and the considerable economies of scale achieved increasingly allowed supermarkets to attain significant price competitiveness compared to their traditional counterparts. Procurement system modernization and the corresponding implementation of private standards further enabled modern food retailers not only to assure product quality and safety along their supply chains. By explicitly signaling their supply chain management capacities and corresponding measures of quality and safety assurance to their consumers, e.g. via

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advertising or labeling, supermarkets also reinforced their self-imposed “role as guardians of their customers’ health and well-being” (Dixon 2007, p. 48). That way, modern food retailers gained a high degree of trust with their customers, which provided them with a further considerable competitive advantage over traditional food retailers (Reardon & Hopkins 2006, p. 527 ff). As already explained before, shopping convenience may not only be understood as the shopping atmosphere on-site. In addition to that, shopping convenience includes a set of “transaction costs” such as search and transportation costs, which come along with a customer’s food shopping process. Compared to traditional food retailers’ narrow assortments, supermarkets with their full-line product policy typically show decisive competitive advantages in terms of search costs, as customers may find everything they need under one roof. In turn, the modern food retailers located further away tend to be costlier in terms of transportation than traditional food retailers that are usually located in close proximity to their customers’ homes (Reardon & Hopkins 2006, p. 528). With the objective to also achieve competitive advantages in terms of location, modern food retailers therefore made extensive use of format diversification: thus, big box formats such as superstores and hypermarkets served to tap suburbs and large cities, where highand middle-income consumers showed high mobility and appreciated a broad product assortment under one single roof (Reardon & Berdegué 2006, p. 7 f; Hawkes 2008, p. 665). Small store formats such as discount stores and superettes in turn were applied in order to compete with traditional neighborhood shops and wet markets on price and locational advantage. To this end, these small store formats were typically inserted into the dense (lower-income) neighborhoods of inner cities and small towns where space was limited and the product assortment could be narrower (Reardon & Hopkins 2006, p. 528). Under the influence of such measures, in the course of time, a decline of traditional food retail formats set in, and the formerly atomistic food retail markets increasingly took a rather oligopolistic shape. The extent and pace of traditional food retail’s decline, and the corresponding structural changes in the food retail markets, varied considerably from case to case, and primarily depended on a region’s income structure, as well as supermarkets’ retail strategies and their capacities to modernize their procurement systems. Generally speaking, however, there was an inverse relationship between the decline of traditional food retail and supermarkets’ gradual encroachment into all of the different food product categories. Thus, the fastest decline in traditional food retail was seen among small grocery stores and other retailers selling processed and semi-processed food. In these product categories, modern food retailers tended to achieve price and quality competitiveness over traditional food retailers early on through direct relationships

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with major processors and producers, and the implementation of private quality and safety standards. At the other extreme, wet markets and other vendors of perishable products tended to show a considerable resilience toward supermarkets.10 Given the difficulties modern food retailers usually faced in establishing reliable and efficient procurement systems for (domestically grown) fresh products, it took supermarkets much longer to become price- and quality-competitive in this product category. This also led to the phenomenon of supermarket “light users” (Goldman, Krider & Ramaswami 1999, p. 126), which in a similar manner had already occurred in the early days of supermarket diffusion in countries of the Global South following World War II. Thus, customers, usually from the middle-class, split their purchases, using wet markets for one-stop shopping for fresh food, while at the same time enjoying the lower prices at supermarkets for packaged and processed food. In some cases, wet markets’ resilience was further enhanced by the important function they performed in a community’s spiritual and social life: Isaacs et al. (2010, p. 421 f), for instance, depict the case of Chiang Mai in Thailand, where wet markets served as sites for spiritual festivals or religious events. In view of the competitive advantages of traditional food retailers, critical voices such as Humphrey (2007, p. 433) even held the view that: “[t]he extent of the transformation of food retailing […] is overestimated, particularly for fresh produce. The future landscape of food retailing will be more varied than the supermarket revolution hypothesis predicts.”

In the end, however, the question had to be raised: “Is the wet market superiority sustainable?” (Goldman, Krider & Ramaswami 1999, p. 135). While some authors assumed wet markets to decline in the long run too (Reardon, Henson & Gulati 2010, p. 116; Gorton, Sauer & Supatpongkul 2011, p. 1636), other studies differentiated between “bad” and “good” wet markets. Thus, smaller, often informal wet markets and open street markets were believed likely to disappear, while more appealing and well-managed wet markets were expected to remain competitive (Goldman, Krider & Ramaswami 1999, p. 135). It is against this background, why researchers called for more empirical, country-specific, and case-study-based information on supermarkets’ particular impact on wet markets in order to verify these assumptions (Mutebi & Ansari 2008, p. 2690; Schipmann & Qaim 2011, p. 3459). 10 See e.g. Faiguenbaum et al. (2002) for Chile; Reardon & Berdegué (2002) for a selection of Latin American countries; Ho (2005) for Hong Kong; Cadilhon et al. (2006) for Vietnam; Minten & Reardon (2008) for primary data on Madagascar and secondary data on ten other countries in the Global South; Gorton, Sauer & Supatpongkul (2011) for Thailand.

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Being well aware of traditional food retailers’ competitive advantages, in some cases, supermarkets could be observed to even imitate traditional food retailers’ practices: supermarkets in Hong Kong and Indonesia, for instance, were found to apply a clean and hygienic version of the traditional wet market stall ambience and service in their fresh food departments. Acknowledging the importance of product freshness to the customers, the stalls featured live poultry and seafood on display, which were served by individual attendants to customer specifications (Ho 2005, p. 94 f; Sunanto 2013, p. 105). Isaacs et al. (2010, p. 423 ff) described the case of supermarkets in Chiang Mai in Thailand, which tried to mimic wet markets’ importance in local spiritual and social life, e.g. by making donations to Thai communities, by selling packaged gifts for monks, or by highlighting vegetarian food during the appropriate festivals. In a similar fashion, modern food retailers took into account the social functions and values of community care as they were expressed by traditional food retailers. Thus, dedicated service became a leading priority in supermarkets—from staff weighing and wrapping the chosen vegetables, and packing the shopping bags, to the provision of wheelchairs and shopping assistants for disabled consumers. Furthermore, just as their counterparts in the United States and elsewhere, it was the hypermarkets in particular that worked on building their utility as social spaces by adding food courts adjacent to their own outlets. Noticing the increasing competitive pressure of supermarkets, traditional food retailers likewise felt the need to amend their modes of operation in order to maintain, or even to increase their appeal for their customers. This resulted in imitation of modern food retail practices, and the corresponding ideas of cleanliness and hygiene, convenience, and standardized order. For instance, traditional food retailers were observed to broaden their assortment by adding new product lines, as well as branded and packaged goods, and to rearrange their merchandise displays in order to increase impulse buying. Further measures comprised investments in a more appealing store or market design, e.g. through the installation of glass shop windows, shelves and aisles, as well as through infrastructure improvements such as the installation of air conditioning or refrigeration facilities (Dholakia, Dholakia & Chattopadhyay 2012, p. 260). Isaacs et al. (2010, p. 426) also witnessed wet markets that mimic supermarkets’ one-stop shopping convenience by introducing parking areas, installing ATM machines, or developing shop houses around the market with restaurants, cafes, hardware stores, or DVD rentals. Joseph et al. (2008, p. 74) reported on traditional food retailers in India that introduced selfservice, enhanced home delivery, and even accepted credit cards with the goal of increasing their convenience and thus attractiveness toward customers.

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Governmental Responses toward Modern Food Retail

From a government’s point of view, the diffusion of supermarkets and the—at a certain point—associated decline of traditional food retail formats represented a double-edged sword: on the one hand, modern food retail may be an important driving force towards lower food prices, product diversity, and increased food hygiene, and safety. Supermarkets may stimulate competition and promote new productivity-enhancing technologies, and business models. Not least, supermarkets may provide domestic farmers and manufacturers with important gateways to the local mass and even export markets, and make considerable contributions to government’s tax revenues by turning the often-informal food retail business into a formal one (e.g. Wrigley, Coe & Currah 2005, p. 469; Altenburg et al. 2016, p. 19 ff). On the other hand, the displacement of traditional food retailers through modern food retail formats may also be seen critically for several reasons: • First, even though modern food retail creates a range of new—and often better paid and more stable—job opportunities, it puts at stake numerous employment opportunities and thus the livelihoods, not only of traditional food retailers, but also of other players along traditional food distribution channels, such as smallholder farmers or unskilled laborers in urban areas (Altenburg et al. 2016, p. 26 f). • Second, a decline in traditional food retailers also reduces the shopping opportunities for low-income customers (McCullough, Pingali & Stamoulis 2008, p. 15; Schipmann & Qaim 2011, p. 345). • Not least, traditional food retail formats, such as wet markets and mom-andpop stores, may be regarded as worth preserving “cultural elements” (Ho 2005, p. 96), which fulfil an important function as spaces of social interaction, and contributors to the establishment of cohesive neighborhood communities (Aliyah, Setioko & Pradoto 2016, p. 109 ff). Against this backdrop, policymakers faced the challenge of exploiting supermarkets’ benefits for the local society and economy, while at the same time avoiding or at least diminishing the negative impacts of modern food retail (Mutebi & Ansari 2007, p. 2690). This task, however, tended to be very challenging. Not only did the issue cut across the competences of many different national authorities—from agricultural, industrial, and trade policy to consumer protection and urban planning. The potentially positive short- and long-term effects in one policy domain had further to be weighed against the corresponding negative effects in

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another (Altenburg et al. 2016, p. 32 ff). In this context, it can be stated with Ho (2005, p. 90) that “[a] sensible public policy must balance the potential benefits of improved foodretailing efficiency with the potential detrimental effects on some other aspects of the society. The optimal manner in which to strike this balance remains an ongoing experiment.”

Political decision makers were observed applying manifold policy instruments to tackle this challenge: among the most common are competition laws to limit market concentration and collusion in modern food retail. Regulations on zoning and opening hours were further widely-applied measures. The former refer to land use regulations, which designate the permitted uses of land based on location. Indonesia, Malaysia and Thailand, for instance, applied zoning restrictions on modern food retailers, in particular on “big box” formats such as hypermarkets, with the aim of protecting existing traditional ventures within a certain radius of housing areas or in the city centers (Mutebi & Ansari 2007, p. 365). Zoning, however, may likewise be a means to inhibit traditional food retail: for instance, in 2003, the Chinese government forbade the construction of new wet markets in urban areas, and municipal governments of various large and medium cities further banned the temporary “morning street wet markets.” While these measures were taken with the objective of relieving the cities of traffic congestions, they also made wet markets lose their competitive advantage compared to supermarkets in terms of locational convenience (Hu et al. 2004, p. 569 f). Regulations on opening hours refer to restrictions on food retailers’ times of operation, which may be applied to either privilege or curb certain food retail formats by making them more or less convenient for their customers. Indonesia, for instance, explicitly forbade supermarkets from opening before 10:00 a.m., with the goal of protecting traditional food retailers such as wet markets or small grocery stores (Mutebi & Ansari 2007, p. 365). In some cases, explicit “retail modernization policies” (Reardon & Hopkins 2006, p. 539) could be observed. Goldman (2000, p. 12), for instance, described the case of Shanghai in China, where the city government established a special retail modernization department with the goal of supporting the diffusion of stateand collectively-owned supermarkets through knowledge transfer and financial support. Considering foreign food retailers as important providers of capital and technology, the modernization department also provided support to foreign supermarket companies by matching them with domestic partners. Likewise, municipal

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and state governments in Russia (Dries, Reardon & Swinnen 2004) and the Republic of Korea (Lee & Reardon 2005) were observed to provide various incentives to encourage the establishment of supermarkets. The promotion of supermarkets and the support of traditional food retailers, however, do not necessarily have to be mutually exclusive, as examples from several countries, e.g. Taiwan, Singapore, China, and the Philippines show: in all cases, the authorities allowed supermarket development while at the same time encouraging traditional food retailers to upgrade and modernize their businesses. The latter included measures such as the allocation of traditional food retailers in fixed, uncongested sites; the improvement of markets’ physical infrastructure, e.g. drainage systems, ventilation, lighting, and sanitary facilities; and vendors’ training on business skills, food safety and hygiene. True to the motto “cherish but upgrade and modernize,” authorities not only intended to strengthen traditional food retailers that way, but also followed the goal of combatting traffic congestion, improving food safety, and raising the tax payment rates of formerly predominantly informal traditional ventures (Reardon & Gulati 2008, p. 24 ff). With the same objective, some governments, e.g. in Hong Kong, China, and Thailand also experimented with the privatization of wet market management (Ho 2005, p. 96 f; Isaacs et al. 2010, p. 427). In the course of the so-called “nonggaichao” (“changing farmers’ markets into supermarkets”) policies, wet markets in large Chinese cities were even auctioned to supermarket chains (Hu et al. 2004, p. 569 f). Similar procedures were described for the cases of Vietnam (Cadilhon et al. 2006, p. 33; Tam 2007, p. 128), Hong Kong (Ho 2005, p. 95 f; Bougoure & Lee 2009, p. 72), Taiwan, Singapore, the Philippines (Reardon & Gulati 2008, p. 24 ff), and Turkey (Koç et al. 2008, p. 21). Given the important role that foreign investors have played in the worldwide promotion of supermarkets, regulations on openness towards, and preconditions for FDI may be a further highly effective instrument to steer not only modern food retail’s development within a country, but also its impact on the local food distribution channels (Mutebi & Ansari 2007, p. 365). However, while several studies, such as the above-cited, provide useful overviews of the range of regulatory measures, there is hardly any evidence on their actual effectiveness, impact, and success conditions (Altenburg et al. 2016, p. 6). Not least, as has already become clear from the evolution of modern food retailing in the United States, policy decisions do not take place in a vacuum, but are influenced by lobbying and political pressure on behalf of specific interest groups that may force governments to counterbalance advantages in competition. Coe & Wrigley (2007, p. 350 f), for instance, described various cases of “indigenous retailer resistance,” where domestic supermarket chains in the Global South

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lobbied their national governments to enact regulations in order to protect their competitive position against foreign ventures. Likewise, policy responses may result from tensions between modern food retailers and traditional food retailers, regardless of whether the modern players are foreign or domestic: Franz (2010, p. 322 ff) for instance depicts the case of traditional food retailers’ successful resistance against domestic and transnational supermarket chains in India in the early 2010s. India, which has witnessed several tides of resistance campaigns against the operation of domestic and/or foreign supermarkets, is also a striking example of how regulatory responses to modern food retail are fluctuating with different interested parties winning out at different phases (for details see e.g. Dholakia, Dholakia & Chattopadhyay 2012, p. 254; Franz 2012). Furthermore, the timing, nature and duration of policies may be highly contextual. The Asian economic crisis of 1997/1998, for instance, accelerated the rapid liberalization of FDI in the (food) retail industry of several South East Asian countries where domestic (food) retail coalitions had up to this point achieved a slowing down of this progress (Coe & Wrigley 2007, p. 342; Mutebi 2007, p. 361 ff). The impact of regulation on the diffusion of modern food retail may further vary considerably given the fact that modern food retailers are very flexible and malleable in terms of their company structure and store formats. As previously already described, in country contexts with restrictions on FDI, transnational supermarket chains may use joint ventures with domestic ventures as regulatory loopholes. Similarly, if the expansion of one format is restricted by a certain regulation, a modern food retailer may decide to switch to another format. Balsevich et al. (2007, p. 54), for instance, depicted the case of Thailand where, in 2003, modern food retailers counteracted zoning regulations on “big box” formats outside Bangkok by launching smaller superettes within the city instead. As Mutebi (2007, p. 365 f) showed in the cases of Malaysia, Indonesia, and Thailand, the fact that various agencies are responsible for different regulations may occasionally result in quite contradictory policies. This leaves room for interpretation, which modern food retailers may exploit for their own benefit. Not least, Reardon & Gulati (2008, p. 13 f) found that regulations often tend to be debated for months or even years before becoming effective. Modern food retailers usually take advantage of this fact by accelerating their expansion before the regulations actually become effective.

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Interim Conclusion on Theoretical and Conceptual Reflections

The overarching research objective of this thesis is the examination of the food retail market of Bangladesh’s capital city Dhaka under the influence of emerging supermarkets. Against this background, the previous chapters laid the theoretical and conceptual foundation for the empirical work on (potential) restructuring processes in Dhaka’s food retail market. The main findings of this theoretical-conceptional part will be outlined in this interim conclusion. In a general sense, markets can be defined as the economic place of the encounter of supply and demand for a particular good, service, or asset. On markets, buyers and sellers interact to determine the quantities and prices of a certain commodity by signaling what they intend to buy or sell in what amounts and at what price. Depending on qualitative characteristics and the respective number of buyers and sellers, markets can take various forms. From the sellers’ perspective, these market forms can be classified along a continuum ranging between the two extremes of polypoly or atomistic competition, and monopoly, with oligopoly and monopolistic competition lying somewhere in between. In food distribution channels where goods flow from producers and manufacturers via wholesalers and retailers to ultimate consumers, retailers perform several important functions from building a product assortment via breaking bulk to maintaining the information flow between the different parties along the distribution channel. That way, food retailers help bridge geographical and temporal gaps between production and consumption, and thus reduce transaction costs by performing procurement and sales in a more effective and efficient manner than producers, manufacturers, or consumers could. Generally speaking, traditional food retail markets feature a rather atomistic structure, with a multitude of individual small vendors who operate their ventures

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_6

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in a quite pragmatic manner and with only low levels of competition. Particularly in the course of the past century, this scenario has changed in many places: innovative entrepreneurs emerged, which performed their functions as retailers in a more efficient manner than their fellow vendors. This gave rise to the emergence of new food retail management practices, which, due to their success, were soon imitated, adapted, refined, and developed further by other players. General improvements in infrastructure and technological advances—from railroad and telegraph to computers and the internet—further facilitated and spurred this process of innovation and development. Due to the resulting increased competition, food retail markets’ atomistic structure successively made its way to rather oligopolistic, consolidated market forms. Thus, even though small traditional businesses continued to coexist alongside large modern food retailers to a certain extent—a typical characteristic of (food) retail competition –, the restructured markets were now significantly shaped by only a few strong and dominant players. In this setting, the development and monitoring of a retail strategy became modern food retailers’ increasingly important tool to differentiate themselves from their competitors, and to create and sustain a competitive advantage. Irrespective of their concrete forms and formats, in comparison to traditional food retail, these modern food retailers had several characteristics in common— starting from a self-service mode of operation and a full-line product assortment, to a mass-merchandising strategy and the exploitation of economies of scale. While the United States can be considered the cradle of modern food retail, in the course of the period following World War II, and not least because of the US Super Market Institute’s “missionary efforts”, supermarkets started to spread to countries all around the world. Depending on the country, however, this process took place at different paces and to varying degrees. In order to fully exploit the competitive advantages of their specific mode of operation, modern food retailers require complementary preconditions on both the demand and the supply side. In many countries of the Global South, these preconditions were initially hardly in place, however. Given consumers’ low and often irregular incomes, the shopping patterns of the vast majority of the population in those countries were hardly compatible with modern food retail practices. Thus, low-income customers put price before other aspects such as convenience, product variety, or quality, and preferred to purchase food very frequently and only in small amounts at low average prices. A lack of storage and refrigeration capacity and limited mobility further encouraged the high frequency of purchases from food retailers within easy walking distance. Consequently, the more distant supermarkets with their comparably sophisticated

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shopping atmosphere and broad variety of often more expensive items had only low appeal for great proportions of the population. On the supply side, domestic food processing and production had yet to adapt to the new food habits of more affluent consumers, which caused supermarkets to import the more expensive required items. Given an absent or only immature packaging industry, modern food retailers were forced to sort, grade and package products themselves in order to make them compatible with their self-service mode of operation. Long and interlaced traditional supply chains with their atomistic actors made product procurement for supermarkets not only very intricate, but also prevented them from exploiting the advantages of economies of scale. High taxes on imported store equipment, e.g. refrigeration facilities or gondola shelves, further added to the already high operational costs of a supermarket outlet. For the above reasons, supermarkets in the Global South initially developed and expanded, if at all, at only a slow pace. In many countries, however, this scenario changed drastically from the beginning of the early 1990s onward. On the demand side, economic development and the corresponding increasing per capita income had by then caused a change in diet patterns and shopping habits. Thus, customers not only attached more importance to food quality and safety, but also shifted from consuming mainly starchy staples toward costlier fresh food. A rise in the ownership of cars and refrigerators led to a lower shopping frequency and a higher number of items bought per purchase. Together with a significant increase in women entering professional life outside their homes, consumers sought more convenient and time-saving forms of shopping and cooking, which was among others reflected in a rising demand for processed and easy-to-prepare food. In some cases, the westernization of lifestyles, in particular among the younger generation, as well as shopping and consumption experiences abroad, had further strengthened this trend. Rapid urbanization thereby provided modern food retailers with important entry gateways to these emerging customer segments. In such settings, modern food retailers increasingly attained considerable competitive advantages compared to their traditional counterparts by establishing themselves as convenient and service-oriented one-stop-shopping destinations with a large variety of high-quality and safe products. Traditional food retail can therefore in a sense be considered as “inferior good” as, from the low-income consumers’ perspective, the additional value offered by supermarkets was originally too low compared to its price. With rising incomes, however, customers then tended to abandon traditional food retailers and switched to supermarkets as soon as they could afford it.

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While the factors described on the demand side demonstrate various parallels to socioeconomic developments that facilitated the expansion of modern food retail in the US, the developments in many countries in the Global South from the early 1990s onward were decisively determined by an additional factor: the surge of foreign direct investment from transnational supermarket chains, which sought new expansion opportunities beyond their already rather consolidated and saturated home markets. These ventures not only brought considerable resources and know-how to their target markets, in particular in regard to the capacity and efficiency enhancement of their procurement systems. Taken together with “second mover” competitive responses by domestic food retail chains, the deluge of FDI led to considerable growth and the consolidation of modern food retail. Figure 6.1 summarizes the principal influencing factors on the presence and expansion of modern food retail in the Global South:

Figure 6.1 Influencing Factors on Modern Food Retail in the Global South. Source: Own

While supermarkets and traditional food retailers initially served different consumer segments, and therefore hardly entered into direct competition, with modern food retailers’ progress in conquering the middle- and even low-income consumer segments, supermarkets and traditional food retailers increasingly became competitors. Product prices, quality, and safety, as well as shopping convenience then emerged as the most contested fields in the battle for consumers.

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Over the course of time, a decline in traditional food retail formats set in, and the formerly atomistic domestic food retail markets gave way to a rather oligopolistic structure. In such setting, small traditional businesses in fact continued to coexist alongside large modern food retailers to a certain extent, the restructured markets however were now significantly shaped by only a few strong and dominant players. The (potential) impact of supermarkets on the structure of food retail markets and the corresponding implications for players along food distribution channels in the Global South have been arousing the interest of researchers, policymakers, and development practitioners for several decades already. While the developments in food retail markets of countries in the first waves of the so-called “supermarket revolution” have already received considerable attention in this regard, other countries—among them Bangladesh—have so far remained rather blind spots. Against this background, the following empirical part of this thesis turns toward the examination of the specific case of the food retail market in Bangladesh’s capital city, Dhaka, under the influence of emerging supermarkets.

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Dhaka: The Emergence of a Capital and Megacity

As already explained before, the analysis and examination of a market requires not only a clear definition of the range of commodities or services to be included in the market under study, but also the delineation of its geographical boundaries. Against the background of the research objectives and questions underlying this thesis, the focus of interest lies here on the food retail market within the geographical boundaries of Bangladesh’s capital city Dhaka. In the following, Dhaka’s historical cornerstones in its development from a small settlement to a vibrant capital and megacity will be depicted, and embedded in Bangladesh’s history. Here, particular emphasis will be placed on historical events that shape Bangladesh’s economy, political landscape and society until the present day, and that thus also have decisive influence on the developments described in Dhaka’s food retail market later on. That way, the chapter not only provides an important basis for the better understanding of the setting where the empirical fieldwork for this thesis was conducted, but also for the soil from which modern food retail in Dhaka has its roots, and that has significantly shaped the industry’s development up until now. Dhaka’s Precolonial Period Since the beginning, Dhaka’s areal expansion and form have been influenced by the physical and topographical features of the landscape in and around the city, in particular the river system and the low-lying area all around (Islam 1996, p. 191). It is not completely clear when and how a settlement was first formed at the site where the older core of Dhaka stands today. What is certain is that in the preMughal period, Dhaka was a small Hindu trading center on the Northern bank of the Buriganga river, with the Dulai Canal defining the city’s circumference (Dani 1962, p. 7, cited after Ahsan 1991, p. 397). As Dhaka’s markets developed © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_7

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in a linear pattern along the narrow streets linking the residential areas with one another, Dhaka at that time was also referred to as a city of “52 markets and 53 lanes” (Bradly-Birt 1906, p. 75, cited after Ahsan 1991, p. 397). Dhaka came into prominence with the Mughal period, which started in the early years of the 17th century (Mohsin 1991, p. 64). In 1610, Islam Khan Chi, the first Mughal Viceroy of Bengal, transferred the capital of the Bengal province from Rajmahal (today India) to Dhaka, and renamed the new capital Jahangirnagar after the ruling Mughal emperor Jahangir (van Schendel 2007, p. 50). During its period as a provincial capital, Dhaka flourished and grew into a metropolis (Chowdhury & Faruqui 1991, p. 48). Dhaka was not only developed as the Mughal’s administrative and defense headquarters, it also gradually attained great commercial importance and became a reputed trading center for the products of Eastern Bengal, such as shell works, bamboo mats, agricultural products, and above all, high-quality cotton textiles (Mohsin 1991, p. 64 ff). From 1616 onward, Dhaka’s commercial importance also attracted European traders, and being actively encouraged by the Mughal government as a source of tax revenue, Portuguese, French, Dutch, English, and Armenians established their trading houses and factories in the city (Karim 1964 cited after Chowdhury & Faruqui 1991, p. 47). With boats being the general means of transportation, the city’s road system at that time was not yet well developed. Instead, waterways such as the Buriganga River and the Dulai Canal served as major communication lines (Islam 1996, p. 8). Dhaka’s status as provincial capital lasted for about a century. In 1704, Murshid Quli Khan, the then administrator of Bengal, moved from Dhaka to Murshidabad (today India), which he consequently declared to be the new capital of the Bengal province. With the removal of the capital, Dhaka lost its political importance. However, the city retained its commercial predominance as a manufacturing center, trading venue, and the collection port of inland custom duties in the region (Mohsin 1991, p. 64). Dhaka Under British Rule Dhaka’s political status further eroded under the rule of the East India Company, a British trading corporation, which took over the political domination and the administrative control of Bengal in 1764 (Bradley-Birt 1965, p. 200 ff, cited after Mohsin 1991, p. 70). The capital of colonial Bengal was moved to Calcutta (today Kolkata in India), and Dhaka’s administrative importance gradually dwindled away (Ahsan 1991, p. 401). About this time, the invention of the spinning machine in England revolutionized the cotton textile industry, and the British government implemented high tariffs in order to protect its home industry (Ghosal

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1939, p. 211, cited after Mohsin 1991, p. 71). The resulting decline of the cotton textile trade had quite a negative impact on Dhaka’s commercial activities. As a consequence, the city’s population shrank massively, and once populated areas became totally desolate (Ahsan 1991, p. 401). Triggered by natural disasters, the collection of arbitrarily high taxes by the East India Company, and uncontrolled profiteering in the food grain markets the Bengal population witnessed the most severe famine of that time: in the years 1769 and 1770, an estimated number of 10 million people—one third of the Bengal population—perished (van Schendel 2009, p. 57). Despite this disaster, the East India Company continued to raise its tax rate even higher the year after the famine. As a consequence, Bengal’s entire economy collapsed. The resulting losses forced the East India Company to ask for a rescue loan from the British government in 1771. The British parliament granted the loan, but at the same time felt the need to interfere. The resulting Regulating Act of 1773 marked the beginning of British governmental control over the company’s affairs in Bengal (Islam 2015a, n.p.), a process that finally ended in the company’s replacement by the British government in the course of the India Act of 1858. From then on, Bengal, together with India, was officially ruled by the British (Ali 2014, n.p.). The replacement of the East India Company by the British colonial rulers did not mean the end of the exploitation of Bengal’s resources. Quite the contrary, not least because of the American Revolution and the corresponding loss of power in the western hemisphere, the British had the ambition to transform Bengal’s economy in such way that it would yield them as much income as possible. To this end, the colonial rulers implied “an endless series of administrative and economic experiments” (van Schendel 2009, p. 56). Among others, the British placed great emphasis on the introduction of the large-scale, export-oriented cash crops of opium, indigo, tea, silk, and jute. As a consequence, the eastern Bengal society became a predominantly rural society, and the vast majority of the population earned their living in the countryside, mostly with agriculture. The British further laid great emphasis on the development of the delta’s educational and health sector, and on the improvement of infrastructure, e.g. through the construction of roads, bridges and railways, which made transportation in the Bengal delta less dependent on waterways (van Schendel 2009, p. 65 f). Under the colonial influence, the 1850s finally marked the end of Dhaka’s decline and the jungle-beset city saw the beginnings of physical renewal. In this period, “[m]edieval Dacca was finally transformed into a modern city with metalled roads, open spaces, street lights and piped water-supply” (Ahmed 1986, p. 129).

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Right from the beginning, Bengal’s colonial period was accompanied by recurring revolts and movements for autonomy and against the economic exploitation of the delta’s resources by the British. In 1905, the British divided the huge province of Bengal into a western part (“Bengal”) and an eastern part (“Eastern Bengal and Assam”), a decision that many saw as a calculated move in order to break the anti-colonial movement by means of “divide and rule” of the Bengali speaking population (van Schendel 2007, p. 79). Opposition against the partition most prominently manifested itself in the form of the Swadeshi1 movement (1905–1908). With press campaigns and petitions proving to have no impact, the movement soon turned to the method of boycotting British goods (in anticipation of Mahatma Ghandi’s later disobedience movement against the British colonial rulers), and self-help through Swadeshi industries, national schools and village development (Roy 2015, n.p.). It was also in the period of the Swadeshi movement, when the famous poet and philosopher Rabindranath Tagore composed the song “Amar Sonar Bangla” (“My golden Bengal”). The song not only stirred a sense of patriotism among the Bengali population, but later on even became the national anthem of the People’s Republic of Bangladesh (Farooq 2014, n.p.). While Bengal’s partition on the one hand strengthened a sense of “Bengaliness” among the population, it also successively led to mutual antagonism between Hindus and Muslims. This resulted in the development of a specific regional political framework in which religious identity began to overrule regional and class identities (van Schendel 2007, p. 80 ff). In 1911, the British annulled the division of Bengal and the capital of British India was moved from Calcutta to Delhi (van Schendel 2007, p. 85). In 1921, the Dhaka University, today Bangladesh’s oldest and largest university, was founded as compensation for Dhaka’s loss of its function as the administrative center of eastern Bengal (Miah 2014, n.p.). The Pakistan Period In 1943 and 1944, Bengal was hit by another severe famine. Just as with the famine of 1769 and 1770, this was a man-made disaster and not a scarcity of food, but the collapse of the grain marketing system caused the death of about 3.5 million people, mostly in rural eastern Bengal (Islam 2015b, n.p.). Three years later, the end of the British imperial and colonial rule in 1947 marked the

1 The

word “Swadeshi” derives from Sanskrit and is a conjunction of the two words “Swa” (“self” or “own) and “desh” (“country”) and therefore means “of one’s own country” (Roy 2015, n.p.)

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partition of the Indian sub-continent, and India and Pakistan emerged as two independent countries. By the same stroke, the province of Bengal was divided along religious lines into the predominantly Bengali-Hindu West Bengal, and the predominantly Bengali-Muslim East Bengal. While West Bengal became a part of India, East Bengal was assigned to Pakistan. As a consequence, Pakistan comprised two geographically discrete areas, which were separated from each other by about 1,500 km of Indian terrain in between (van Schendel 2009, p. 107). With Dhaka being declared the provincial capital of East Bengal (later East Pakistan), the city regained political and administrative importance (Chowdhury & Faruqui 1991, p. 58). The partition of Bengal led to a mass exodus of (high class) Hindus from East Bengal to India, and a remarkable influx of Bengali and non-Bengali Muslim migrants from India to East Bengal (Shelley 2008, p. 202). Simultaneously, in the post-1947 period, Dhaka witnessed an unprecedented growth in population. Initially, the new inhabitants were mainly accommodated in the old city, where existing houses and compounds were divided to make room for the rising population. In 1949, Dhanmondi, an area in the northwest fringe of Dhaka that was formerly predominantly covered with paddy fields, was developed as residential area. In 1956, the Dhaka Improvement Trust (DIT)2 was created to further plan and develop the city, and to cater to its ever-increasing residential needs. The highland on either side of the Mirpur road came to be occupied right up to Mohammadpur and Mirpur—two areas that were developed by the government in the mid-1960s. In the following years, “new Dhaka” emerged in the flood-free higher elevation areas in the Northern fringe of the city. In 1961, the DIT developed the Gulshan model town, followed by the establishment of the residential areas Banani (1964), Uttara (1965) and Baridhara model town (1972) (Chowdhury & Faruqui 1991, p. 58 f). Although originally planned to accommodate Dhaka’s middle-income residents, the allocation procedure and a rapid increase in the price of land finally ended up with these satellite towns becoming high-income residential areas. Over the years, these areas matured and became important (business) centers of the city (Kabir and Parolin 2010, n.p. cited after Kabir & Parolin 2012, n.p.), and that way also important locations for today’s modern food retail outlets. Ever since Pakistan’s independence from Britain, the young state faced manifold challenges: Pakistan not only had to compensate for the considerable losses of resources and industries that had been inherited by India, it also had to govern 2 In

1987, the Dhaka Improvement Trust was transformed into the Rajdhani Unyayan Katripakkha (Capital Development Authority of the Government of Bangladesh, RAJUK) (Chowdhury & Faruqui 1991, p. 59).

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two unconnected territories, and to weld its citizens into a united nation (van Schendel 2009, p. 107). The initial euphoria over the new sovereign Islamic homeland was soon shadowed by numerous controversies between the Eastern and the Western wing of the country: as most industries in Bengal during the British era were set up in the adjacent regions of Calcutta, after the partition of Bengal in 1947, East Pakistan inherited only a small share of Bengal’s industries. With the objective of filling this gap and achieving self-sufficiency in production, the government of Pakistan issued an industrial development policy to encourage public and private industry investment (Raihan & Eusuf 2008, p. 121 f). The industrialization process in East Pakistan, however, was strongly marked by a policy promoting the shifting of resources from East Pakistan to West Pakistan. New industrial ventures in East Pakistan were dominated by non-Bengali entrepreneurs, and under the government’s control, products grown or manufactured in East Pakistan were sold in the local market at prices higher than in West Pakistan (Raihan & Eusuf 2008, p. 121 ff). In view of these disparities, the initial impression that East Pakistan was “only” neglected and overlooked by the Pakistani government increasingly gave way to the sentiment that the region was being systematically exploited by the West Pakistan elite (van Schendel 2009, p. 138). The situation was further aggravated under the influence of a new factor: the link of economic development with foreign aid. In the early 1950s, the Cold War had made government-to-government aid a useful geopolitical tool. It thus did not take long until the new state of Pakistan established aid links, above all with the United States. Instead of mobilizing internal resources and taking the demands of its population into account, the Pakistani government increasingly followed the development priorities of foreign donors. These were based on the firm conviction that investments in Pakistan’s strongest economic sectors and enterprises would lead most effectively to rapid economic growth, and that the wealth generated would then gradually trickle down to the poor and to weaker economic sectors. This policy was particularly unfavorable for East Bengal, which received more than five times less aid than West Pakistan. This not only widened the gap with West Pakistan, but also discouraged the development of Eastern Bengal entrepreneurs, while tens of millions were trapped in a state of poverty (van Schendel 2009, p. 144 ff). In addition to the economic disparities, East Pakistan further suffered from ethnic and linguistic discrimination: Even though East Pakistan featured the larger population, Bengalis were hugely under-represented in Pakistan’s federal government and military forces. Furthermore, notwithstanding the fact that more than half of the population spoke Bengali as their mother language, central leaders and the Urdu-speaking intellectuals of Pakistan declared Urdu to become the official

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language of the new state (van Schendel 2009, p. 110 ff). In February 1948, at the Constituent Assembly of Pakistan, central leaders, among them the prime minister of Pakistan, and the chief minister of East Bengal, opposed a motion to include Bengali as one of the languages of the Constituent Assembly. This incident marked the beginning of the Language Movement, which was mainly driven forward by students, intellectuals, and politicians of East Pakistan in protest against the imposition of Urdu as the official language of Pakistan (Al Helal 2015, n.p.). The growing sense of deprivation and exploitation made people in East Pakistan increasingly lose their faith in Pakistan’s governing Muslim League. As a consequence, in 1949, a new party, the Awami Muslim League (which renamed itself Awami League in 1955, in order to stress its non-communal character) was established as the Bengali alternative (van Schendel 2009, p. 117). On February 21, 1952, the Language Movement reached its climax when police opened fire on an assembly of thousands of protesting students in Dhaka, leaving many people injured and five dead. The following day, a mourning procession for the dead was again attacked by police and army, resulting in several dead and wounded.3 Notwithstanding this tragedy, the Language Movement went on until February 16, 1956, when it finally achieved its goal: Bengali, along with Urdu, was enacted as one of Pakistan’s state languages (Al Helal 2015, n.p.). The events of 1952 marked a sharp psychological rupture between East and West Pakistan, and the following years were shaped by a further deterioration in the relationship between the two. In this period, East Pakistan witnessed the emergence of a self-confident regional Bengali culture, whose customs, symbols, and institutions exist to this day (van Schendel 2009, p. 152 ff). In 1970, Sheik Mujibur Rahman (popularly known as Mujib), the leader of the Awami League, came off as the winner of the general elections, which made him the sole spokesman of the people of East Pakistan, and the majority leader in the Pakistan National Assembly. However, West Pakistan’s political and military elite refused to relinquish their power to him. As a consequence, on March 7, 1971, Rahman gave a historic speech to one million people gathered at Dhaka’s Race Course. At the end of his speech, he declared (cited after Harun-or-Rashid 2015, n.p.):

3 Today,

February 21 is not only a key national holiday in Bangladesh. In 1999, following a proposal by the Bangladeshi government, UNESCO declared the day the International Mother Language Day in order to promote awareness of linguistic and cultural diversity and multilingualism. Bangladesh’s national monument Shaheed Minar (“martyrs’ memorial”), established for the first time in 1963 in Dhaka to date commemorates the people who were killed during the Language Movement (van Schendel 2009, p. 114 f).

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“Build forts in each homestead. You must resist the Pakistani enemy with whatever you have in hand. […] Remember, we have given a lot of blood, a lot more blood we shall give if need be, but we shall liberate the people of this country, Insh Allah. […] The struggle this time is the struggle for our emancipation; the struggle this time is the struggle for independence.”

The speech marked the beginnings of the non-violent Non-Cooperation Movement under the leadership of Rahman and the Awami League, which had the aim to achieve East Pakistan’s autonomy from the central government of Pakistan. In the morning hours of March 26, 1971, the Pakistani army started “Operation Searchlight,” a punitive operation against what the military rulers perceived as the centers of Bengali opposition. On the same day, the independence of Bangladesh was declared, Sheikh Mujibur Rahman was taken into custody by the Pakistani military and the Bangladesh Liberation War had begun. While East Pakistan’s resistance toward the Pakistani army was initially quite spontaneous and uncoordinated, it gradually became more organized: All over the delta, young men and women joined the mukti bahini, the freedom fighters, which, with training and support from India, began a guerilla war against the Pakistani army. These events on the subcontinent also had broader implications up to the global level; with the Bangladesh Liberation War having broken out in the middle of the Cold War, the world’s superpowers also became involved. While the Soviet Union backed India and supported the Bangladesh liberation movement, the United States and China allied with Pakistan, which also received the support of many Muslim-majority states. Because of these constellations, intents to resolve this conflict through diplomatic means were doomed to failure. On December 3, 1971, Indian forces and the freedom fighters marched into the delta, and after the ensuing 13 days of war between India and Pakistan, the Pakistani government crumbled and its army finally surrendered (van Schendel 2009, p. 161 ff). The Bangladesh Period On December 16, 1971, East Pakistan became independent from Pakistan, and Dhaka was declared the capital of the new nation “People’s Republic of Bangladesh.”4 In January 1972, Sheikh Mujibur Rahman was released from Pakistani captivity and returned to Bangladesh where he was enthusiastically welcomed as the “Father of the Nation” and established an Awami League government (van Schendel 2009, p. 175 f). In the course of its first years as a sovereign nation, Bangladesh suffered from severe poverty. Over 80 percent of the population lived below the poverty line 4 “Bangladesh”

is Bengali and means “The land of the Bengalis.”

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(van Schendel 2009, p. 215). The country’s transportation and communications network as well as its industrial sector had been heavily damaged by the war, and the significant exodus of entrepreneurs and skilled labor led to a nearly complete collapse of the business network (Raihan & Eusuf 2008, p. 121). In the countryside, agricultural production had to be revived after it had nearly come to a standstill in the course of the Liberation War. In addition to the physical damage, the country had to deal with the war’s considerable social and societal aftermath: hundreds of thousands of people were displaced, maimed, and traumatized. Not least, there was the remaining question of how to proceed with the citizens who, during the Liberation War, had been on the Pakistani side. In January 1972, collaborators with the Pakistani military were brought before a collaborator’s tribunal and tried for war crimes. Although the tribunal declared collaborators liable for trial, on the occasion of the celebration of the second anniversary of Victory Day, the Bangladeshi government declared a general amnesty (Mamoon 2015, n.p.). Nonetheless, the demand for justice and the corresponding handling of war criminals are issues that have repeatedly been revived up to the present day. Two years after independence, the country’s dream of a Golden Bengal turned into a nightmare instead: the country was in a profound economic and political crisis, and people became deeply disillusioned with the governing Awami League. In the course of the government’s socialistic development strategy, a large number of enterprises, including those that had been abandoned by their Pakistani owners, were nationalized. The government restricted private industry investment and exerted extensive state control over the industrial sector. However, it did not take long until the public enterprises suffered from mismanagement and scarce resources (Raihan & Eusuf 2008, p. 123 ff). Thus, the country’s economy did not recover as rapidly as expected, economic productivity lagged far behind the prewar level, and the standard of living of the majority of the population kept falling instead of improving. Even though the rice harvest of December 1973 had been good, rice prices kept increasing, and by March 1974, starvation was on the rise. To make the situation even worse, the summer brought long and damaging floods. While Bangladeshi civil society made strong efforts to help the victims of the resulting famine, the Bangladeshi government initially denied the situation, and later on only showed half-hearted attempts to fight the famine’s causes and consequences. At the end of the disaster, the government had lost all of its political capital and stood exposed as inept and indifferent in view of an estimated 1.5 million who perished (van Schendel 2009, p. 177 ff). In view of the country’s struggling economy and the increasingly deteriorating law and order, Sheikh Mujib Rahman reacted with the introduction of a

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single party system in January 1975. The so-called “Bangladesh Krishak Sramik Awami League” (BAKSAL) aimed for an exploitation-free and socialist economic and administrative order, following the examples of other government systems in socialist countries of that time. The new system, however, provoked great discontent among large parts of the population. Many people who had formerly appreciated Mujib as “Bangabandhu” (Bengali for “Friend of Bengal”) and a democratic activist were now disappointed to see him as the creator of an authoritarian single party system (Islam 2015c, n.p.). Even before BAKSAL started its work, on August 15, 1975, Mujib was assassinated at his residence, along with nearly all of his family members. A military-backed government came into force, which was overthrown on November 3 by a second military coup. On November 7, a third military coup followed. This time, a former freedom fighter and major general, Ziaur Rahman (popularly known as Zia), emerged as Bangladesh’s ruler. In order to gain legitimacy for his military regime, Zia created the Bangladesh Nationalist Party (BNP), which came out as the winning party of controlled elections (van Schendel 2009, p. 199). Zia’s regime marked a decisive shift in the country’s economic policies from socialism to privatization: nationalized enterprises were handed back to their former owners, and the regime laid heavy emphasis on the development of the private sector and export-oriented growth. Foreign aid—an instrument applied by Western countries to prevent Bangladesh from joining the communist bloc during the Cold War—supported these policies and substantially contributed to the country’s economic recovery (van Schendel 2009, p. 193). In 1981, Zia was assassinated during a military coup, and after several months of a military backed civilian government, another general, Hussain Muhammad Ershad, followed. A popular uprising in 1990 forced Ershad out of power. The following year, democratic elections for the national parliament were held, and two parties clearly dominated: the BNP of Ziaur Rahman, now led by Zia’s widow, Khaleda Zia, and the Awami League, which was now run by Sheikh Mujibur Rahman’s eldest daughter, Hasina Wazed (also known as Sheikh Hasina), who had survived the assassination of her family in 1975 just because she happened to be abroad. With the BNP coming out as the winner of the elections, Khaleda Zia became the prime minister of Bangladesh. After 15 years of military rule, Bangladesh had returned to a parliamentary democracy (van Schendel 2009, p. 199 ff). The following parliamentary elections cemented Bangladesh’s “unofficial twoparty parliamentary system” (van Schendel 2009, p. 200) with the arch rivals Sheikh Hasina and Khaleda Zia at the respective head. An Awami League-led government ruled from 1996 to 2001 with Sheikh Hasina as prime minister,

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followed by a BNP government with prime minister Khalea Zia from 2001 to 2006. The planned elections for 2007 had to be postponed because of widespread pre-election violence, and a military-backed caretaker government took over (van Schendel 2009, p. 197 ff). Since the elections in December 2008 and the landslide victory of the Awami League, Bangladesh is again governed by prime minister Sheikh Hasina. Ever since, in their struggles for power, both parties and their leaders have made strong reference to the Bangladesh Liberation War of 1971. While both parties anchor their claims for legitimacy in the moment of the nation’s birth, the Awami League sees Bangladesh as having originated in the language movement and the 1971 war. Again, BNP considers the nation’s roots to lie in the movement for Pakistan and the 1971 war. Other than Awami League, BNP thus considers the creation of Pakistan not as a misstep, but, on the contrary, as a necessary move toward the ultimate manifestation of the delta’s Muslim-Bengali identity (van Schendel 2009, p. 203). It is through this constellation of the two “Begoms”5 Khalea Zia and Sheikh Hasina, and their respective parties’ historical narrative, that unsolved tensions in Bangladesh’s political system have taken shape (van Schendel 2009, p. 199 ff) and remain existent until the present day— with sometimes considerable implications for the country’s business environment, including modern food retail (subchapter 9.2.1.5). In the years and decades following the liberation war, Dhaka experienced phenomenal growth and emerged as the country’s political, economic, and cultural hub (Ahsan 1991, p. 405). Rural migrants increasingly sought their fortune in the capital, and slums began to occupy any conceivable vacant land (Chowdhury & Faruqui 1991, p. 60 f). The ready-made garment industry, which emerged in the 1980s and then developed into the country’s largest industrial industry, made a significant contribution to Dhaka’s growth in both inhabitants and economic importance (Raihan & Eusuf 2008, p. 123 ff). Commercial activities in Dhaka spread out in tentacles following the main routes along the upper- and middleclass residential areas, and informal bazar type service activities mushroomed on the pavement near almost all shopping centers. With the growth of the city, Dhaka’s formally bi-nodal shape made way for a polycentric form (Ahsan 1991, p. 412 f).

5 Muslim

honorific term for “respectable lady.”

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Contemporary Dhaka As is evident from the above explanations, Dhaka’s development from a small rural settlement to a megacity has not only been very eventful, but also closely entangled with the history of the Bengal Delta. Over the decades, private and informal industry initiatives as well as major urban development plans were implemented by formal public industry authorities or institutions to shape the cities’ growth, but with limited effect. Unforeseeable events such as the breakup of Pakistan and Dhaka’s nomination as the capital of the new nation, the People’s Republic of Bangladesh, have posed additional challenges to the city’s controlled development (Islam1996, p. 184 f).6 As city planners and regulators were hardly able to keep pace with Dhaka’s growth, in the end, “the city has grown more outside of a planning framework than within it” (Islam 1996, p. 206). Observers therefore see Dhaka’s development path as a cause of concern and unanimously warn of great danger from congestion, air and water pollution, environmental degradation and intolerable pressure on utilities such as power, gas, water, waste, and sewage disposal services (e.g. Ahmed, Nahiduzzaman & Bramley 2014, p. 40 f). With the aim of providing the constantly growing capital with more effective governance, on December 4, 2011, the Dhaka City Corporation (DCC) that was founded in 1983 was divided into two self-governing bodies, namely Dhaka South City Corporation (DSCC) and Dhaka North City Corporation (DNCC) (Ahmed 2014, n.p.). Nonetheless, a review of current publications reveals that the quality of life in Bangladesh’s capital has not significantly improved, and that Dhaka continues to expand in quite an unplanned and unchecked manner. Contemporary Dhaka7 comprises nearly 18 million inhabitants in the metropolitan region, and thereby accounts for one-tenth of the country’s population, while the city occupies only 1 percent of the country’s land. The average density in Dhaka’s central part is 41,000 inhabitants per square kilometer. Air, soil, and water quality have deteriorated to alarming levels, and pollution continues to affect the capital’s residents. Given the poorly established connectivity network, the poor mass transportation systems and the high road density, the current average driving speed on Dhaka’s 6 For further details on these initiatives, see e.g. Islam (1996, p. 175 ff); Kabir & Parolin (2012,

n.p.); Ahmed, Nahiduzzaman & Bramley (2014, p. 31 ff). 7 There is uncertainty as to what constitutes the spatial extent of contemporary Dhaka, because

of different organizations applying different methods to delineate the city’s area. Additionally, Dhaka’s boundary changes with the temporal horizon (Kabir & Parolin 2012, p. 5). For an overview on the concepts of Dhaka in usage, please see Islam (1996, p. 211 ff) and Kabir & Parolin (2012, p. 5 ff). In the context of this thesis, Dhaka is understood as the regional authority of DSCC and DNCC.

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roads has declined from 21 kilometers per hour to 7 kilometers per hour in only five years. This causes each Dhaka urbanite to spend an average of 2.4 hours a day in traffic, out of which 1.3 hours is in traffic jams (The International Bank for Reconstruction and Development & The World Bank 2018, p. 7 ff; Figure 7.1).

Figure 7.1 Rush Hour in Dhaka. Source: Own pictures (August 2012)

It is no surprise that, just as in previous years, in 2018, among others because of the intolerable quality of public transportation, poor cultural and recreational opportunities, and uncomfortable climatic conditions, Dhaka again had one of the lowest rankings on the livability index: with the second lowest rank out of 140 cities, Dhaka is followed only by the capital of the Syrian Arab Republic, Damascus (Economist Intelligence Unit 2018, p. 5). Thus, experts’ continual appeals for a farsighted city planning and corresponding regulatory activities have lost none of their relevance, as otherwise, “Dhaka may choke itself to death” (Shelley 2008, p. 224). In such an environment, it does not seem surprising that Dhaka’s modern food retailers strive for competitive advantages by establishing themselves as islands of modernity, purity, and comfort, as will be shown in subchapter 9.2.2.2.

8

Research Design and Methodology

Just as so many other countries already have before, for nearly two decades now, Bangladesh and in particular its capital Dhaka are witnessing the emergence and diffusion of modern food retail formats. Although an increasing amount of grey literature in the recent past may be interpreted as a growing interest in the subject matter, to date, an extensive study has neither been conducted on the characteristics of Dhaka’s modern food retail landscape, nor on modern food retail’s (potential) impact on traditional food retail formats. The examination of both of these aspects, however, is an essential basis for answering this thesis’ overarching question of whether, and if yes, how and to what extent Dhaka’s food retail market is undergoing a structural change under the influence of emerging supermarkets. With the aim of shedding light on these aspects, the author applied an iterative research process with theoretical and conceptual reflections in Kaiserslautern, and phases of fieldwork in Dhaka. In the following, the research process (subchapter 8.1), data collection, and applied research methods (subchapter 8.2), as well as the procedure of data analysis (subchapter 8.3), will be described.

8.1

Research Process

According to the original project proposal, the sub-project’s first research phase in Kaiserslautern was supposed to comprise desk research in order to reconstruct the history of “supermarketization” in Dhaka/Bangladesh, and to assess the current Electronic supplementary material The online version of this chapter (https://doi.org/10.1007/978-3-658-33315-7_8) contains supplementary material, which is available to authorized users.

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_8

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food retail market share of supermarkets in Bangladesh’s capital. In preparation for the first fieldwork in Dhaka, the project proposal then scheduled the elaboration of questionnaires for a survey on kacha bazar vendors’ adaptive capacities to upcoming supermarkets. However, right at the beginning of the research project, the desk research in Kaiserslautern revealed that available information and figures on the evolvement, presence, and characteristics of supermarkets in Dhaka and Bangladesh were extremely scarce. In view of this finding, the author decided to rearrange her work schedule. Thus, instead of examining kacha bazar vendors’ adaptive capacities to modern food retailers in Dhaka, the author dedicated her first fieldwork to the development of a profound understanding of Dhaka’s supermarket landscape. The purpose of the first phase of fieldwork in Dhaka (October 2011–December 2011) was therefore twofold: First, it allowed the researcher to settle in the field, to recruit and train translators and transcribers for her expert interviews, and to establish contacts with (potential) interview partners—all essential prerequisites for the successful conduct of the following fieldwork. In particular during the first few weeks in Dhaka, numerous exploratory excursions to food wholesale markets, kacha bazars, mudir dokans (grocery shops), and supermarkets allowed the researcher to familiarize herself with the local food distribution system, and to gain a “true to life” overview of its key actors—beyond the scarce available literature the author was able to review in the course of her desk research prior to the first fieldwork phase. With increasing familiarization with the research environment, the author steadily focused on the second goal of the first fieldwork phase: the collection of firsthand information on the evolution of modern food retail in Dhaka, and the determination of the current local supermarket landscape, its key actors and structures via semi-structured interviews with modern food retailers. Here, it soon turned out that Dhaka’s supermarket sector was far smaller than originally expected. Furthermore, it became clear that, other than as was assumed in the original project proposal (see Figure 8.1), Bangladesh did not yet feature any transnational modern food retailers. Instead, the researcher came across several significant factors, which proved to be considerable barriers to the further expansion of modern food retail in Dhaka and Bangladesh. Hence, the author refined her research questions to these findings and, in the further course of her fieldwork, dedicated particular attention to the identification of hindering factors for supermarkets and modern food retailers’ strategies to handle them. The focus of the second phase of fieldwork in Dhaka (August 2012–September 2012) was then on the exploration of supermarkets’ (potential) impact on traditional kacha bazars in Dhaka, and kacha bazar vendors’ (proactive) measures

8.1 Research Process

105

to cope with competitive pressures from supermarkets. In addition, the author conducted interviews with key informants and further modern food retailers. Based on the findings of her first fieldwork, the author in the latter case put an emphasis on the in-depth examination of one of the identified major barriers to modern food retail, namely product procurement, and supermarket managers’ corresponding supply chain improvement activities. The third and last phase of field research in Dhaka was scheduled for March to April 2013, and supposed to proceed with the interviews of kacha bazar vendors and to triangulate the information and knowledge generated thus far with primary data on the perspective of key political actors and authorities. Unfortunately, however, this phase fell into the peak of “Bangladesh’s year of violence” (Sattar 2013, n.p.): because of several violent general strikes (“hartals,” see also subchapter 9.2.1.5), public life in Dhaka—including food retail—nearly came to a standstill. In combination with travel advice from her former student assistants and interview partners, the author finally refrained from the third field stay at short notice, given the disproportionate risk-benefit-ratio of such a venture. Instead, the author sought out appropriate support in Dhaka who, thanks to their permanent presence on-site, could conduct the pending interviews whenever the situation would permit. As the author’s student assistants at this time had just finished their studies and entered professional life, she finally assigned the Alternative Movement for Resources and Freedom Society (AMRF Society), a renowned local NGO with extensive experience in qualitative social research, to conduct the interviews. To this end, the author gave comprehensive instructions to her AMRF contact person on the background and objectives of her research project, and the corresponding required interviews. While interviews with other vendors at kacha bazars could finally still be done, the initiation of interviews with political key actors and authorities unfortunately proved to be unsuccessful. Consequently, this perspective could only be considered in the course of the author’s document analysis. The implications of this fact for the interpretation of this thesis’ results as well as the consequent further need for research will be discussed in subchapter 11.2. In the course of the entire last phase of fieldwork (June 2013–September 2013), the author was in regular contact with AMRF Society in order to supervise the data collection and the subsequent process of translation and transcription, which was carried out by AMRF Society as well. Transcription and translation of the interviews included, this rearrangement of the author’s work schedule led to an extension of data collection beyond the official duration of the research project by three months. Table 8.1 provides an overview of the author’s research process. The individual stages of data collection and analysis will be described in the following paragraphs.

Source: Own

elaboration of interview guidelines, preparation of first fieldwork

literature review, theoretical and conceptual work on market theories, (food) retail management

desk research on (modern) food retail in Dhaka/Bangladesh

Kaiserslautern 04-09/2011

translators/transcribers

author

assisting the author

qualitative observations at supermarket outlets, kacha bazars, mudir dokans, and food wholesale markets

semi-structured interviews with supermarket managers, BSOA representatives

recruitment and training of translators and transcribers

exploratory excursions to food retailers, and wholesalers

orientation in Dhaka

Dhaka 10-12/2011

transcription of interviews/recordings, translation of transcribed interviews, recordings, and grey literature

recording of discussions and speeches at BSOA’s 10th anniversary celebration

Dhaka 01-07/2012

elaboration of interview guidelines, preparation of next fieldwork

follow-up literature review, in particular on research wave on the “Role of Modern Food Retail in Economic Development”

documentation and presentation of intermediate research results

selective data analysis

supervision of transcriptions and translations

Kaiserslautern 01-07/2012

Table 8.1 The Research Process underlying the Thesis

assisting the author

qualitative observations at supermarket outlets and distribution centers, kacha bazars, mudir dokans, food wholesale markets, and food production sites

semi-structured interviews with supermarket (supply chain) managers, key informants, kacha bazar vendors

Dhaka 08-09/2012

translation of transcribed interviews and grey literature

transcription of interviews

Dhaka 09-12/2012

documentation and presentation of intermediate research results

official end of research project

interviews with kacha bazar vendors, transcription and translation of interviews

Dhaka 06-09/2013

documentation of preliminary research results

selective data analysis

supervision of pending interviews with kacha bazar vendors, transcriptions and translations

supervision of transcriptions and translations selective data analysis

Kaiserslautern 07/2013-09/2013

Kaiserslautern 09/2012-06/2013

finalization of thesis

document analysis on latest developments on-site (07/2013-12/2018)

systematic data (re)analysis

Kaiserslautern 10/2013-12/2018

8

AMRF Society

106 Research Design and Methodology

8.2 Data Collection

8.2

107

Data Collection

In order to examine Dhaka’s food retail market and its potential structural changes, the author triangulated several types of data and research methods with the aim of validating, enriching and completing the results achieved with each single source of information and research method (Flick 2017, p. 311 f). In the following, the specific research methods, namely semi-structured expert interviews (subchapter 8.2.1), qualitative observations (subchapter 8.2.2), and document analysis (subchapter 8.2.3) as well as their objectives will be described.

8.2.1

Semi-Structured Expert Interviews

In the course of the fieldwork in Dhaka, semi-structured interviews were the author’s most important source of primary data to trace and understand the developments and (potential) restructuring processes in Dhaka’s food retail market. Other than fully-structured or unstructured interviews, semi-structured interviews allow conversational, yet focused communication. Despite the relative openness of the conversation, there is a clear distribution of roles: as the interviewer strives for an information goal, it is incumbent upon them to steer the conversation and to ensure that all relevant information is obtained (Gläser & Laudel 2009, p. 42; Brinkmann 2018, p. 577 f). With this end in view, it is the interviewer’s responsibility to operationalize their scientific interest, and to translate it into the reality of life of the respondent and thus a common language (Gläser & Laudel 2009, p. 112 ff). By following a guideline, say a list of topics and questions, the interviewer makes sure that all important areas of interest are covered. At the same time, both the interviewer and the respondent have the flexibility to go into detail when needed, and to follow topical trajectories that may stray from the guidelines when it seems appropriate (Gläser & Laudel 2009, p. 42). Prior to all phases of data collection in Dhaka, the author drew up semistructured interview guidelines. In addition to the examination of theoretical literature on market structures and restructuring processes in markets (chapter 2), the analysis of studies on the evolution, growth and impact of modern food retail worldwide (subchapter 4.1 and chapter 5) provided the author with an important basis for this step, as it revealed valuable hints on influencing factors and processes that might also be of importance for the analysis of the specific case of Dhaka (Flick 2007, p. 72 ff; Gläser & Laudel 2009, p. 74 ff).

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Notwithstanding the helpful insights she gained from her literature analysis, the author chose a very explorative approach for her interviews: to make sure that knowledge gained through the literature analysis would not blind her from factors relevant to the very specific case of Dhaka, the author approached the subject matter by formulating deliberately open questions. The knowledge she had attained through the literature review then helped the author to formulate further specific inquiries, and to better understand and classify the information obtained (Flick 2007, p. 74). To make her interviews more efficient, whenever possible, in the course of her investigations in Dhaka, the author revised and, where appropriate, modified her interview guidelines along grey literature and other relevant information she had recently received on-site.

8.2.1.1 Interview Partners The term “expert” in expert interviews does not refer to a person’s hierarchical position or the information a person might have because of that position. Here, experts are instead understood as witnesses of and participants in the processes and incidents being of the researcher’s interest, which makes them important sources of expert knowledge (Gläser & Laudel 2009, p. 11 ff). Against the background of the author’s research questions (subchapter 1.2), modern food retailers and kacha bazar vendors in Dhaka were crucial experts and sources of information. The data gained in the course of these interviews was further complemented by interviews with six key informants (see also Table 8.2). In the following, the interviews with each of the above-named groups of interviewees will be described more in detail. Modern Food Retailers In order to learn about the evolution of supermarkets in Dhaka, and Bangladesh, the current local supermarket landscape, and its potential future development, the author conducted semi-structured interviews with modern food retailers on-site. These interviews were also very helpful in gathering grey literature on the subject matter, which was unobtainable in Germany or via the internet. While actual interviews were subject to the respective person’s availability and willingness, to the extent possible, the author attached importance to select interview partners that would represent the complete bandwidth of modern food retailers in Dhaka, e.g. in terms of retail strategy and size of venture, and to consider members as well as non-members in the “Bangladesh Supermarket Owners’ Association” (BSOA) (see subchapter 9.1.4). The author conducted in total 16 interviews with representatives of Bangladesh’s modern food retail industry,

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109

Table 8.2 Overview of Semi-Structured Interviews with Experts and Key Informants Interviewees

Major issues discussed

No. of interviews

Modern food retailers Impulses for and patterns/milestones of 16 modern food retail’s expansion in Dhaka/Bangladesh; mission, vision, and work strategy of Bangladesh Supermarket Owners’ Association (BSOA); self-perception of modern food retailers; expected future development of modern food retail; promoting and hindering factors for modern food retails’ further development, and corresponding coping strategies Kacha bazar vendors Supermarkets’ competitive pressures and their 122 implications for kacha bazar vendors’ businesses; expected future development of kacha bazars under the influence of supermarkets; (proactive) measures to cope with supermarkets’ competitive pressures Key informants

Total of interviews

Trends in and public discourses on food production, distribution, and consumption in Dhaka/Bangladesh

6

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Source: Own

namely with BSOA’s president and his general secretary, as well as with the founders respectively managers of Dhaka’s three major supermarket chains (Agora, Meena Bazar, and Shwapno), four smaller chains with two to five outlets, and five single-outlet ventures. In the case of two ventures, the author further had the opportunity to observe their food procurement processes (see subchapter 8.2.2), and to interview the respective supply chain managers. Interview partners were acquired by personalized emails to all members of the BSOA. In order to capture non-BSOA members as well, the author also personally visited supermarket managers1 who were not members of the association to make interview requests. Additionally, the researcher made intensive use of the “snowballing technique” (Willis 2006, p. 148) by asking one contact to suggest further appropriate interview partners. Even though several of the interview 1 The

selection of these interviewees was based on the characteristics of their ventures. Thus, the author only considered food retailers whose ventures featured the characteristics of modern food retail as defined in subchapter 4.2—above all a self-service mode of operation and a multiline product assortment, including perishable products such as vegetables, meat, or fish.

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requests were refused or went unanswered, this strategy proved to be very helpful in regard to the acquisition of interview partners. The researcher stopped the acquisition of new interview partners as soon as a certain “saturation point” was reached, and additional interviews seemed to not reveal any further significant new information (Creswell 2014, p. 189). On January 24, 2012, the BSOA celebrated its 10th anniversary with around 400 invited guests, particularly high-ranking politicians, representatives of foreign and local supermarket suppliers, NGOs, and the local media (see also subchapter 9.2.1.4). The author of this thesis was lucky enough to be invited. However, due to several postponements of the event, in the end, she was not able to actually attend. Instead, the author was represented by one of her translators, who recorded all of the speeches and discussions that were held during the celebration. Kacha Bazar Vendors As literature review on the evolution of modern food retail elsewhere revealed, supermarket diffusion tends to show certain patterns of diffusion over space, customer segments, and product categories. Thus, modern food retailers initially focus on larger cities that provide access to dense concentrations of relatively affluent consumers who are amenable to new forms of food retail and corresponding shopping and consumption practices. With increasing competition and saturation in these initial market niches, modern food retailers tend to gradually expand their operations to smaller cities and less affluent consumer groups. Furthermore, given the difficulties, risks, and uncertainties going along with procurement and stocking fresh products, supermarkets initially tended to gain ground in the categories of non-food and processed food before they also conquered the categories of semi-processed and perishable products. These diffusion patterns were again reflected in supermarkets’ impact on traditional food retail: hence, with modern food retailers initially serving only the small segment of highincome customers, their impact on traditional food retail was hardly, if at all, felt. However, with supermarkets’ increasing conquest of the middle- and even lowincome consumer segments, competition between modern and traditional food retailers intensified. The resulting decline of traditional food retail formats was a mirror image of supermarkets’ diffusion over product categories: thus, small grocery stores and other retailers selling processed and semi-processed food tended to be most affected, while fresh product shops and wet markets showed a much higher resilience, at least for a while. Assuming that the above-described relationships could also be of relevance for the specific case of supermarkets’ impact on traditional food retailers in Dhaka, the author ensured that the sample of kacha bazars and kacha bazar vendors interviewed would reflect the following criteria:

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• First, the selected kacha bazars had to be permanent, not temporary, in nature, and be located in areas that represented the different income groups to which supermarkets in Dhaka primarily direct their products and services, namely (lower) middle-income and high-income consumers (see subchapter 9.1.3). • Second, the selected kacha bazars would have to be located in a 2-kilometer vicinity to supermarkets to make sure they would have the same trade area. • Third, the author only considered well-established kacha bazars that had already been on-site before the emergence of supermarkets in Dhaka had started in the year 2000. That way, the author made sure that kacha bazar vendors would really have the necessary personal on-site experience to compare the situation before and after the presence of supermarkets in their trade area. • Fourth, the sample of kacha bazar vendors would have to cover all major product categories: as already described earlier, wet markets can be defined as a grouping of individual stalls offering a wide product assortment from perishables to processed food. Stalls selling similar items are in close proximity, which allows customers to compare quality and price. Kacha bazars in Dhaka tend to be divided into a “wet” section for perishable products such as vegetables, meat, or fish, and a “dry” section for products such as rice, lentils, potatoes, or spices. Thus, interviews were conducted with vendors representing the typical major product categories of kacha bazars in Dhaka, namely chicken, fish, red meat (mutton, goat, beef), (leafy) vegetables, and staples (e.g. rice, lentils, potatoes). Based on these premises, the following kacha bazars were selected for semistructured expert interviews with kacha bazar vendors in Dhaka (Figure 8.1): At each of the selected kacha bazars, a random sample of vendors was chosen for the interviews. To this end, the interviewers at first tended to approach a vendor who apparently was not busy with any activity in that particular moment. After having conducted the interview with this vendor, the second succeeding vendor of the same product category was selected for the next interview. That way the researcher ensured that the answers of one vendor would not be influenced by the statements of the neighboring vendor who had been interviewed before. Interviews were conducted with four vendors of each of the five above-named product categories. Thus, in total, the author and the staff of the AMRF Society conducted 122 semi-structured interviews with vendors at the seven above-named kacha bazars, whereas it has to be taken into account that data collection at Uttara 6 Kacha Bazar had to be stopped after only two interviews with meat vendors, as described in subchapter 8.2.1.1.

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Figure 8.1 Interview Sites for Explorative Survey among Kacha Bazar Vendors in Dhaka. Source: Own, based on supermarket mapping by Keck (2015, p. 294)

Key Informants Complementary to the semi-structured interviews with the above-described experts, the author further consulted six key informants. Generally speaking, the semi-structured interviews with key informants took about an hour and centered around trends in and public discourses on food production, distribution, and consumption in Bangladesh and Dhaka, whereby a special emphasis was placed on

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the role and implications of modern food retail. The interviews were quite open in nature, and followed a set of impulse questions that were individually prepared for each interviewee and complemented by ad-hoc questions in the course of the respective interview. Three of these key informants were representatives of domestic and international (research) organizations with expertise on food production, distribution, and consumption in Bangladesh, and in particular its capital city Dhaka, namely: • A senior researcher at the Bangladesh Institute of Development Studies (BIDS), • a senior researcher at the Bangladesh office of the International Food Policy Research Institute (IFPRI), • and a high representative of the Consumers Association of Bangladesh (CAB). In addition, the interview with a high representative of the Dhaka South City Corporation’s (DSCC) City Planning Department helped the author to better understand the historical development of Dhaka and its food vending sites. Not least, interviews with representatives of two major local food manufacturers, in conjunction with qualitative observations at their production sites (see subchapter 8.2.2), provided the author with complementary information on (emerging) food production, consumption, and distribution patterns in Dhaka, and Bangladesh. That way, the author strived for further information with relevance to this thesis from another, possibly more objective perspective. The discussion of the author’s findings also helped her to reflect on this information, and to integrate it into a broader context. Representatives of Transnational Supermarket Chains Interviews with Bangladeshi supermarket founders and managers revealed that despite their present absence in Bangladesh, several transnational supermarket chains had already shown a certain interest in entering the Bangladeshi market. For this reason and being well aware of the decisive impetus FDI had placed on the rapid spread of supermarkets in other countries of the Global South, the author also attempted to conduct interviews with representatives of transnational supermarket chains in order to learn about these chains’ expansion plans and potential entry strategies into Bangladesh. Unfortunately, but not surprisingly, these interview inquiries were refused due to the confidentiality of the information.

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8.2.1.2 The Role of Language and Translators All interviews in the context of this thesis were held in English or Bengali. Interviews in English were conducted by the author herself. Given the author’s rudimentary command of Bengali, the author employed Bangladeshi student assistants as translators to bridge the language gap in all interviews that had to be held in Bengali, as was principally the case with vendors at kacha bazars. In qualitative research, language and communication have dual functions: they are data, and at the same time, the method through which the data are generated. Thus, language and communication may have a considerable impact on the quality, validity and utility of qualitative research. This is even more true when, as in the case of this thesis, the researcher is not familiar with the language and culture of the interviewees (Hennink 2008, p. 24). Just like the researcher, translators bring in their own perspectives, cultural background, experiences and opinions to the interview process. Notwithstanding this fact, translators often tend to be rarely considered as part of the research process. While their presence is noted, the effect of their actions on the research process and their influence on the research outcomes tend to remain largely invisible (Bujra 2006, p. 175 f; Hennink 2008, p. 25 f). As a consequence, the recognition and inclusion of translators as “co-investigators” often falls short, or is even completely neglected (Hennink 2008, p. 32). The author of this thesis tried to take this into account as thoroughly as possible: when selecting the translators for her research project, the author not only placed great importance on fluent command of English, but also on diligence and social openness, as interviews would have to be conducted with people of diverse social classes (Bujra 2006, p. 177). Working frequently with only few translators allows each translator to be more familiar with the particular research process and to be more knowledgeable about the nature of the information to be collected (Adamson & Donovan 2002, p. 823 cited in Liamputtong 2008, p. 8). Furthermore, long-term cooperation between researcher and translator(s) facilitates the development of a trustful mutual relationship (Bujra 2006, p. 177). Therefore, in the course of the whole research project, the author worked with only two translators in conducting interviews, and with two student assistants who translated and/or transcribed the conducted interviews. The student assistants working as translators for this thesis were not “only” essential mouthpieces, but also important cultural brokers. They contributed to the development of rapport and trust with potential interview partners, raised the author’s awareness of protocols that could affect fieldwork, and helped the author to understand statements in an overall context. Last but not least, the translators to a great extent helped the author of this thesis to quickly adapt to

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the research site and to navigate herself through the incredibly busy and vibrant megacity of Dhaka. In the course of and after each interview, the author and, if applicable, her translator, took notes, in particular on additional comments that were made once the recorder was switched off (Willis 2006, p. 150). Additionally, in a debrief after each interview, author and translator discussed the data collected and any observation that could be essential for the interpretation of the findings. Debriefing after each interview also helped to optimize the interview process and the interaction of author and translator during the interviews (Bujra 2006, p. 177).

8.2.1.3 Ethical Aspects and Diligence Prior to the interviews, all respondents were informed about the background and the overall purpose of the research project, as well as the approximate interview duration. Where applicable, ambiguities were removed in advance of the interview (Willis 2006, p. 149). That way, the author strived for fulfilling the principle of “informed consent,” by allowing the potential interviewee to make informed decisions about whether or not to participate in the interview (Gläser & Laudel 2009, p. 51 ff). In one case, for instance, a vegetable vendor at a kacha bazar felt like she was caught using polyethylene bags—which is an illegal practice in Bangladesh2 —and expressed her worries about being reported to the authorities. After making clear that this was by no means the intention of the author, the vendor willingly answered the author’s questions. As for the case of modern food retailers, on a few occasions the author had to amend the initial conjecture that her research interest was of a commercial nature, or that she was a business consultant for modern food retail practices. All interviews were fully recorded. Before each interview, the author obtained the interviewee’s permission for recording, and assured confidentiality on whatever issue the interviewee demanded (Willis 2006, p. 149). Recording the interview allowed the author to fully concentrate on the conversation, to check the meaning of words and phrases that were missed during the interview later on (Willis 2006, p. 149 f), and to verify ambiguities or the accuracy of the translations (Birbili 2000, p. 4 cited in Bujra 2006, p. 177). The duration of each interview was subject to the willingness and time of the interviewees. In the case of supermarket founders and managers, the duration of each interview ranged from half an hour

2 On

January 1, 2002, as the first country worldwide, the Bangladeshi government forbade the production and use of polyethylene or polypropylene shopping bags (Greenpagebd 2016, n.p.).

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to one and a half hours. Interviews with kacha bazar vendors tended to be considerably shorter, taking between five and fiveteen minutes. Interviews held in English were directly transcribed by well-trained student assistants from Dhaka University and Primeasia University. If the interview was held in Bengali, it was directly translated by the student assistants, or later by staff of the AMRF Society. Interviews with supermarket founders and managers were conducted in the respective offices and on dates that were agreed beforehand. The interviews with kacha bazar vendors, however, took place in a very spontaneous manner and were conducted directly at the vendors’ stalls. Here, the author and her translators were very attentive to respect the research sites, and to impede the flow of activities of the participants as minimally as any possible (Creswell 2014, p. 99). In practical terms, this meant that the author only approached vendors who were apparently not busy attending to clients or any other activity. Whenever the interviewed vendor was visited by a customer during the interview, the author patiently waited until the customer was served, and then picked up the threads of the conversation. As for the case of Uttara 6 Kacha Bazar, the premise of disturbing the activities on-site as little as possible even ended with the author and her translator leaving the kacha bazar nearly empty-handed after only two interviews with meat vendors. In this incident, one of the butchers on-site strongly expressed his discomfort in talking to the author, and thus refused the interview. The author and her translator immediately accepted this decision, apologized for the disturbance, and moved on to the next stall. The butcher however kept on venting his displeasure in such way that he quickly drew the attention of other vendors, and even some of the customers. In view of this situation, the author and her translator decided to leave the market before the mood swung. This experience, however, was the only one of its kind. Generally speaking, the kacha bazar vendors reacted very kindly and openly to the author’s interview requests and questions.

8.2.2

Qualitative Observations

In addition to the above-described interviews, the author also conducted qualitative observations (Creswell 2014, p. 190 ff). To this end, the author visited numerous supermarket outlets, kacha bazars, mudir dokans and food wholesale markets with the goal of understanding the physical structure and organization of these food vending sites, as well as the corresponding activities and processes on-site.

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The author was also invited to observe the food procurement processes of two supermarket chains. In the first case, the author accompanied two procurement managers of a small supermarket chain during their purchasing activities for perishable products (in particular fresh vegetables and fruits) at wholesale markets and kacha bazars in Dhaka. In the second case, the author was allowed to visit a major supermarket chain’s distribution center, as well as its ware- and slaughterhouse. Here, early in the morning, the author observed the processes of product delivery and slaughtering, as well as the subsequent sorting, testing, grading, and packaging activities before the products were loaded onto delivery vans heading to the chain’s several supermarket outlets. Not least, the author had the chance to visit the production sites of two major local food manufacturers that supply supermarkets with meat, respectively packaged and processed food items such as dairy products, snacks, sweets, and condiments. In all these cases, the author was not only able to observe the above-described processes, but also to address her questions to the staff involved on-site and the procurement and factory managers, who accompanied the author. Beyond these planned observations, the author could not keep from collecting information and impressions on food production, distribution and consumption practices even in her leisure time. Most commonly, the author became a spontaneous observant in her role as a client during her own food purchases at kacha bazars or supermarkets. Similarly, in the course of her numerous private trips within Bangladesh and its capital city Dhaka, the author frequently made observations, which aroused her interest as a researcher. These observations ranged from supermarket advertising activities on the streets to random encounters with fishermen on the Meghna river packing the recently caught fish for its delivery to Dhaka, and to the long line of trucks lined up ahead of Dhaka’s gateways, loaded with agricultural products and waiting for their permission to pass on to the destined wholesale markets without causing even more congestion. In the course of both fieldwork sessions, the author recorded all of these observations and impressions in a research notebook. With consent, the author also took numerous pictures of the sites and processes she visited and witnessed.

8.2.3

Document Analysis

In addition to semi-structured interviews and qualitative observations, secondary data was collected with the goal of triangulating data sources and perspectives, and deepening the information obtained elsewhere (Flick 2017, p. 113 ff).

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In terms of academic literature, however, the author’s searches in relevant international online catalogues and at the libraries of universities and research institutes in Dhaka proved to be rather unfruitful—even for the case of grey literature, such as project reports or unpublished theses. The same applied to the case of official statistics and data on traditional and modern food retail. Thus, the collection and analysis of press articles represented the most important additional information source. For this purpose, the author carried out systematic research on press articles, above all in the internet archives of Bangladesh’s most popular English-speaking local daily newspapers “The Daily Star,” “The Independent,” the “Financial Express,” and “New Age.” Prior to the first fieldwork in Dhaka, the emphasis of this research was on finding material on the structure and main actors of Dhaka’s modern food retail landscape. To this end, the author applied key words such as “Dhaka,” “supermarket,” or “superstore,” and once she had learned about BSOA and identified the names of some of the ventures on-site, the names of these supermarkets, too. The analysis of the information gathered helped the author to gain a first impression of Bangladesh’s supermarket industry, its major players and historical cornerstones. Even though this overview was still quite superficial in nature, it proved to be a very helpful first step in terms of the acquisition of interviewees and the development of the guidelines for the semi-structured interviews with modern food retailers. In the further course of the research project, the author systematically searched for press articles dealing with political and public discourses on food production, retail, and consumption in Dhaka and Bangladesh with the goal of better understanding the information and findings she had obtained and made elsewhere. The key words applied in this context were, e.g., “kacha bazar,” “Bangladesh Supermarket Owners’ Association,” “food consumption,” or “food safety.” Overall, the author evaluated 76 relevant press articles covering a period from 2003 to 2013, the year the research project ended. Besides the (non-confidential) material she was given by the supermarket founders and managers interviewed (e.g. image brochures or leaflets), supermarkets’ online presence in the form of websites and Facebook accounts provided the author with further relevant information on supermarkets’ retail strategies and corresponding activities, as well as their self-representation toward the public, including their positioning toward (traditional) competitors. YouTube videos, such as a video taken at the presentation of Agora’s supplier development program on the occasion of Bangladesh’s first “Agribusiness Supply Chain Management Conference” in 2012, were additional important sources of information.

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With five years lying between the end of the research project and the actual completion of this study, the question of the actuality and contemporary relevance of the project’s findings and their embedding into the latest developments in Dhaka’s food retail market arises. For want of the necessary resources, however, the repetition of empirical work such as expert interviews or qualitative observations was not possible. In order to still close the remaining knowledge gap and to put her findings and conclusions into a more current context in the best possible way, the project’s results were complemented by an additional desk research and document analysis, which followed the above-described scheme and covered the time period from July 2013 to December 2018. In the course of this desk research, it turned out that there is still no official bureaucracy in Bangladesh that would collect data or release statistics on traditional or modern food retail (see also Datta 2018, n.p.). In terms of scientific publications, in turn, an increasing amount of—also grey—literature seems to reflect an awakening scientific interest in Bangladesh’s supermarket industry. The research interests underlying these publications are yet mainly centered around issues such as customers’ perception of modern food retail, supermarkets’ customer relationship management, the enhancement of brand equity, or the improvement of store design. The author came across neither an in-depth or primary data-based study describing the first nearly two decades of supermarket development in Bangladesh or, in particular, its capital city Dhaka, nor any study dealing with the potential and/or real impact of modern food retail on traditional food retail formats. Consequently, against the background of this study’s research questions, the analysis of publications and newspaper articles, as well as supermarkets’ online presences, furthermore remained an important information source for this study.

8.3

Data Analysis

All transcriptions, translations, and fieldwork notes were entered into Word documents. Together with the press articles, pictures and other material they were finally analyzed with MAXQDA 11, a professional software for qualitative (and mixed methods) data analysis. The author systematically examined the data for relevant information in the context of the research questions by applying an analysis grid in the form of codes. Thus, sentences, paragraphs, or images were segmented into labelled categories (Creswell 2014, p. 198). At that point, the author principally followed a deductive approach by applying codes that were developed prior to the data analysis and determined by the analytical categories provided by the literature analysis on markets and market structures, as well as

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on research on (modern) food retail in the Global South In order to also take into account relevant aspects for the specific case of food retail in Dhaka, which could not be assigned these specific theoretical codes, the author also used codes that were obtained with more inductive open coding. After all data was coded, the coded passages were extracted and processed independent of their original sources, compared and/or combined with other passages, or even rejected (Gläser & Laudel 2009, p. 46 f). The used codes are listed in annex 3. During the analysis and discussion of the results of her data collection, the author constantly reflected on her statements with the goal of avoiding “going native,” as would have been the case if she had only considered results that place a specific group in an (un)favorable light. Instead, the author paid attention to reporting the diversity of all perspectives on food retail in Dhaka and their current development processes (Creswell 2014, p. 100). The author is deeply grateful to each and every person who invested his or her time—not to mention a certain degree of trust—in the author and her research project. Thus, protecting the anonymity of individuals, organizations, and incidents, and respecting the wish for confidentiality of certain information, is the author’s major concern (Creswell 2014, p. 99 f). When describing and discussing her findings in the following chapters, the author therefore only uses quotations, pictures, and other data that would not violate this commitment. As some of the represented quotes contain (authorized) information that reveals the identity of a venture, the sources in question are coded in such a way that comparisons between the quotes will not allow all quotes to be assigned to a certain venture and the respective interviewee.

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Modern Food Retail in Dhaka

The present and the following chapter present the empirical results of the examination of Dhaka’s food retail market under the influence of emerging supermarkets. Here, the first subchapter 9.1 portrays the first decade of modern food retail in Bangladesh’s capital Dhaka, and the country as a whole. Starting with a description of the impulses and drivers that finally led to the emergence of supermarkets, the subchapter further provides an overview of Dhaka’s supermarket landscape in the course of the modern food industry’s first decade, and modern food retailers’ retail strategies and lobbying activities. The second subchapter 9.2 then turns to hindering factors on both the supply and the demand side, which pose considerable challenges to the diffusion of supermarkets down to the present day. For each of these hindering factors, modern food retailers’ coping strategies will be depicted. Chapter 10 finally delves into supermarkets’ impact on Dhaka’s kacha bazars, and kacha bazar vendors’ (proactive) responses to supermarkets’ competitive pressures.

9.1

The Outset of Modern Food Retail in Dhaka

As already outlined before, data—be it in form of official statistical releases, or scientific publications—on the structure and the functioning of Dhaka’s food retail sector is still extremely scant. The few available publications and the author’s own findings, however, indicate that traditional food retail in Dhaka and Bangladesh shows many similarities with traditional food retail in other countries of the Global South prior to the emergence and dominance of supermarkets. Thus, just as in many other low-income countries, traditional food retail with its low barriers © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_9

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to entry provides the less fortunate and a multitude of migrants from rural areas with an opportunity to make their living. Food retail in Bangladesh therefore traditionally “[…] had never been perceived as an industry, but rather as an individual or family business with a very limited scope for organized expansion” (Hussain & Leishman 2013, n.p.).

Likewise, traditional food retailers had hardly attached any importance to aspects such as high shopping convenience or a comfortable shopping environment. As a consequence, prior to the emergence of supermarkets, Dhaka’s food retail market featured an atomistic structure, which was dominated by countless small individual or family businesses such as mudir dokans, kacha bazars, and mobile street hawkers. These food retailers tended to focus on only narrow, in some cases even single product line assortments with mainly undifferentiated commodities, and were involved in a highly-fragmented, atomistic distribution system (e.g. Hussain & Leishman 2013, n.p.; Ali & Faroque 2017, p. 288; Figure 9.1). In this setting, PQS (“Price Quality Service”), a domestic venture, can be considered the innovator. With the launch of its first supermarket outlet on September 5 2000 in Dhaka’s high-income ward Uttara, PQS brought elements of modern food retail to Bangladesh’s capital, and the country as a whole (see also Hasan 2005, n.p.). It did not take long until other entrepreneurs set out to get a foot in the door of the promising and yet untapped business opportunity of modern food retail in Bangladesh: one year after the launch of PQS, domestic venture Rahimafrooz Superstores Ltd. followed with the opening of its first Agora outlet in Dhaka’s (upper) middle-income ward, Dhanmondi. Despite the prior existence of PQS, the appearance of Agora is to date publicly perceived as Bangladesh’s entrance into the supermarket era—a perception that is not least fostered by Agora’s claim to be the “first ever retail chain in Bangladesh” (Rahimafrooz Ltd. 2011a, n.p.). In a kind of gold rush atmosphere, numerous modern food retail ventures mushroomed in the city in the course of the following decade, among them two other major supermarket chains, namely Meena Bazar (established in 2002), and Shwapno (established in 2008). Even though Bangladesh’s capital city Dhaka is consequently the “cradle” of the country’s modern food retail industry, over the course of the years, major supermarket chains Agora, Meena Bazar and Shwapno expanded their business operations into other bigger cities such as Chittagong, Khulna, Rajshahi, or Sylhet. Simultaneously, these cities also witnessed the emergence of local ventures, such as Khulshi Mart and Well Mart in Chittagong, or Safe N Save in Khulna.

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Figure 9.1 Facets of Traditional Food Retail and Wholesale in Dhaka. From left to right: A vendor at a mudir dokan; a mobile hawker selling bananas; an open-air kacha bazar; wholesalers at Kawran Bazar. Source: Own pictures (October 2011-September 2012)

With supermarket diffusion taking root in rapidly growing big cities with dense concentrations of comparably affluent local and foreign consumers, analogous to other countries in the Global South, Bangladesh thus shows the typical wave patterns of spatial supermarket diffusion within a country.

9.1.1

Drivers for the Emergence of Modern Food Retail

In search of the initial impulses that had led to the evolution of Bangladesh’s supermarket industry from 2000 onward, the author of this thesis came across driving forces on the demand side, which, in combination with visionary and innovative entrepreneurs on the supply side, had already played a pivotal role

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in the emergence and diffusion of supermarkets elsewhere (see also chapter 6). Thus, just as in many other countries, the most important impulse for the advent of supermarkets in Dhaka, and Bangladesh, was the country’s socioeconomic development: Since 1971, Bangladesh has made remarkable achievements in both human development indicators and economic growth: over the 40 years of the country’s independence, real per capita income has increased by more than 130 percent (Government of the People’s Republic of Bangladesh 2012, p. 1). Bangladesh’s head count poverty ratio had declined sharply from close to 60 percent in the early 1990s to 31.5 percent in 2010, and, in the first decade of the 2000s, Bangladesh’s economy achieved an annual GDP growth rate of nearly 6 percent on average (World Bank 2013a, n.p.). Since 2005, Bangladesh has been viewed as one of the countries among the “Next Eleven”—a set of eleven countries that are believed to have BRIC-like potential to rival the G7 nations in the 21st century (Goldman Sachs 2007, p. 161 ff). Bangladesh’s government is striving to push these developments further, and pictures the country’s shift from a low-income economy to a poverty-free, middleincome country on the eve of the country’s 50th anniversary of independence in 2021. With the goal of achieving this “Vision 2021,” the government applies its “Perspective Plan 2010–2021,” which lays out a series of respective development targets and corresponding measures to be implemented (Government of the People’s Republic of Bangladesh 2012, p. 10 ff). The above-described socioeconomic developments were also being increasingly reflected in new food shopping and consumption patterns, in particular among the more affluent and higher educated share of Bangladesh’s urban population. These changes have not gone unnoticed by Bangladeshi entrepreneurs, as the interviews with modern food retailers revealed: “People are getting busier day by day. About 10 years back you would see that the husband is the only working family member, while the wife used to be at home. But now, both of them are working, and they don’t have enough time to go to the wet markets.”1 (Modern food retailer A, 21.10.2011) “In the past, every family used to have four to six members. I have four brothers. When I was busy, one of my brothers used to go to the wet market. But now the families have

1 From 2000 to 2013, the labor force participation rate of women in Bangladesh has risen from

26.66 percent to 31.42 percent (World Bank 2013b, n.p.).

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less children. And they are busy in the universities or schools. So they have no more time for shopping.”2 (Modern food retailer H, 27.08.2012)

Just as formerly in other countries, the increasing lack of time did not only go along with a growing demand for enhanced shopping convenience, but also for modes of time-saving food preparation and consumption, which was reflected in a rising demand for processed and ready-made food. Furthermore, increasing per capita income made consumers less price sensitive and more focused toward food quality and safety (Hussain & Leishman 2013, n.p.). Frequent media coverage of food scandals, such as cases of microbiological and chemical contamination, or the adulteration and mislabeling of food items (e.g. Amin et al. 2004, n.p.; Solaiman & Ali 2013; Alam 2013a, n.p.), as well as public discussions on the increase of widespread diseases such as diabetes, obesity, allergies, or hypertension (e.g. Saquib 2013, n.p.; Bhuiyan, Zaman & Ahmed 2013, n.p.) further reinforced this trend and led to a corresponding mind shift: “Just to give you an example: Some years ago, nobody would have thought that people would buy bottled water. But people do buy it now because of hygiene, because of convenience, because of lifestyle.” (Modern food retailer J, 06.09.2012)

According to the modern food retailers interviewed, the above-described changes in shopping and food consumption practices have been further enhanced through customers’ exposure to global consumption patterns and lifestyles through the media and the internet, as well as international travel or long-term stays abroad: “It’s sad to say, but it’s true: we love to copy the Europeans, we love to copy the Americans, especially our young generation. My dad, my uncles, they don’t like pizza or chicken nuggets. But the young generation loves this kind of junk food. It’s cool, it’s a kind of status symbol.” (Modern food retailer C, 25.10.2011) “We see this kind of junk food emerging now – pizza, hotdog, and so on. These items are not healthy. But especially children and their parents become very much attracted to those things. And the companies do vigorous marketing.” (Representative of Consumers Association of Bangladesh, 18.10.2011).

2 The average size of households in Bangladesh’s urban areas has continuously declined from

5.89 in 1974 to 4.29 members in 2011 (Bangladesh Bureau of Statistics 2011, p. 139).

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In view of these socioeconomic developments, supermarket founders reported to have perceived a discrepancy between the emerging demands of an everincreasing consumer base with higher disposable income, and the actual supply of food and food retail services in the country: “Especially working people who are earning good money want to have a comfortable life. They want convenience, hygiene, and everything. But those wet markets do not guarantee you hygiene, the right weight or after sales services. So there was a supply gap. And we [the supermarket founders] wanted to fill up this supply gap.” (Modern food retailer E, 01.11.2011)

Inspired by their personal shopping experiences at supermarkets abroad, from the early 2000s onward, Bangladeshi supermarket founders finally felt the time was right to introduce modern food retail practices to Bangladesh: “They [the supermarket founders] have spent a long time in the US, in Europe, Malaysia, or Singapore. Then they decided: ‘let us, the upper class, contribute to the development of our society’. So they invested in ventures such as Agora, Shwapno, and Meena Bazar.” (Modern food retailer L, 20.09.2012)

9.1.2

Dhaka’s Supermarket Landscape at the End of its First Decade

In the course of its first decade, Dhaka’s supermarket landscape featured three major supermarket chains with more than ten outlets each, namely Agora (which took over “innovator” PQS in August 2011), Meena Bazar and Shwapno, a medium chain named Nandan Mega Shop with five outlets, a number of smaller modern food retail chains with not more than two or three outlets, and a multitude of single-outlet supermarkets. Contrary to the research project’s original assumption there were no foreign transnational supermarket chains, neither in the form of greenfield investments, nor joint ventures, or acquisitions. There were some foreign-owned single-outlet ventures, e.g. a Korean and an Australian supermarket in Dhaka’s high-income bank and embassy area, Gulshan. However, these ventures were operated by individual private entrepreneurs and not associated with any transnational supermarket chain. Interestingly, in interviews, these foreign food retailers even reported to hardly perceive themselves as supermarket owners. Instead, they described themselves as importers who provide goods from their countries of origin to their expatriate countrymen and better-off clientele in Dhaka.

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In January 2012, representatives of the “Bangladesh Supermarket Owners’ Association” (BSOA), the supermarket industry’s most important public mouthpiece and lobbying body in Bangladesh (see subchapter 9.1.4), spoke of 21 modern food retail ventures countrywide, and 19 ventures operating 89 outlets in Dhaka. These figures, however, only referred to member companies of the association. The supermarket mapping that was conducted in 2012 in the course of this study’s partnering project found nine supermarket chains running a total of 68 outlets, and another 27 single-outlet ventures in Dhaka (Keck 2015, p. 295). Another study of that time vaguely spoke of about 30 companies operating at around 200 supermarket outlets across the country, and “roughly” 40 supermarket outlets in Dhaka (Hussain & Leishman 2013, n. p.). While the reasons for the discrepancies between the last two sources remain unclear, they reflect the difficulty of attaining reliable data on the supermarket industry in Bangladesh, as well as in its capital. Nonetheless, in accordance with its assignment to the last geographical wave of modern food retail diffusion in countries of the Global South, it could be stated that Bangladesh’s supermarket sector, one decade after its emergence, was one of the smallest in the world. In 2013, BSOA representatives estimated supermarkets’ market share to be at about 2 percent of total food retail in Bangladesh, and not more than 5 percent of total food retail in Dhaka. As this estimate only comprised BSOA member companies, modern food retail’s actual market share, including non-BSOA member companies, could be assumed to be slightly higher.

9.1.3

Supermarkets’ Retail Strategies

Notwithstanding its comparably small scale, at the end of the first decade of its existence, Dhaka’s modern food retail industry already showed a considerable diversity in regard to retail strategies and corresponding outlet sizes, pricing strategies, services, or product assortments. Or, as a modern food retailer stated at that time, “At present, everyone is trying to find his niche.” (Modern food retailer F, 02.11.2011)

However, in the time period the research for this thesis was conducted, Bangladesh neither featured discounters, nor “big box” food retailing formats such as hypermarkets or supercenters. Generally speaking, modern food retailers in Dhaka offered a full-line product assortment that comprised non-food products, such as houseware and cosmetics,

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sometimes also clothes and electronic products, and food products from grocery items via dairy products, up to fresh fish, meat, vegetables, and fruits. The breadth and depth of the product assortment, as well as the proportion of imported products and foreign brands, however, varied considerably depending on the retail strategy of the venture in question. In some cases, modern food retailers even adapted their assortment in a specific outlet to the particular needs of the customers in a given location: “Our Gulshan branch is different [than] our other branches. The other branches were set up according to our local peoples’ demand, so we don’t have so many imported items like e.g. cherries or mozzarella cheese. In Gulshan, they import nearly everything, because there are many foreign people, and the customers’ choice is different.” (Modern food retailer C, 25.10.2011)

In regard to modern food retail diffusion over consumer segments, developments in Dhaka seemed to parallel the diffusion waves described in subchapter 5.2.1.2. Thus, modern food retailers entered the food retail market by focusing on (upper) middle- to high-income level customers, including affluent expatriates. Accordingly, supermarket outlets were mainly located in high-income city districts, such as Gulshan and Uttara, or (higher) middle-income wards like Mohmmadpur and Dhanmondi, where consumers were not only amenable, but also financially able to adapt to new ways of shopping, as the manager of a supermarket chain explained: “We focus on higher-income areas: Gulshan, Dhanmondi, Uttara. We started in Gulshan as this this the area where the upper-income class lives. In order to build up a brand you need to start in Gulshan. Later on, you can expand to other areas. It’s simple business logic: where purchasing power is highest, people will naturally buy from our shops.” (Modern food retailer J, 06.09.2012)

While many modern food retail ventures, including major supermarket chains Agora and Meena Bazar, operated their businesses according to the abovedescribed pattern, major chain Shwapno followed a different retail strategy: after having launched its pilot outlet “Fresh’n’Near” in lower middle-income ward Wari, Old Dhaka in 2008, Shwapno’s management soon decided: “[…] to bring the habit of supermarket shopping to the masses. […] Compared to upper-class consumers, the share of middle- and lower middle-class consumers is so much higher. This is why we focus on the common people.” (Shwapno manager, 2011)

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To this end, Shwapno applied a superette-like retail strategy with the goal of also attracting customers from lower-income brackets. Compared to other supermarkets’ sales areas of up to 1,200 square meters, Shwapno’s outlets featured a comparably small sales area from around 27 to 65 square meters. In regard to product assortment, the chain offered its customers everyday essential products and equal service wherever the outlets were located. In applying this retail strategy, Shwapno not only sought to take into account its target market’s lower budget, but also to achieve the locational advantages of a “neighborhood supermarket,” as one outlet manager explained: “We thought: ‘our customers do not like to go to us, so we have to move to our customers.’ So we started to establish our shops close to their homes, their schools and so on. If we open outlets at each and every location, customers will have no other choice than to go to Shwapno and purchase from here.” (Shwapno manager 2011, emphasis by author)

In accordance with the management’s ambitious vision “to spread our outlets to every corner of Dhaka” (Shwapno manager, 2011), Shwapno showed the highest expansion rate among all modern food retail ventures in Dhaka, and also countrywide. Managers of other supermarket chains, however, stated to follow a step-by-step approach by putting the first priority on the branding of their ventures, as well as the establishment of sustainable internal structures and supply chains (see also subchapter 9.2.1.1) before striving for extensive expansion. At the end of 2012, Shwapno had 30 outlets in Dhaka, compared to the other two major supermarket chains Meena Bazar and Agora, with 14 and 11 outlets in the capital, respectively.

9.1.4

The “Bangladesh Supermarket Owners’ Association” (BSOA)

With the goal of promoting the development of Bangladesh’s supermarket industry, and in order to publicly represent the industry members’ respective visions, interests and concerns, Rahimafrooz Superstores Ltd. set up the “Bangladesh Supermarket Owners’ Association.” The association unites the major supermarket chains Agora, Meena Bazar and Shwapno, and a multitude of smaller food retail chains and single-outlet ventures. The BSOA is not only the modern food retailers’ most important public mouthpiece and lobbying body in Bangladesh, but also a platform for collaborative learning and knowledge exchange. Thus,

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notwithstanding a certain noticeable degree of competition, Bangladesh’s modern food retailers made strong efforts to work together for their common cause, as a BSOA member explained: “Even though Agora started the supermarket culture ten years back, the pride is taken by everybody. We may be competitors, but everybody is investing money, sharing ideas, and cooperates to develop this industry. This is the current spirit.” (Modern food retailer E, 01.11.2011)

And the manager of a major supermarket chain added: “We are not yet BGMEA, but we are working hard on our development.” (Modern food retailer M, 20.09.2012)

Here, BSOA’s comparison with “The Bangladesh Garment Manufacturers and Exporters Association” (BGMEA) is not arbitrary: in promoting the development of Bangladesh’s ready-made garment industry, the country’s most important industrial sector (see also chapter 7), the BGMEA is one of the country’s largest and most powerful trade associations. Members of BSOA interviewed frequently expressed their conviction that after the ready-made garment industry, Bangladesh’s growing modern food retail industry would be the next booming industrial sector, and that BSOA would attain corresponding power and influence. Despite the association’s strong efforts to recruit any new player in the supermarket industry, in interviews, some owners of smaller ventures reportedly refused to join the association because of doubts regarding the cost-benefit ratio in view of an annual membership fee of Bangladeshi taka 240,000.3 In January 2012, one decade after Dhaka’s first supermarket outlet had opened its doors, the BSOA comprised 21 member companies countrywide (Bangladesh Supermarket Owners’ Association 2012, p. 18). Interestingly, to the present day (see e.g. Chakma 2018a, n.p.), BSOA’s publicly proclaimed self-perception and vision of Bangladesh’s supermarket industry shows strong parallels with proponents of modern food retail in the decades following World War II (see also subchapter 5.1.3): Thus, just as their predecessors nearly 70 years ago, Bangladesh’s modern food retailers believe modern food retail to be:

3 According

to the exchange rate in the time period the interviews for this thesis were conducted, 1 euro corresponded to about 104 Bangladeshi taka.

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“[…] the only industry which can trigger development in both, agriculture and industry.” (Modern food retailer E, 01.11.2011).

Consequently, Bangladesh’s modern food retailers perceive their industry as an important change agent and contributor to the country’s socioeconomic development, in alignment with the government’s “Vision 2021.” Modern food retailers are convinced and highly committed to bringing “positive changes” (Modern food retailer M, 20.09.2012) to their countrymen’s lifestyles by offering a comfortable, safe and time-saving shopping environment where customers find a consistent and wide range of international and local hygienic, safe and healthy food at fair and fixed prices under one single roof. In this context, modern food retailers describe themselves as “educators” (Modern food retailer E, 01.11.2011), who not only help their consumers to develop and enhance their health, food safety and quality awareness, but also their corresponding product knowledge. Modern food retailers further stress the important changes their businesses would bring to the upstream members of the food distribution channels: hence, farmers would benefit from higher surpluses through shortened and more efficient distribution channels. On the level of food processors and manufacturers, supermarkets would encourage the improvement of manufacturing, packaging and distribution technology, and stimulate large-scale food production. In the end, this would lead to higher quality and safety levels of both traditional and new products, and even provide local producers with opportunities for export. The government would not only see the supermarket industry creating employment—in modern food retail, and in related industries such as food production or packaging—but also benefit from the supermarket industry as a driving force for the transition of food retail from often non-taxed informal spheres to taxable forms. Not least, by stimulating the introduction of up-to-date technologies along the food distribution chains from the farm to the shop level, the supermarket industry would make a considerable contribution to the achievement of the government’s goal of a “Digital Bangladesh.”4 To date, modern food retailers’ self-perception of their industry can probably be best summed-up by this quote from the manager of a major supermarket chain: “By getting into this [modern food retail] business, we are actually doing a favor to the nation.” (Modern food retailer E, 01.11.2011) 4 The

goal of a “Digital Bangladesh” is constituted in the government’s “Vision 2021” (see subchapter 9.1.1) and based on the assumption that enhanced application and usage of information and communication technologies is a decisive precondition for Bangladesh’s future development (Government of the People’s Republic of Bangladesh 2012, p. 99).

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With the goal of spreading this word among the broad public and creating favorable conditions for the supermarket industry’s further development, in its working strategy of July 29, 2010, the BSOA defined the following three strategic priority fields of action (Bangladesh Supermarket Owners’ Association 2012, p. 11): 1. The establishment of good rapport with relevant ministries and authorities, such as the Bangladesh Standards and Testing Institution (BSTI5 ), the Dhaka Chamber of Commerce and Industry (DCCI), and the police, in order to ensure supermarkets’ “smooth” operation and “favorable” policies for the development of the industry. 2. The promotion of intensive public relations, in order to increase the public’s positive perception of supermarkets, and to create a clean, positive and credible image of modern food retail in society. 3. The implementation of special projects, depending on the BSOA members’ demand (e.g. training programs on sourcing, supply chain management and merchandising techniques, or the promotion of universal use of electronic cash registers).

9.2

Hindering Factors to the Expansion of Modern Food Retail in Dhaka

In view of the country’s emerging modern food retail, the question arises whether Bangladesh, just as so many other countries before, is likewise experiencing a “supermarket revolution” and corresponding profound structural changes in its food retail markets. And indeed, by the time the fieldwork for this thesis was conducted, in view of the above-described socioeconomic developments, Bangladesh’s modern food retailers were quite optimistic about the future of modern food retail in their country: “Setting up superstores in Bangladesh is just like swimming downstream. I have been frequently visiting England and the US, so I know superstores are commonplace in developed countries. All countries formerly had wet markets, and then gradually transformed them into supermarkets. Bangladesh is yet a developing country. But it’s only

5 The

Bangladesh Standards and Testing Institution (BSTI) was established as a government authority in July 1985. Generally speaking, the institution is entrusted with the formulation and control of standards for products, methods and services in Bangladesh (Bangladesh Standards and Testing Institution 2013, n.p.).

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a matter of time until our people will come to the superstores.” (Modern food retailer J, 06.09.2012) “Food retail is a difficult terrain, because we are talking about cultural change, about changing attitudes. Despite that, we chose to walk in this direction. Now, 10 years later, we are glad about that. Today people are much more conscious about what they are eating. The government has woken up. They are elaborating consumer protection laws; they are bringing quality standards into operation. So just by one small step, there has been a revolution in the food industry. And even you as a foreign researcher are coming to talk to us about the change that has taken place.” (Modern food retailer E, 01.11.2011) “Superstore expansion is going on, and steady growth is there in terms of sales, and customers. By 2016, 2017, we will see supermarkets cross 40 percent of food retail in Dhaka city. We are hoping that actually.” (Modern food retailer M, 20.09.2012)

In particular, the managers of the three major supermarket chains Agora, Meena Bazar, and Shwapno further expressed their vision that Bangladesh would emerge as the leader among the fourth wave countries of the so-called “supermarket revolution” in the Global South. Echoing this optimistic prognosis, local media repeatedly observed the Bangladeshi middle-class turning to supermarkets (Ghias 2008, n.p.), and modern food retail in Bangladesh consequently face a promising future (Munni 2010a, n.p.; The Daily Star 2012a, n.p.). However, a view of Bangladesh’s supermarket landscape at the end of the year 2018 reveals that, from a retrospective, modern food retailers’ above-described visions and estimates appear to have been too optimistic. The BSOA currently speaks of about 40 supermarket ventures in Bangladesh running more than 130 outlets (Mahmud 2018, n.p.). In July 2013, one month after the formal end of the research project underlying this study, Dhaka witnessed the inauguration of Unimart, “Bangladesh’s first hypermarket” (Aziz 2013, n.p.), with more than 3,700 square feet of floor space. With the launch of Unimart in Dhaka’s high-income quarter Gulshan, a new actor thus joined the circle of Bangladesh’s modern food retail operators: Unimart is operated by United Enterprises & Co. Ltd., a Bangladeshi enterprise with a broad investment portfolio, e.g. in healthcare, education, real estate, construction, and logistics. Agora, Meena Bazar and Shwapno continue to be the country’s—and the capital’s—largest supermarket chains, and the modern food retail industry’s major players. As there is still no governmental agency collecting data on Bangladesh’s modern food retail industry, available figures should be treated as approximate values. Bangladesh’s modern food retailers estimate the current countrywide market share of their industry to range between 1.52 percent and 2 percent (Mahmud 2018, n.p.; Chakma 2018b, n.p.). These figures indicate that, compared to modern

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food retail’s estimated countrywide market share of 2 percent in 2013, Bangladesh’s modern food retail industry not only seems not to have grown any further, but might have even slightly shrunk in the course of the past five years. As for the case of Dhaka, more recent sources speak of supermarkets having a market share of “no more than 2 per cent” (Ali & Faroque 2017, p. 295) of the total food retail market. Compared to an estimated market share of roughly 5 percent in 2013, this figure also indicates a certain shrinkage of supermarkets’ market share in Bangladesh’s capital city. And indeed, the desk research on the latest developments of modern food retail in Bangladesh and its capital revealed that up to the present date, the extensive expansion of modern food retail in Dhaka, and even more in Bangladesh as a whole, is still being hampered by various factors on both the supply and the demand side (see Figure 9.2).

Figure 9.2 Influencing Factors on Modern Food Retail in Dhaka/Bangladesh. Source: Own

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While all of those factors were already present by the time the empirical work for this thesis was conducted, some of them even seem to have aggravated in recent years. The following subchapters describe the supermarket industry’s most important challenges in Dhaka/Bangladesh, and modern food retailers’ corresponding coping strategies.

9.2.1

Hindering Factors to Modern Food Retail on the Supply Side

Other than for the case of traditional food retail, given its comparably high resource intensity, e.g. in terms of know-how and capital, modern food retail shows comparably high barriers to entry. Furthermore, modern food retail relies on a considerable range of certain conditions in order to fully achieve and play on their competitive advantages. As for the case of supermarkets in Dhaka, the respective major hindering factors on the supply side are subsequently: difficulties in product procurement, a lack of know-how in modern food retail and a shortage of skilled labor, unfavorable governmental regulations, a challenging business environment, and finally, the absence of foreign direct investment.

9.2.1.1 Difficulties in Product Procurement The establishment of stable and efficient supply chains has been an essential precondition for supermarkets’ competitiveness and successful expansion ever since. Direct business relations with a selection of reliable, dedicated suppliers on a long-term basis allow modern food retailers to not only achieve the necessary reduction in purchase and transaction costs, but also to fulfil their promises regarding product availability, diversity, quality, and safety. This also holds true for the case of supermarkets in Dhaka and Bangladesh. However, similar to their counterparts in other countries prior to the emergence and dominance of supermarkets, to the present day, Bangladesh’s modern food retailers face considerable challenges on their way to achieving this goal for the following reasons: Bangladesh’s agricultural sector is shaped by innumerable small and medium farmers who are spread throughout the country and sell small amounts of marketable surpluses of the crops they grow. Agribusiness struggles with several hampering factors such as inappropriate technology, irregular power supply, and poor business development services. Traditional food distribution channels are highly fragmented, and agricultural products usually have to pass from four up to eight intermediaries on their way from producer to consumer (see also Ali & Faroque 2017, p. 289). Wholesalers in the cities function as essential nodes along

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these traditional food distribution channels: they maintain close and frequent contact with a broad network of suppliers all over the country, from which they procure the products before reselling them to the food retailers. In this system, commercial agreements tend to be based on verbal contracts, which are underpinned by long-standing reciprocal and trust-based business relationships between supplier and wholesaler. While these broad supplier networks have proven to be very efficient and extremely resilient in the context of traditional food distribution channels (Keck 2016, p. 192 f), they by no means comply with modern food retailers’ specific requirements. According to the modern food retailers interviewed, assembly of the widely dispersed and lightly marketed quantities of agricultural products is very intricate and inefficient. A lack of market transparency and on-spot transactions instead of long-term contracts leads to considerable price fluctuations and has a severe impact on supply chain stability, and thus the shelf availability of products. The lack of (sufficient) quality control mechanisms along traditional food supply chains further impedes product standardization and the procurement of products of consistent quality. Not least, the comparably long structure of traditional supply chains with their numerous intermediaries leads to unnecessary markups in food prices. Modern food retailers quantified the common margin between original producer and final consumer at 30 percent, out of which about 15 percent, or say half, remains with the intermediaries. Corresponding to the waves of supermarket diffusion over product categories as observed by Reardon and colleagues, procurement of fresh products presents the greatest challenge, as the manager of a major supermarket chain explained: “Procurement is still not easy, especially with perishables. There is no cold chain, nothing. Products are delivered on open trucks. Products are not properly kept in temperature. We are wasting 35 to 40 percent of our fresh produce due to improper storage, packaging and transportation. This is a great challenge we all face together.” (Modern food retailer E, 01.11.2011)

Even though perishables are the most demanding product category, modern food retailers also face considerable constraints in the category of processed and storable food. Thus, because of modern food retailers’ yet comparably small size and procurement needs, producers consider it more profitable to sell their products to traditional wholesalers, which are capable of purchasing in larger quantities. This practice prevents modern food retailers from deriving important cost advantages that may result from direct sourcing and bulk buying.

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Inadequate transportation infrastructure across the country, such as poor road conditions and traffic connections, as well as severe congestion may further lead to heavy delays in delivery, which prevents goods from reaching the stores on time. While the efficient procurement of domestic products is hampered by the above-described factors, modern food retailers reported of intricate procedures and tax rates of more than 200 percent for the case of imported food and nonfood products, which would make foreign items expensive luxury goods. Some modern food retailers at least tried to avoid the bureaucratic hassle by renting gondola space to importers and foreign grocery store owners where they can display their imported products. In view of these circumstances, Bangladesh’s modern food retailers face great difficulties in securing a reliable supply of products of consistent quantity, quality, and price to reduce their (transaction) costs, and to achieve the necessary economies of scale that would allow them to become price competitive compared to traditional food retailers. The negative consequences of this situation were most drastically exemplified in the case of supermarket chain Shwapno. While in May 2010, the venture announced plans to expand from 70 country-wide stores to about 500 stores within the next five years, only half a year later, Shwapno had to cut back its aggressive expansion strategy (see also Munni 2010a, n.p.). Instead of expanding further, in October 2010, the supermarket chain was even reported to see itself forced to shut down more than 20 of its outlets across the country, which the chain managers explained with supply chain deficiencies in regard to product availability, quality, and safety (see also Munni 2010b, n.p.). With traditional food distribution channels unable to fulfill their specific needs, similar to modern food retailers in other countries, it is, in particular, Bangladesh’s major supermarket chains that are working on the establishment of their own customized procurement systems. The measures applied in this regard feature considerable parallels to the measures supermarkets have taken elsewhere, and will be described in the following chapters. Centralized Procurement As shown in subchapter 5.2.2.3, with an increasing number of stores, supermarket chains typically tend to shift from the traditional mode of fragmented, per-store procurement on a daily basis to a centralized procurement via distribution centers, to which suppliers are required to organize their deliveries. Besides serving as collection points, distribution centers are also used as sites for value-adding

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activities such as the grading, cleaning, or packaging of products. The centralization of procurement allows modern food retailers to not only substantially reduce their coordination and other transaction costs, but also to purchase at a mass scale, which goes along with stronger bargaining power toward their suppliers. For these very reasons, supermarket chains in Bangladesh can be observed to follow a similar approach: warehouses and distribution centers not only serve as central product collection points, but also as places where goods are sorted, graded, weighed and/or packaged, before they are loaded on delivery vans heading to a venture’s supermarket outlets (see Figure 9.3).

Figure 9.3 Impressions from a Distribution Center of a Major Supermarket Chain. From left to right: Sorting, trimming, weighing, and packaging of vegetables. Source: Own pictures (22.09.2012)

In accordance with the modern food retailers’ promises regarding food safety, some of these venues also feature their own small laboratories where incoming goods are controlled and tested for potential contamination. Here, modern food

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retailers pay particular attention to the publicly highly-noticed issue of the socalled “silent killers” (Dhaka Tribune 2014, n.p.) formalin and calcium carbide. Notwithstanding their toxicity, both chemicals have been frequently reported to be illegally applied as preservative, e.g. for fish, respectively ripening agent for fruit (e.g. Fattah & Ali 2011, p. 37; Matin 2013, n.p.). Even though sources provide highly diverging information in terms of the actual extent of this scandal (e.g. Haque & Mohsin 2009, p. 53; Uddin et al. 2011, p. 49), the corresponding media reporting has led to a high level of uncertainty among the population, and increased attention on behalf of the government and its authorities on the matter. In order to smooth their product procurement and to secure the shelf availability of products, similar to modern food retailers elsewhere, Bangladesh’s modern food retailers are also increasingly applying up-to-date logistical technology. Thus, warehouse management systems, Enterprise Resource Planning (ERP), or Point of Sale (POS) software systematically track the supermarkets’ business processes and allow a more efficient management of procurement and stocking operations. However, the modern food retailers interviewed still saw a lot of potential for further improvements in this context: “I have been working for Tesco in the UK for seven years. What I have seen there is: you don’t have to do anything because everything is automatic. But here we still have to do a lot of things manually, which is very time-consuming.” (Modern food retailer L, 20.09.2012)

While the above-described measures are mainly carried out by the major supermarket chains, managers of small chains don’t see the cost-benefit ratio of such investments. But even in the case of the major supermarket chains, each investment is a balancing act that has to be weighed carefully, as the following statement shows: “For example, at Wal-Mart in the US we had a chilling chamber especially for bananas. We could keep the bananas there at a certain temperature for months, and when we wanted them to ripen faster, we just increased the temperature and that’s it. But we don’t have these items here in Bangladesh, they are very expensive. The major problem is: My company even has the money to implement the system. But if I add these additional supply chain costs to the product price, the customers will say ‘let’s go to the kacha bazar!’” (Modern food retailer A, 21.10.2011)

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Establishment of Direct Relationships with Preferred Suppliers As described in subchapter 5.2.2.3, the rationalization of the supply chain and the establishment of direct business relationships with preferred suppliers forms another important pillar of modern food retailers’ supply chain modernization activities. This measure allows supermarkets not only to reduce their transaction, coordination, and search costs, but also to assure the suppliers’ consistent responsiveness to supermarkets’ specific requirements, e.g. in terms of product quality, price, and delivery time. Not least, direct relationships with suppliers help to cut out all actors along the supply channel that do not fulfill any value-adding functions, and therefore only lead to unnecessary price markups from producer to retailer. For the same reasons, Bangladesh’s modern food retailers seek to achieve a shift from on-spot market relationships with traditional wholesalers to long-term and preferably direct business relationships with a network of preferred suppliers, rural buying agents, or agricultural cooperatives. This streamlining of the supply channels allows the supermarkets to command a higher profit margin from 12 to 18 percent, which is partly used to provide the customers with competitive product prices. Just as with the emergence of supermarkets elsewhere, this measure also leads to a formalization of the business relationship along the supply chains: thus, in modern supply chains, the traditional practice of concluding verbal agreements is replaced by formal written contracts between supermarkets and their suppliers. As for the product category of packaged or canned items, e.g. ready-to-eat meals, snacks, beverages, or condiments, Bangladesh’s modern food retailers strive for avoiding unnecessary markups along the multi-staged supply channels through direct procurement from local food manufacturers. As already previously described, an immature local food production and packaging industry may pose considerable barriers to the emergence and growth of modern food retail. In cases where domestic food processing and production have not yet adapted to new food habits, usually of the higher-income customers, supermarkets have to compensate for these shortcomings with often more expensive imports. And wherever the local processing and packaging industry is lagging behind, modern food retailers themselves have to perform functions such as product sorting, grading, and packaging to make sure the products are compatible with their self-service environment. Bangladesh’s food production industry, however, seems to be largely keeping up with the country’s changing consumption patterns, and thus provides the local supermarkets with comparably favorable conditions for product procurement: the increasing demand for processed food items and the rising awareness on health issues, food quality and safety have not only led to the emergence of new modes of food retail, but also to changes in Bangladesh’s food production industry: in

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recent years, in addition to the numerous traditional small-scale family businesses, commercial-scale food processors and producers have emerged and expanded with the goal of exploiting the market niche of “the ever-increasing number of people who want to live better and healthier lives” (Food manufacturer A, 22.10.2011). The palette of the corresponding products ranges from “international standard halal6 and hygienic processed foods” (Food manufacturer B, 26.10.2011) to diabetic food up to supposedly health-promoting items such as a “low glycemic index rice,” a rice that is praised to control the blood glucose level and by that means relief for people suffering from diabetes, heart diseases, or obesity. Being well aware of the fact that Bangladeshi consumers tend to have great confidence in the quality of foreign brands, some local food manufacturers also cooperate with foreign food producers. For instance, in 2016, the Bangladeshi venture Islam Group Foods Ltd. announced its aim to establish the country’s “most trusted household brand in poultry food.” To this end, the venture launched a new line of ready to eat poultry products, whose raw material is being imported from France. The new product line was media-effectively presented at a ceremony in an Agora outlet in Gulshan in the presence of the ambassador of France in Bangladesh (The Daily Observer 2016, n.p.). Supermarkets with their self-imposed role as promoters and guardians of safe and healthy high-quality food are thus not only thankful recipients of these emerging product lines and corresponding brands—modern food retailers also provide the food manufacturers with an ideal marketing and sales platform for these products. In this context, several modern food retailers expressed their pride not only in maintaining business relationships with large manufacturers, but also with small ventures, and in particular with women selling their homemade food items. In this, modern food retailers saw themselves as promoters of businesses and livelihoods, even for tendentially underprivileged entrepreneurs. In addition to these direct relationships with local food manufacturers, some supermarket chains also feature a certain vertical integration in their supply channels: all three major chains, Agora, Shwapno, and Meena Bazar, as well as some smaller chains such as Prince Bazar7 process and manufacture food items under their own company labels and trademarks. While modern food retailers in Bangladesh thus already seem to be on their way to forming a symbiotic relationship with manufacturers of (semi-)processed 6 “Halal”

is an Islamic Arabic term and means “permissible.” In this context, “halal” refers to food that complies with Muslim purity laws. 7 The Prince Group of Companies Pvt. Ltd. started its business in food production in 1985. In 2005, the group also entered the food retail business by opening its first of two “Prince Bazar” supermarket outlets (Prince Group 2013, n.p).

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and packaged food, the establishment of direct supply chain relationships with the often widely-dispersed smallholder producers of perishable products still constitutes a major challenge. However, from a lack of alternatives, modern food retailers work hard on the establishment of their own platforms with fruit and vegetable growers, or fish farmers, which are tailored to modern food retail’s specific needs: “As there was no organized supply chain for supermarkets, we had to start with small suppliers to help us. When we started growing from one outlet to another outlet, we added more people. Because our first supplier was so small, he could not supply three or four of our stores. This is how our supplier platform is gradually growing now.” (Modern food retailer E, 01.11.2011)

With the goal of supporting these growing supplier platforms and enhancing the suppliers’ capacities to grow along with their clients, all major supermarket chains have rolled out their own supplier development programs. In addition to providing support in the procurement of capital equipment, these programs comprise trainings on issues such as the use of fertilizers and pesticides, the implementation of mechanized production processes, the prevention of post-harvest losses through improved product packaging and transportation, the maintenance of product quality and safety, or the use of information technology. Given the producers’ often only low level of formal education, some trainings also focus on basic commercial knowledge and a range of business skills. Taking trends in the United States and Western European countries as example, Meena Bazar even strives for first mover advantages by placing special emphasis on organic farming. Against this background, under its welfare organization, the Kazi Shahid Foundation, Meena Bazar has initiated a training program in organic farming for peasants. The supermarket chain even organizes Farmers’ Days, where it invites its producers of organic vegetables to visit Meena Bazar’s warehouse and outlets in Dhaka, and to meet customers. In doing so, Meena Bazar not only intends to enhance the motivation of its suppliers, but also to raise its customers’ awareness of organic products. It is for such activities that Bangladesh’s modern food retailers consider themselves as “silent catalysts” (Modern food retailer A, 21.10.2011) in the country’s food distribution systems, who make a significant contribution to the development of local agribusiness: “Our farmers’ resilience and power are not being utilized. They are very vulnerable to the land owners. They are not being encouraged or empowered. We [the supermarkets] give them the opportunity to expand their businesses, and to grow and develop with us.” (Modern food retailer E, 01.11.2011)

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Thus, thanks to the streamlining of the supply chains by cutting out the middlemen, local farmers would not only benefit from a higher profit margin from formerly three to up to six percent. Through training and the provision of resources and capital, local producers would also be given the chance to tap new markets: modern food retailers reported that local farmers have started the cultivation of formerly imported crops, such as baby papaya, dragon fruit, or strawberries, which would now even provide opportunities for export. Not least, modern food retailers believed a farmer’s contract with a renowned supermarket chain to be an important quality seal, which would make the supplier an attractive business partner for other ventures as well. Apparently, Bangladesh’s modern food retailers don’t stand alone in this assessment: indeed, some of the supermarkets’ supplier development programs are supported by foreign development agencies, which consider such programs to have a considerable positive impact on the local agricultural development and the livelihood of (smallholder) farmers (see e.g. Business Innovation Facility 2013, n.p.). Notwithstanding their conviction in their supplier development programs and their pride in their prior achievements, modern food retailers are still on a long and sometimes difficult journey: “The big food manufacturers, like BEXIMCO, Meghna Group, or Partex Group, they all are maintaining the quality of their products very well. So we do not need to guide them. But there are a lot of small vendors, which have recently come into the market. And we have to provide them with guidelines, even on simplest things: ‘You have to deliver your products on time. You need to be BSTI-approved. You have to place an expiry date, the price tag, and the manufacturer seal on your products.’” (Modern food retailer A, 21.10.2011)

With their own supply chains still—if at all—being in the midst of the development process, Bangladesh’s modern food retailers also have to (partly) rely on Dhaka’s traditional wholesale hubs such as Kawran Bazar, Krishi Market, or Babu Bazar. In some cases, supermarkets even procure products from kacha bazar vendors. This holds particularly true for smaller chains and single-outlet ventures that have neither the financial and human resources, nor the purchasing power to develop their own supplier base. Implementation and Monitoring of Private Standards As already explained in subchapter 5.2.2.3, following the shift to centralized procurement and the establishment of a network of preferred suppliers, supermarkets also tend to implement private standards along their supply chains. Generally speaking, private standards allow modern food retailers to not only ensure that

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their specific requirements in regard to product characteristics are met, but also to coordinate the processes along their distribution channels accordingly. The same applies to supermarkets in Bangladesh: here, it is in particular the major supermarket chains that apply private standards to make their procurement processes more efficient, and to comply with their self-imposed image as guardians of safe and healthy, high-quality food. Given the novelty of modern food procurement systems in Bangladesh, modern food retailers reported that they often had to start from scratch in developing the necessary bases they needed to establish supply channels complying with their needs: “First you need to define what is ‘standard.’ Initially, we did not know what characteristics a product should have to be considered as good. So we tried to develop a vegetable manual, a grading system together with two PhDs who are specialized in agro-based industry. With that manual, we can clearly decide now if we accept a product or if we reject it. Another objective is to increase shelf life. If I can increase shelf life, it is going to minimize my costs and I can increase profitability. But we did not have any information on how to trim and pack perishables in order to increase their shelf life. On the whole national level, we don’t have any experts on that. So when I started as a supply chain manager, I said: ‘Even if it takes long time, we have to incorporate this.’ We are going through trial and error, and we are trying to solve our problem through research on our own.” (Modern food retailer L, 20.09.2012) “We are very conscious about what we sell to our customers. When this formalin thing came up, nobody knew what to do with the formalin. I have my children living in the US, and I told my son to find out how they control this formalin issue in the US. He sent me a formalin detection kit, and then we gave it to an authority here. With our help and with their technical equipment expertise they developed a kit to test our products for formalin.” (Modern food retailer J, 06.09.2012)

In particular against the background of the numerous food scandals of the recent past, and the resulting public awareness of the subject matter, supermarkets’ private standards also fulfill an important signaling function toward customers and the government: in November 2012, for instance, supermarket chain Agora and the Bangladesh Council of Scientific and Industrial Research (BCSIR), a scientific research organization and regulatory body, signed a memorandum of understanding on the common promotion of food safety and the provision of consumers with more corresponding transparency and security. To this end, BCSIR agreed to provide its state-of-the-art food testing laboratory support so Agora could put perishable and non-perishable products labelled “Tested by BCSIR” on its shelves (The Daily Star 2012c, n.p.). In March 2013, Meena Bazar followed suit, and signed an identical agreement with BCSIR (The Daily Star 2013, n.p.).

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Figure 9.4 Supermarket Street Banners. Advertisement for chemical-free mangoes and hygienic meat. Source: Own pictures (August/September 2012)

To the present day, via corresponding advertisement and public relations, modern food retailers are making strong efforts to draw their customers’ attention to their private standards and the corresponding quality and safety promises (Mahmud 2018, n.p.). Procurement System Modernization: Still a Long Way to Go Generally speaking, notwithstanding their achievements to date, the modern food retailers interviewed saw modern procurement structures in Bangladesh to be still in their infancy and with lots of potential for further improvements: “I am pretty sure you will not see the problems we face in Bangladesh in other parts of the world. These are very customized problems. When I talked about these issues to my former colleagues at Wal-Mart back in USA, they were laughing at me because these are such traditional problems.” (Modern food retailer A, 21.10.11)

Nonetheless, the modern food retailers interviewed expressed pride in their role as changemakers in their country: “Before supermarkets came into business ten years ago, nobody in Bangladesh ever spoke about this whole supply chain management concept. And now, we even had the country’s first conference on that issue.” (Modern food retailer M, 20.09.2012)

And indeed, in June 2012, Dhaka witnessed the “Agribusiness Supply Chain Management Conference,” the first of its kind in Bangladesh. Following the motto, “Creating opportunities through partnering,” the conference featured seminars and panel discussions from local and international experts on the importance and essentials of efficient rural supply chain system development (Inclusive Business Action Network 2012, n.p.).

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The supply chain improvement activities of Bangladesh’s modern food retailers are even followed with considerable interest from abroad, as a study on “Business opportunities related to the development of retail and agro-food chains in Bangladesh” showed (van Gorp et al. 2013). Thus, despite persistent difficulties, the managers of the major supermarket chains in particular did not want to be daunted, and instead saw themselves to be taking the first and most difficult steps on a journey to success. As the desk research on the latest developments in Bangladesh’s modern food retail market revealed, this journey has not yet come to an end: to the present date, Bangladesh’s modern food retailers are making strong efforts to establish, strengthen and expand their own supply chains in order to overcome the abovedescribed difficulties in product procurement (IDLC 2017, p. 17 f; Datta 2018, n.p.). In accordance with the BSOA’s working strategy, through correspondent coverage in the local media, and via their own social media channels, Bangladesh’s modern food retailers are allowing the public to partake in this ongoing journey, and their corresponding activities, achievements, and challenges. Two Sides of One Coin: Supermarkets’ Potential Impact on (Smallholder) Farmers As in other countries too, the emergence of supermarkets in Bangladesh bears considerable potential for development opportunities, but also certain risks for suppliers. Against the background of experiences in other countries of the Global South, critical voices already raised the question early on whether supermarkets in Bangladesh will indeed “be super for small farmers” (Ali 2004, n.p.), arguing that: “[f]or small farmers, it is difficult to get into the procurement system of supermarkets. This is because entry into the system will require investment in irrigation, greenhouses, trucks, cooling sheds and packaging technologies among other things. Supermarkets will insist on grading, quality control, uninterrupted and timely delivery. There is a need to assist farmers in these and other related areas so that they may get full advantage of the opportunity created by supermarkets. One of the ways to provide the linkage between small farmers and the supermarket is to establish what is known as contract growing system. It is not known if the very limited number of so-called supermarkets in Dhaka have adopted the system. It is unlikely that they have done so. This is because it is more convenient for them to buy from wholesalers the products that they need. It is impossible for the small farmers to bring their products in tiny lots for sale to the supermarkets.” (Ali 2004, n.p.)

Interestingly, by the time the fieldwork for this thesis was conducted, the opposite seemed to be the case. As is becoming clear from the previous subchapters, in the

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absence of alternatives, Bangladesh’s modern food retailers actually depended on partnerships with small and medium farmers in order to streamline their supply chains, and to make sure their specific product and process requirements were met. In this context, some modern food retailers exhibited a strong commitment and responsibility toward their suppliers: “Now, as we are growing [as a supermarket chain], how can we dump people who started small with us? This is a moral issue. So first we will give them the option to try and develop. With our growth, they also grow. And if they cannot grow, if they are incapable, if they don’t want to grow? Then we will get more people from outside.” (Modern food retailer E, 01.11.2011, emphasis by author)

However, critics’ fears regarding the exclusion of small and medium farmers in supermarkets’ procurement chains may not completely be unjustified, as the following quote from the manager of a smaller supermarket chain revealed: “We have moved from traditional suppliers to young entrepreneurs, young university graduates who are trying to get into the business. They are more fine-tuned to the quality we need, there’s an atmosphere of trust. Traditional suppliers are uneducated people. You can’t get along with them, you can’t really exchange ideas with them. With those educated young people, communication is much better.” (Modern food retailer J, 06.09.2012)

Furthermore, despite the comparably small size of Bangladesh’s supermarket industry, and similar to experiences in other countries, it has already become apparent that power along the supply chains is distributed unevenly in favor of the supermarkets. For instance, the manager of the smaller supermarket chain reported of a common practice that has already been described by Mainuddin et al. (2007, p. 158): “We have arrangements with our suppliers that they have to take back whatever is left unsold. It cost a lot of effort to make them accept this. I told them ‘We will pay a you a little higher, but we cannot carry over the remaining perishables for the next day. Just take them back and do whatever you like with them’.” (Modern food retailer J, 06.09.2012)

The interview further revealed that the venture applies a similar procedure for damaged goods, and even in the case of price changes or a lack of stock on the supermarket level. In response to the question of what consequences these practices might have for the suppliers, the manager interviewed showed little concern,

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and believed suppliers to sell the returned products to traditional retailers at a lower price in order to recoup their funds. Even though the author refrains from hasty conclusions and unjustified generalizations, there are consequently occasional hints that the distribution of power and benefits between modern food retailers and their suppliers may not be as balanced as suggested in every case. While scientific studies or other publications on the subject matter are not yet available, it is still above all the major supermarket chains that, particularly via their social media channels, highlight the important contributions they make to the development of the country’s farmers. Time will show if, and if yes, to what extent modern food retailers in Bangladesh are (further) willing to fulfil their self-commitment to take over social responsibility for their suppliers, and in particular the smallholders.

9.2.1.2 Lack of Know-How in Modern Food Retail Management Most of the supermarket ventures in Bangladesh were founded by enterprises or entrepreneurs with no prior experience in food retail. This even holds true for the country’s three major supermarket chains. Rahimafrooz Ltd., the parent group of Agora’s Rahimafrooz Superstores Ltd., is a renowned Bangladeshi enterprise with core businesses in the automotive, storage power and energy industry. Supermarket chain Meena Bazar is a branch of the Bangladeshi Gemcon Group, with various business fields ranging from real estate and engineering, herbal and jute products, to shrimp processing. Supermarket chain Shwapno belongs to ACI Ltd., one of Bangladesh’s biggest conglomerates with its main business divisions in pharmaceuticals, consumer brands and agribusiness. In the course of her research, the author of this thesis also came across founders of smaller modern food retail ventures with the most different professional backgrounds, ranging from a former member of the Bangladeshi Airforce to the owner of a paper mill, or a supermarket owner who had formerly worked in the medical technology sector. Given the high degree of novelty of modern food retail in Bangladesh, managers of supermarkets of all sizes reported running through a process of “trial and error” (Modern food retailer J, 06.09.12) and “learning by doing” (Modern food retailer K, 14.09.12) of how to manage and develop their businesses successfully. The founder of a two-outlet venture, for instance, recalled: “Necessity is the mother of invention, you know? I didn’t know the business when I started doing it. Once I was in the business, I had to know in order to save the money I invested. I had no other choice but to learn.” (Modern food retailer H, 27.08.2012)

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Modern food retailers applied a considerable variety of approaches in order to gain and deepen their know-how on modern food retail management. The approaches ranged from internet research and reading technical literature, to more sophisticated activities such as the deployment of staff for trainings and the observation of modern food retail abroad. The major supermarket chain Agora even went one step further by recruiting foreign consultants: “As far as Agora is concerned, we have hired consultants from Sri Lanka to come and help us. So why Sri Lankan, why not American consultants? Because, nobody from the US was willing to come to Bangladesh. They thought this market is too small for anybody to come here. And the fees they were charging did not make sense for the Bangladeshi market. In South Asia, Sri Lanka has been the first country to have supermarkets. So Sri Lanka is at least 15 years ahead of us. And fortunately, our socioeconomic and cultural situation is almost the same. So when they came, they assimilated very easily. They were cheaper than the Americans, and they also knew the business. So whatever you see of Agora is what we learned from the Sri Lankans.” (Agora manager, 2011)

Thus, expertise and know-how in modern food retail management are transferred to Bangladesh’s supermarkets from all over the world: from the United States and various European countries, via Indonesia, Sri Lanka and Singapore, to Dubai and Kuwait. This transfer goes so far that founders of a smaller chain even copied the logo and naming components of a famous transnational supermarket chain. In response to the question whether this was due to a corresponding business relationship with the said transnational chain, e.g. via franchise or joint venture, the respondents stated that they had simply believed that it might enhance the attractiveness of their own business, if customers would associate them with a successful transnational food retail chain. Even though they stated to perceive themselves as “latecomers of a fourthwave country” (Supermarket manager F, 02.11.2011) who benefit from the manifold lessons on modern food retail that have already been learned in other parts of the world, the modern food retailers interviewed repeatedly stressed the necessity to adapt modern food retail management to the specific conditions of their country: “It [the supermarket industry] has to grow from the soil of the country. You cannot simply import a foreign system. We have to translate it into a Bangladeshi theme. But of course, you can buy the basic thing.” (Modern food retailer J, 06.09.2012)

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“Just to give you an example: initially, our fish were cleaned, cut and kept on ice – just as you will find it at Tesco or Wal-Mart. But people did not buy the fish because they thought it was old. People in Bangladesh want to buy live fish, not frozen fish. So we realized: we cannot follow the Western model, we have to follow the Bangladeshi model. We will do the cleaning and cutting in front of our customers – not in the traditional manner of course, but in a modern and hygienic manner.” (Modern food retailer E, 01.11.2011)

Notwithstanding the adoption of know-how from abroad, Bangladesh’s modern food retailers also paid close attention to the practices of their local competitors to gain further orientation and inspiration for the improvement of their own business operations. In this context, supermarket chain pioneer Agora was commonly perceived to be the most important local role model,8 as the manager of a small supermarket chain vividly described as follows: “If you ask me which soccer player is best at the moment, obviously it is Messi from Barcelona. So every soccer player wants to be Messi. In our food retail industry, Agora is the best. This is not only my personal opinion. Every food retailer in our country will say that. Therefore, we all are trying to be Agora.” (Modern food retailer A, 21.10.2011)

Not least, expertise and knowledge in modern food retail practices wander from venture to venture, with staff changing employers or even making the decision to launch their own supermarkets.

9.2.1.3 Shortage of Skilled Labor As the interviews with modern food retailers further revealed, finding and retaining skilled and experienced labor at the management level—from the level of outlet manager to back office positions, such as marketing or procurement management—pose a considerable challenge. On the one hand, the interviewees traced these difficulties back to the low attractiveness of the supermarket industry for highly educated people: “To be very honest, university graduates are still not too enthusiastic to develop a career in the food retail industry. Our industry is still too small to be attractive. If Bangladesh

8 Agora’s efforts and achievements have even been acknowledged internationally: in February

2011, on the occasion of its conference in Mumbai, the Asia Retail Congress awarded Rahimafrooz Superstores Ltd. the “Retail Leadership Award” for playing a vital role in shaping Bangladesh’s retail industry and being a major contributor to the country’s GDP (Rahimafrooz Ltd. 2011b, n.p.).

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already had big players such as Aldi, Wal-Mart, or Tesco, then people would like to work in this industry.” (Modern food retailer L, 20.09.2012) “Another problem in this industry is that educated people are still not coming to us. Maybe people are thinking this is not a good place to work. Educated people think: ‘I will not work in a shop.’ Students coming from university or college prefer to work at the office.” (Modern food retailer G, 26.08.2012)

On the other hand, modern food retailers explained the shortage of skilled labor with the lack of corresponding education and study programs in Bangladesh. It is therefore not surprising that employees who have acquired know-how and practical experience in modern food retail management abroad are very sought-after in Bangladesh’s supermarket industry: “Our CEO spent more than 16 years in the USA. He worked for the largest food retail chain in New York. Now he is trying to spread his knowledge and experiences in our country. Ten years back this would not have received much recognition here, but now the demand is there.” (Modern food retailer L, 20.09.2012, emphasis by author)

In the course of her fieldwork, the author of this thesis came across a multitude of modern food retailers, who, as in the case above, had formerly worked for supermarket chains abroad. With modern food retailers also beginning to emerge in their country of origin, these managers felt the desire to come back and apply their expertise and know-how in order to make their personal contribution to this development. In view of the shortage of qualified personnel, some modern food retailers reported sending their staff to attend training courses abroad. Managers of the major supermarket chains even described their efforts to stimulate the development of academic curricula on agribusinesses, supply chain and modern food retail management, at local universities: “I have been to USA for food training and all that. And the good part in the West is the fact that businesses and universities work together. Business problems are transferred to universities, they do research and come back with the solution. Unfortunately, this kind of culture has not evolved in Bangladesh. Here, universities look at businesses as separate entities, and businesses at universities as separate entities. There is no university and business cooperation in this country. We are trying to develop that. We were working with a US aid-funded program in order to establish an MBA in agribusiness at AIUB [American International University Bangladesh]. We sponsored the first two years of the MBA program and told that every graduate coming out of that will be employed with us.” (Modern food retailer F, 02.11.2011)

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Some supermarket chains’ web presences also feature especially produced image films, which illustrate the manifold amenities of developing a career in the modern food retail industry. Notwithstanding modern food retailers’ strong efforts, a view toward current sources reveals that the lack of skilled and experienced labor remains one of the major challenges for modern food retailers in Bangladesh and its capital (IDLC 2017, p. 17; Datta 2018, n.p.).

9.2.1.4 Unfavorable Governmental Regulations Unlike in other countries or cities where supermarkets were proactively promoted through respective structural adjustment policies and regulations (see subchapter 5.2.4), the emergence and so-far development of modern food retail in Bangladesh and its capital city Dhaka has taken place without the Bangladeshi government or Dhaka’s municipality playing an active role in promoting, or even initiating: “Supermarkets in Bangladesh are not government-driven at all. All the growth, all the development can be traced back to private initiatives.” (Modern food retailer E, 01.11.2011)

In the course of the past nearly two decades, BSOA has made strong efforts “to get on the government’s radar” (Modern food retailer F, 02.11.2011), and to direct the government’s attention to the country’s growing supermarket industry, its positive contributions to Bangladesh’s development, but also the industry’s need for governmental support. An important milestone to enhance supermarkets’ visibility and to proclaim the BSOA’s visions was the association’s event on the occasion of the “10-Year Celebration of Supermarkets in Bangladesh,” which was held on January 24, 2012 in Dhaka (see also subchapter 8.2.1.1). Beforehand, a BSOA representative described the objectives of the event as follows: “On this event, we want to provide the political decision makers with a big picture of the whole idea, how we see supermarkets evolving over the next ten years. We will invite as many ministers as possible. Especially the minister of commerce, the minister of agriculture, and we are planning the finance minister. We will have some suppliers coming to tell about the benefits they received from supermarkets, how they developed from zero to hero. Maybe we will also invite somebody to talk about how supermarkets have changed the developed countries. We want to present the windows of opportunities that are here. And we invite a lot of journalists, so they can make stories out of that. We want to tell the government: ‘this is the dream we have and we need your support,’ Many people perceive Bangladesh as a country without opportunities, as a hopeless country. And we are saying ‘No, this is not a hopeless country. This

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country has a lot of opportunities which those blind people just can’t see.’” (Modern food retailer E, 01.11.2011)

And indeed, at first, BSOA’s strategy and efforts seemed to be successful: in his speech at the BSOA’s 10th anniversary, Bangladesh’s industries minister acknowledged supermarkets as a “symbol of present urbanized civilization, and a product of modern thinking.” The minister further highlighted the pivotal role supermarkets had already played in contributing to the country’s import independency by empowering local farmers and stimulating agricultural production for export. In view of these achievements, the minister further held out the prospect of declaring modern food retail as a service industry in industrial policy, which would clear the path for various state subsidies to promote the sector’s growth (see also Financial Express 2012, n.p.). At the same time, the minister admonished the modern food retailers to further prioritize food quality and safety, and to comply with their selfimposed responsibility as role models in this regard. The BSOA representatives interviewed expressed to highly appreciate these first achievements: “Gradually they [the government] intend to understand what we are trying to do. They induct people from our association into their committees and meetings. They want to know about us. So the eagerness is there, the government wants to support us, but it does not know how to support us. Of course, it has not yet taken the shape of how we want to see ourselves tomorrow. But we understand that any change takes time. And we are happy that at least they are listening to us.” (Modern food retailer E, 01.11.2011, emphasis by author)

Nonetheless, BSOA’s struggle for more favorable regulations to develop Bangladesh’s modern food retail industry still seems to be far from coming to an end. Not only have the subsequently described challenges remained the major battlefields in the course of the recent years. It further seems that, in some aspects, the situation has even become aggravated. The following closer look at the related discourse between BSOA and government representatives reveals that these seem to follow the same patterns as ever based on the same arguments on both sides. Value Added Tax (VAT) on Essential Items Sold at Supermarkets In the spring of 2013, for the first time since its emergence in 2000, Bangladesh’s supermarket industry was reported to be experiencing negative growth, and seeing an 8 to 10 percent decline in sales (see also New Age 2013, n.p.; Munni 2013, n.p.). This development stood in sharp contrast to the prediction of the 20 to 30 percent annual growth that BSOA representatives had made only one year before at the occasion of celebrating one decade of supermarkets in Bangladesh. Modern

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food retailers traced the unpleasant situation back to the government’s decision in July 2012 to levy VAT on everyday essential products sold at supermarkets from 2 to 4 percent for fiscal year 2012–2013.9 In view of that decision, modern food retailers felt disadvantaged compared to mudir dokans that, instead of paying VAT per sold item, would have to pay an annual VAT rate based on their store location and size (see also Noor 2013, n.p.): “This is a discriminatory policy! Our customers feel discouraged from buying at our superstores, as there is 4 percent VAT on sales, while other general stores pay VAT at a flat rate. We say: this is not fair, because the pattern of doing business is the same.” (Modern food retailer N, 25.09.2012)

In April 2013, the management of Nandan Mega Shop, formerly one of the key pioneers and bigger players in Bangladesh’s supermarket industry, even claimed to see themselves forced to sell two of the chain’s five outlets to Meena Bazar, and to shut down another one because of the prevailing unfavorable conditions (see also New Age 2013, n.p.). In view of this situation, BSOA representatives repeatedly urged the National Board of Revenue (NBR) to reverse its decision for fiscal year 2013–2014, and to create a level playing field by ensuring a uniform VAT rate for all types of retail stores. This would not only protect the consumers’ interests, who could then purchase safe and high-quality food at affordable prices from modern food retailers, but would also help the supermarket industry to grow and that way become an even more important contributor to the country’s development and the government’s tax revenue. On these occasions, BSOA representatives did not miss the opportunity to emphasize that, despite its still small size of only 2 percent national market share, the supermarket industry had already earned the government Bangladeshi taka 300 million tax revenue in 2011, while traditional food retailers and wholesalers would often not even pay taxes or comply with other regulations (see also Munni 2013, n.p.): “This business [the supermarket business] is one of the businesses where people are religiously paying VAT because we use ECR [electronic cash register] machines. You can see it on the receipt. But what happens e.g. at Kawran Bazar? You go there, you buy something, and they are not even paying the 2 percent VAT. They are supposed to pay, but they don’t even give you a receipt.” (Modern food retailer N, 25.09.2012)

9 Previously,

for fiscal year 2010–2011, the government had already levied VAT on essential products sold at supermarkets from 1.5 percent to 2 percent.

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Notwithstanding the BSOA’s protests, in June 2013, the NBR announced that it would maintain the 4 percent VAT rate on everyday essential products sold at supermarkets for fiscal year 2013–2014 (Jahan 2013, n.p.). As the desk research on the latest developments in the food retail sector of Bangladesh and its capital revealed, the issue of VAT on essential products sold at supermarkets has remained an issue of major concern for the development of the industry until the present day: in January 2014, at first it seemed as if the tide had turned in favor of the modern food retailers, when the NBR lowered the VAT on everyday essentials sold at supermarkets from 4 to 2 percent for fiscal year 2014–2015. The NBR justified this step with its intention to help Bangladesh’s modern food retail industry grow, and to ease the burden of VAT on supermarkets’ customers. However, the NBR’s decision only applied to supermarket outlets with less than 12,000 square feet (1,115 square meters) of space, and on the condition that the respective outlets would maintain electronic cash registers or point of sale software, and ensure the safety and quality of the food items sold. Notwithstanding these specific conditions, modern food retailers were reported to feel a strong relief at the government’s concession (Dhaka Mirror 2014, n.p.; Uddin 2014, n.p.). The reason to feel relieved, however, did not last too long: in April 2015, the NBR again announced a doubling of the VAT rate on sales at superstores from 2 percent to 4 percent for fiscal year 2015–2016. BSOA representatives expressed their deep concern about this plan, and pointed out that supermarkets’ survival would be jeopardized at a time when modern food retail had just begun to recover from an arduous period. Thus, the tax raised would not only discourage customers from shopping at supermarkets, but also prevent new investors from entering the modern food retail business. In the end, this would not only be suicidal for Bangladesh’s supermarket industry, but also for the government, as it would lose supermarkets as important tax generators. Backed by the Federation of Bangladesh Chambers of Commerce and Industry, BSOA members therefore appealed the finance minister to reconsider the decision (The Daily Star 2015a, n.p.; New Age 2015, n.p.). As so many times before, on these occasions, BSOA representatives further reiterated their wish that the government issue a VAT package for modern food retailers in order to avoid supermarkets’ discrimination against traditional food vendors. Notwithstanding the BSOA’s efforts and objections, in the end, the NBR stayed with its to decision to levy the VAT rate again (Parvez 2015, n.p.; Dhaka Tribune 2015, n.p.). A review of media reports and publications in the following years reveals a perennial pattern in the more recent discourse between BSOA and NBR. Thus, at each pre-budget discussion for the fiscal year to come, BSOA again made

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its request for a uniform, square foot-based VAT rate for all general stores (see e.g. Dhaka Tribune 2016, n.p.; Dhaka Tribune 2018, n.p). However, until the present day, all of BSOA’s efforts have been unsuccessful. In June 2018, the NBR even announced an increase in the VAT rate for essentials sold at supermarkets from 4 to 5 percent for fiscal year 2018–2019. Modern food retailers expressed their strong frustration at this decision, and lamented that modern food retail in Bangladesh would not only be denied the necessary governmental support that it would deserve as a new and growing industry, but even worse, face discriminatory barriers to its expansion (Dhaka Tribune 2018, n.p.). According to BSOA, this unfavorable condition has led to a 15 percent decline in the supermarket sales rate for the first half of the year, and driven the vast majority of supermarket outlets into the red (Mala 2018, n.p.). Food Safety Regulations and Corresponding Monitoring Systems As already outlined in subchapter 9.1.1, in the course of the past few years, frequent media coverage on food scandals in Bangladesh has led to a significant rising public awareness on issues of food safety and quality. In 2010, a study carried out in the course of the United Nation’s Food and Agriculture Organization’s program “Improving food safety in Bangladesh” revealed severe weaknesses in the government’s corresponding enforcement and monitoring mechanisms: the shortcomings identified ranged from a poorly coordinated multi-agency system with manifold gaps and overlaps of mandates, to inconsistent methods of detecting non-compliance, understaffed authorities with insufficient equipment, know-how and limited technical skills. The FAO’s study further found that food inspections hardly covered all stages along the food distribution chain from farm to fork, and disclosed a multiplicity of partly outdated and inconsistent food laws and regulations, as well as an inconsistent and decentralized recording and filing system (Rahman & Højskov 2010, p. 2). Another study estimated that two thirds of the total food items enter Bangladesh’s markets without any safety or quality checks, and nearly one third of Bangladesh’s population to suffer from food poisoning or food-borne diseases year-round (Rahman et al. 2014, p. 103 f). In view of these inacceptable conditions, in the recent past, Bangladesh’s government has shown increased efforts to master the situation. While the modern food retailers interviewed welcomed the government’s measures to overcome the above-described deficiencies, they also stated that they themselves felt disadvantaged in comparison to traditional food retailers, as supermarkets were disproportionately at the center of the government’s attention:

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“Most of this anti-adulteration drive is against the superstores. Leaving aside the other food retailers. The focus is on the superstores because of news value. Catching a trader at the kacha bazar is not news. Who cares? No camera will follow that. But if Nandan is fined, if Agora is fined, if Shwapno is fined, that’s big news. We say this is unfair, totally unfair!” (Modern food retailer J, 06.09.2012)

Indeed, local media had repeatedly reported on various food adulteration inspections in supermarket chains in Dhaka and elsewhere in the country, and on modern food retailers being fined for having offered adulterated and expired food on the shelves of their stores (e.g. bdnews24 2005, n.p.; Chowdhury 2012, n.p.). According to the modern food retailers interviewed, these incidents were severe setbacks to the development of the supermarket industry: “We are investing a lot of money, and a single bad publicity pushes us all the way back. Because the people lose their trust in us.” (Modern food retailer E, 01.11.2011)

Modern food retailers further criticized that food inspections were mainly concentrated on the retail level, while upstream stages along the food distribution channels were not taken into account. As a consequence, modern food retailers felt unjustifiably held responsible for misconduct that was already being committed at the producer level. They further emphasized that monitoring food safety at the production level should be the main responsibility of the government, not of the modern food retailers: “As a supermarket, we took some initiative to ensure safe products for our customers. We do our tests and if the test is positive, we reject the products and we don’t work with that supplier anymore. But how far can you go as a supermarket? It takes our time, it takes our money and we are not the right people to do it. We are just retailers. Actually, it is the government authorities’ task to detect malpractice and adulteration in food factories.” (Modern food retailer M, 20.09.2012)

While the modern food retailers interviewed expressed a high commitment to contribute to safer and higher quality food in their country, they also stated that they suffer from unsystematic and poorly coordinated activities from the government’s authorities, and outdated and inconsistent food laws and regulations: “There are conflicting laws also. Some laws, which are prevalent here, are from the British era. In between, we had two independencies: from the British to Pakistan, from Pakistan to Bangladesh. But the laws have not changed. […] And then, somebody is fining us. When we ask: ‘Why did you fine us?’, they come to say, ‘This is against the law’. Then we ask our lawyers: ‘What is the record?’ And they tell us: ‘You cannot be

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fined, because in another law, you are allowed to do this. One law says yes, the other no.’” (Modern food retailer E, 01.11.2011)

According to their own statements, modern food retailers decided to refuse to handle the prevailing situation in the usual manner: “What I am going to say now is a negative part of our culture: the tendency here is to ‘manage’ the situation. If someone is trying to fine you, you pay him some taka and feed him a cup of tea to keep him quiet. But we cannot do that. Because in this business we will have these issues all the time. And we cannot let anybody take advantage of that and make money out of our misery.” (Modern food retailer F, 02.11.2011)

Thus, modern food retailers reported to have chosen an approach of cooperation instead of confrontation, with the aim and hope of making a real contribution to a more effective food safety monitoring system in their country: “When the inspectors were fining us, we decided to pay the fine. And to talk. Because the inspectors’ objectives and our objectives are the same.” (Modern food retailer F, 02.11.2011)

In accordance with this approach, BSOA members repeatedly sought conversations with government representatives to show their will to cooperate with the government in its promotion of food safety. At the same time, via corresponding media coverage and personal meetings with high-level policymakers, the BSOA worked on raising the awareness of the unfavorable situation of its industry. At such occasions, the BSOA placed demands, such as for the need of food safety monitoring, already at the production level of the food distribution channels, a better coordination among the government’s various enforcement agencies, and the implementation of a single standard for the detection of non-compliance with food safety regulations (see also Bilkis 2012, n.p.). Government representatives repeatedly affirmed to take note of the BSOA’s concerns and demands, but at the same time appealed to modern food retailers’ responsibility to guarantee food safety, making clear that any case of non-compliance would be prosecuted. The government further pointed to the elaboration of a new food safety law that would provide a remedy to the current problems in the country’s food safety enforcement and monitoring system (see also Financial Express 2012, n.p.; The Daily Star 2012b, n.p.). As the desk research on the latest developments in Bangladesh’s food retail sector revealed, the new Food Safety Law was passed in October 2013. The law replaced the Pure Food Ordinance of 1959 and called for a central food safety

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authority to coordinate the promotion and monitoring of the law’s implementation (Alam 2013b, n.p.). While the government worked on the establishment of the authority, local media coverage kept showing a familiar picture: managers of various supermarket outlets in Dhaka were reported to have been fined by the mobile courts of several authorities for selling adulterated or expired food (e.g. Daily Sun 2014, n.p.). The modern food retailers, in turn, accused the mobile courts to lack coordination in their operations, and of arbitrarily imposing fines without specifying the respective infringements or giving the modern food retailers a chance to defend themselves. The representatives of said authorities assured the modern food retailers that they would address these problems, and further pointed to the single authority to be established according to the Food Safety Law of 2013, which would then be in charge of elaborating consistent food safety standards, and the coordination and monitoring of their implementation (The Daily Star 2014, n.p). In February 2015, said authority, the Bangladesh Food Safety Authority (BFSA), commenced its operation. Since then, a 30 member-strong coordination committee has been in charge of coordinating the food safety activities among all authorities and organizations directly or indirectly involved in the country’s food safety enforcement and monitoring system (Bangladesh Food Safety Authority 2018, n.p.). However, it seems that the situation for the modern food retailers has not significantly improved, and that the above-described problems persist. In December 2015, the supermarket chains Agora and Meena Bazar were reported to be fined by a Dhaka South City Corporation mobile court for having stored adulterated and stale food, as well as items that had already passed their expiration dates (The Independent 2015, n.p.). In May 2016, BFSA’s mobile court imposed two years of imprisonment and fines on the managers of an Agora and a Meena Bazar outlet for keeping stale fish, meat, and other expired food in their outlets. One week later, on May 15, 2016, the BSOA proclaimed a one-day supermarket strike all across the country in order to protest the “harassment through implementation of discriminatory policy and misuse of law” (The Daily Star 2016a, n.p.). In its corresponding press release, as so many times before, the BSOA stressed the supermarket industry’s efforts to promote food safety, and, once again, affirmed its genuine will and interest to partner with the government in this regard. The association further required the government to monitor food safety not only on the retail, but also on the production and supply levels, and to ensure that inspections would be based on scientific food safety tests. While the BFSA representative defended the necessity and work of food security inspection forces, he also acknowledged that the tests

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applied showed some dissimilarities, and asserted that BFSA would standardize the tests promptly (The Daily Star 2016b, n.p.). Notwithstanding their protests, Bangladesh’s modern food retailers hardly seem to have found rest recently. In December 2017, Agora’s chairman and BSOA president was sentenced to two years in prison and given a fine after authorities found adulterated ghee in two cases at one of Agora’s outlets in Dhaka back in 2008. While one of the two ghee producers, both of them BSTI-certified, confessed the adulteration and was consequently fined, the other producer was released for lack of evidence (bdnews24 2017, n.p.). In May 2018, a Dhaka Metropolitan Police mobile court fined Meena Bazar for selling juice without BSTI permission (The Independent 2018, n.p.). To date, Bangladesh’s modern food retailers call for the proper coordination of the numerous government food safety inspection agencies, the opportunity to defend themselves, and the necessity to also prevent malpractice at the producers’ and the import level (Mala 2018, n.p.; Mahmud 2018, n.p.). In parallel, modern food retailers are continuing their efforts to (re)gain and foster the public’s trust. In this context, particularly supermarket chain Shwapno seems to have been very active in the recent past. In 2017, Shwapno announced that it was the first retail organization in South Asia to operate in accordance with Global G.A.P., an internationally renowned standard for safe and sustainable agriculture (Shwapno 2017, n.p.). The venture has not only released several informational videos on food safety on its Facebook page, but in cooperation with reputable newspaper Prothom Alo, has also organized round tables on food safety with high-profile participants from BFSA, the Dhaka Chamber of Commerce and Industry, the FAO and USAID (Prothom Alo 2018, n.p.; The Daily Star 2018 n.p.). Despite these efforts, in May 2018, Shwapno was reported to have been fined for selling expired food products, manipulating weights and prices, and storing food products in unhygienic conditions at one of its outlets in Dhaka (New Age 2018, n.p.). In a news conference following the raid, Shwapno’s executive director refuted the accusations and made clear that Shwapno would have no other choice than to have go out of businesses if such kinds of harassment continued (bdnews24 2018, n.p.). However, so far, this point seems not yet to have been reached. In August 2018, Shwapno launched “Shuddo,” its new brand of chemical-free vegetables. Similar to Meena Bazar’s approach of connection producers and consumers, at the occasion of the brand’s launch, Shwapno started the “Meet the Farmer” campaign, where customers were encouraged to get to know Shwapno’s farmers personally (ACI Limited 2018a, n.p.).

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Import Duties on Supermarket Equipment Given the early stage of modern food retail evolution in Bangladesh, the country does not feature its own manufacturing industry for supermarket equipment. Thus, just as formerly with supermarkets in other countries, store equipment, such as cabinets, display counters and chilling facilities, have to be imported from abroad. At the time the fieldwork for this thesis was conducted, the modern food retailers interviewed reported to have had to pay 107 percent duty for imported store equipment, which would have added significantly to the already high entry costs of modern food retail, and thus not only discourage supermarket owners from expanding their ventures, but also deterring entrepreneurs from entering the modern food retail business at all (see also Financial Express 2012, n.p.): “It is very difficult to establish your own refrigerated transportation system for 10 or 15 stores because of the high import duties. You cannot hardly afford it. This means, it will take you lots of time to break even. […] Other businesses do not even have to pay such taxes. This pushes our prices over the market prices and discourages our customers. This makes it so much harder for us to compete.” (Modern food retailer M, 20.09.2012)

Referring to other industries that only have to pay a maximum of 5 percent import duty, in the spring of 2013, BSOA representatives thus urged the National Board of Revenue to withdraw the import duty on equipment for supermarkets (Financial Express 2013, n.p.; New Age 2013, n.p.). And indeed, the inquiry was shown to be relatively successful, as for fiscal year 2013–2014, the Bangladeshi government proposed the full exemption of the 30 percent supplementary duty on store equipment for all VAT-registered supermarkets (Saha 2013a, n.p.; Jahan 2013). However, the long-term nature of this achievement remains to be seen, as duty rates tend to change almost annually in line with the government’s budget. A look at the media reports of the recent past shows that the issue of high import duties on supermarket equipment remains an issue of concern. To date, Bangladesh’s modern food retailers are struggling to lower the duty further from 65 percent to 5 percent (e.g. Dhaka Tribune 2016, n.p.; Mahmud 2018, n.p.).

9.2.1.5 Generally Challenging Business Environment As already proven by the history of supermarkets in other countries, in comparison to traditional food retail, modern food retail is a capital- and knowhow-intensive business with considerable barriers to entry. Efficient modern food retailing not only requires comprehensive know-how of corresponding management practices, but also goes along with high initial investments, e.g. for

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permissions or store equipment, which are followed by considerable running expenses such as space rent, salaries and maintenance costs. Not least, successful modern food retail depends on certain preconditions such as adequate infrastructure, be it a reliable electricity supply, safe transportation routes and closed cold chains, or preceding or parallel developments at upstream stages along the food distribution chain, such as a mature food processing, production and a packaging industry. In addition to these sector-specific barriers to entry, supermarket founders interviewed reported of general hurdles for the private sector in Bangladesh. Or, as stated by one of the modern food retailers: “Doing business in Bangladesh is difficult” (Modern food retailer H, 27.08.2012)

And indeed, Bangladesh can regularly be found in the lower ranks of the Ease of Doing Business Index.10 In 2013, Bangladesh ranked 129th rank out of 183 economies. According to the Index, Bangladesh’s major business obstacles range from inadequate access to finance to the country’s poor infrastructure, above all the lack of reliable power and gas supply, and to the absence of good transportation networks. Governmental bureaucracy works inefficiently and slowly, and the inadequate and non-transparent legal and judicial system leaves significant room for corruption. Not least, Bangladesh’s political situation is still considered as unstable, and the country’s confrontational politics (see chapter 7) tend to erupt in continual violent general strikes (hartals)11 (The International Bank for Reconstruction and Development & The World Bank 2013, p. 6 ff; Rahman & Rashid 2018, p. 91 ff). Just as other entrepreneurs, Bangladesh’s modern food

10 The Ease of Doing Business Index is an annual report that presents quantitative indicators on business regulation and the protection of property rights. The higher the ranking, the more conducive a country’s regulatory environment is to operating business. 11 The term “hartal” is derived from Gujarati and can be translated with “closing down shops” or “locking doors” (United Nations Development Programme 2005, p. 15). While hartals originally presented an essential instrument of Mahatma Gandhi’s non-violent resistance in the course of India’s struggle for independence (see chapter 7), today, hartals in Bangladesh can be understood as “the temporary suspension of work in business premises, offices and educational institutions and movement of vehicular traffic nationally, regionally or locally as a mark of protest against actual or perceived grievances called by a political party or parties or other demand groups” (United Nations Development Programme 2005, p. 16). Critical voices, however, observe contemporary general strikes in Bangladesh to have transformed into “a wholesale replacement for democratic checks and balances” (Sattar 2013, n.p.), with severe consequences for the country’s economy, and society.

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retailers face considerable difficulties in sustaining themselves and growing in such business environment. The challenge begins right from the first step: in particular, founders of smaller supermarkets reported of the difficulties they had in finding an adequate bank loan to set up their ventures. And even major supermarket chain Agora sought financial resources to further develop its business. The chain finally received support from a UK development finance institution, which believed Agora’s business model was making an important contribution to the country’s development, and recognized the fact that: “businesses in developing countries struggle to find the investment they need to grow, particularly in [politically unstable] countries like Bangladesh” (Business Innovation Facility 2012, n.p.).

Another challenge for modern food retailers lies in finding an adequate location for the future outlet. As outlined in subchapter 3.2, the selection of the appropriate store location is a key element in a venture’s retail mix. Modern food retailers in Dhaka stated that they attach great importance to a store’s visibility and accessibility from the main roads, its proximity to where target customers live, and sufficient space for warehouses, cold stores and customer parking facilities. Given the high construction density and real estate costs in Bangladesh’s capital, such sites are, however, hard to find. The prevailing bureaucracy poses another significant barrier, and modern food retailers spoke of waiting periods of more than one year for all of the necessary permissions and licenses to open a new store. In view of these constraints, modern food retailers found themselves trapped in a vicious circle: “Due to this situation, we cannot open up stores. When we cannot open stores, we cannot drive volume. When we cannot drive volume, we cannot get direct supply. All this prevents us from exploiting the full potential of the superstores.” (Modern food retailer N, 25.09.2012)

In addition to that, various modern food retailers expressed feeling disadvantaged in comparison to traditional food retailers: “Most of them don’t have a trade license. So they are not accountable to the government. They don’t pay income taxes. They don’t pay VAT. It is likely that they are using electricity at the domestic rate. So they have all those advantages, and still we have to compete with them.” (Modern food retailer H, 27.08.2012)

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While the managers of the larger supermarket chains interviewed showed a certain confidence in being able to somehow cope with these hurdles, some owners of smaller supermarkets, in particular single-outlet managers, expressed serious worries regarding the future of their ventures. According to their statements, they felt squeezed between the more powerful and resourceful major supermarket chains, and the low-cost operations of kacha bazars and mudir dokans. This would make it difficult for small players to amortize the high initial investments, and the following considerable operating expenses, e.g. for salaries, credit card commissions, VAT, or power supply. Not least, other than larger ventures, managers of small ventures did not see the scope for compensating losses from other outlets or business branches. By the time the field research for this thesis was conducted, these unfavorable conditions had already made several owners of smaller supermarkets give up their businesses, or sell their outlets to lager competitors. It is therefore not surprising that some of the remaining small entrepreneurs showed no motivation to expand their businesses (anymore). The manager of a small chain with two outlets even admitted: “I got into this business after my retirement. If I had known before how tough it is, I would have never stepped into this.” (Modern food retailer H, 27.08.2012)

In this already challenging business environment, Bangladesh’s political volatility and confrontational politics are further aggravating factors, as the manager of a food factory explained: “In our country we have this sad tradition that our two governing parties are in constant conflict. They follow the pattern of: ‘I am blaming you, you are blaming me.’ But there is no long-term view, no vision. Governments come to power and go away. And the decisions and policies of one government will not be followed by the next government. And that way we have spent – how many? – 15 to 20 years now. That’s the democracy we have passed through.” (Food manufacturer B, 26.10.2011)

The impact of the country’s political instability on private business showed once again in 2013, when “the ghosts of 1971” (Al Jazeera 2013, n.p.) (see also chapter 7) reemerged. In February 2013, the assistant secretary-general of the political party Jamaat-e-Islami (“Islamic Gathering”) was sentenced to life in prison for the severe war crimes he had committed in the course of the Bangladesh

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Liberation War in 1971.12 The verdict was followed by the protests of hundreds of thousands of people who gathered at Shahbag Chottor, an intersection in the heart of Dhaka, to claim the convict to be sentenced to death instead of imprisonment. It did not take too long until the initially peaceful “Shahbag movement” grew into a series of demonstrations and counterdemonstrations, which, in combination with numerous hartals, led to severe and bloody clashes between the opposing parties, leaving numerous people dead and injured (see also Anam 2013, n.p.). Just as many other business sectors, Bangladesh’s supermarket industry painfully felt the consequences of this situation. Local media saw the “superstores bleed over political chaos” (Saha 2013b, n.p.), as security concerns caused customers to prefer to spend as little time as possible on the streets, and to do their shopping at nearby neighborhood mudir dokans and kacha bazars, instead of frequenting the often more distant supermarkets. The repeated blockades and strikes further led to product unavailability, as suppliers could not deliver their goods on time, or at all. Modern food retailers reported seeing their sales drop by over 50 percent and raised serious concerns that their businesses were about to collapse. In view of this situation, BSOA members urged the two main political parties Awami League and BNP to immediately take the necessary measures to end the political crisis, and to ensure a peaceful business environment (Saha 2013b, n.p.; Hasan 2013, n.p.). As the desk research on the latest developments in Bangladesh’s food retail revealed, the above-described business environment and its consequences for modern food retailers do not seem to have improved in the recent past. In 2018, Bangladesh was ranked 177th out of 190 economies. Among the eight South Asian countries, the country is thus only ahead of Afghanistan, which is ranked 183th . According to the corresponding report, it takes entrepreneurs 404 days to get an electricity connection and 244 days to register property, which is significantly higher than the South Asian and global averages (The International Bank for Reconstruction and Development & The World Bank 2018, p. 2 ff). In addition to that, in view of the bloody unrests of 2013, and “one of the most violent elections in the country’s history” in 2014 (The Guardian 2014, n.p.), observers expect domestic and local investors’ confidence in the country’s stability to remain shuttered (World Bank 2018a, p. 35). As already outlined in the previous subchapters, 12 As outlined in chapter 7, following Bangladesh’s independence, the Collaborator’s Tribunal

had declared a general amnesty for collaborators with the Pakistani military. The tide, however, turned when the Awami League won a landslide victory in the general election of 2008. In the course of its election campaign, the Awami League had made the pledge to set up a tribunal to prosecute the war criminals of 1971. After its establishment in 2010, The International Crimes Tribunal started the gathering of evidence and hearing testimonies against the accused.

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the country’s modern food retailers continue to struggle with unfavorable governmental regulations, and the costs of launching a supermarket outlet are reported to be at least four times as much as in other countries in the region, e.g. Sri Lanka or Indonesia (Mala 2018, n.p.). As for the specific case of Dhaka, the problem of the scarcity of commercial space even seems to have become aggravated (IDLC 2017, p. 19). Not only has Dhaka’s planning authority RAJUK increased the fees to convert land in Dhaka’s upscale areas from residential to non-residential by 750 percent in the recent past. In the course of the last three years, RAJUK has further carried out “relentless and rampant” (Mahmud 2018, n.p.) evictions of unauthorized business establishments in Dhaka’s upscale residential areas. Beforehand, business association leaders and apex urban planners had voiced sharp criticism in relation to the plan. They pointed to the fact that the respective businesses had once been established under RAJUK’s watch without any intervention, and that a thorough concept would be needed in order to cushion the job losses the evictions would cause. Notwithstanding these objections, RAJUK demolished or shut down numerous businesses in Uttara, Gulshan, and Dhanmondi. Besides small shops, and even hospitals and private universities, several supermarket outlets fell victim to these actions. The evictions caused more than 1,000 people to lose their businesses and livelihoods, and approximately 20,000 students their places of study (The Daily Star 2015b, n.p.; Mahmud 2016, n.p.; Mahmud 2018, n.p.). The modern food retailers affected also lost a decisive competitive advantage in terms of store location in proximity to their customers.

9.2.1.6 Absence of Foreign Direct Investment As became clear in subchapter 5.2.2.2, the surge in foreign direct investments has been one of the key drivers for the considerable growth of the supermarket industry in many countries of the Global South from the early 1990s onward: transnational ventures entered the emerging markets with considerable financial resources, profound know-how, and up-to-date technology. In many countries, in the early stages, or even in anticipation of the entry of transnational competitors, domestic supermarket chains had already worked hard on strengthening their own competitiveness. Together with these “second mover responses” by domestic food retailers, FDI had given modern food retail in many countries of the Global South a considerable boost. As for the case of Bangladesh, it can be stated that the country’s modern food retail industry is to date (IDLC 2017, p. 16) a “homemade” development, which has been inspired, though not initiated or spurred by transnational food retail ventures. However, studies on business opportunities for foreign ventures in

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Bangladesh’s consumer good markets, as well as the country’s food production and retail industry (e.g. van Gorp et al. 2013; Hussain & Leishman 2013; Munir, Muehlstein & Nauhbar 2015) may be interpreted as hints that the developments in Bangladesh’s food retail sector are not going unnoticed abroad. Likewise, the modern food retailers interviewed reported on approaches by foreign transnational supermarket chains, e.g. from the US, Western Europe, Singapore, and Thailand, and apparently exploratory talks seem to be going on (Mamun & Afrin 2015, n.p.). While the author’s interview requests with representatives of transnational supermarket chains on their prospective expansion strategies in Bangladesh were rejected due to the confidentiality of this information (see subchapter 8.2.1.1), some of the modern food retailers interviewed reported that the market entry by foreign competitors is so far deterred by the population’s comparably low purchasing power, the country’s unfavorable business environment, its significant infrastructural deficits, and political instability. In view of these conditions, transnational modern food retailers so far seem to apply a wait-and-see approach: “I personally have some correspondence with Wal-Mart. And they said they don’t have any intention to go to Bangladesh at the moment. In fact, as everyone else, they carry out studies on the local bottlenecks and hurdles I just talked about.” (Modern food retailer H, 27.08.2012)

However, the modern food retailers interviewed did not doubt that foreign supermarket chains would eventually enter the Bangladeshi market, and in this context perceived themselves as the pioneers providing the necessary ground. Overall, the modern food retailers interviewed claimed to welcome transnational supermarket chains as a significant boost to the development of the country’s modern food retail industry. In response to the question of how they perceived the idea of transnational competitors entering the market, several interviewees showed little to no concern, as they believed Bangladesh’s modern food retail market to still be big enough to support many more players without getting into tough competition. Not least, transnational ventures would give the local modern food retail industry’s growth a considerable boost, which would allow Bangladeshi society and government to finally witness supermarkets’ real merits. Given the still suboptimal environment for modern food retail in Bangladesh, interviewees expected transnational food retailers to use franchises or joint ventures rather than make greenfield investments as initial market entry strategies:

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“Their business policies cannot 100 percent be fulfilled here. So, I don’t think that big brand companies will sacrifice their image by investing here under their own brand names. Maybe they enter through the back door, and invest in our local ventures.” (Modern food retailer G, 26.08.2012)

Most of the modern food retailers interviewed considered this scenario to be positive, as they were convinced that experience, resources, and the good reputation of foreign food retail chains would help their own businesses grow. The manager of a small supermarket chain even took another perspective by seeing the entry of transnationals as a good opportunity to profitably sell his own venture: “Personally speaking, I am not bothered with big transnational companies coming to our country. Business is all about making money in the end, so if you can make money by getting sold to a big company like Tesco or Wal-Mart, why not? If Tesco comes and buys me, I will be more than happy to sell because Tesco will offer me a very good price. And then I go and seek another business.” (Modern food retailer J, 06.09.2012)

In particular, the managers of the major supermarket chains, however, showed a high commitment toward their own businesses, and made clear that they would not allow transnational supermarket chains to drive their Bangladeshi counterparts out of the market: “Everything we do is still on a small, small, small scale. But they [the transnational supermarket chains] will come with a lot of financial strength, with a lot of management knowledge, with a lot of infrastructure and facilities. We, who built this platform over the last 10 to 15 years, we could be knocked out in only one second. So, we will have to have our say about how they come in. If they get preferential treatment by the government, if they come and throw us in the Bay of Bengal, we will definitely have to create a campaign and resist them. But if they come to shake hands and grow together with us, they are very welcome, and our people, our farmers, our country, everybody will develop.” (Modern food retailer E, 01.11.2011, emphasis by author)

In this context, modern food retailers interviewed frequently referred to the role model of Bangladesh’s neighbor country India, where domestic modern food retailers had successfully defended their interests against transnational competitors (see also subchapter 5.2.4). However, at present it is still too early to predict whether and if yes to what extent Bangladesh may also witness this kind of “indigenous retailer resistance” (Coe & Wrigley 2007, p. 350 f) in the future. Given the above-described unfavorable business environment, compared to other peers in the region, the country is still lagging behind when it comes to foreign direct investment (The International Bank for Reconstruction and Development & The

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World Bank 2018, p. 127 ff). Nonetheless, the Bangladeshi government is working on the improvement of conditions for domestic and foreign direct investment. In May 2017, for instance, the government passed the so-called “One-Stop Service Act,” with the goal of facilitating bureaucratic procedures for investors by providing several services under one roof (World Bank 2018a, p. 35). However, from the current point of view, it seems as if Bangladesh, other than countries in the earlier waves of the so-called “supermarket revolution,” is not about to expect a tidal wave of foreign direct investment in modern food retail in the foreseeable future.

9.2.2

Hindering Factors to Modern Food Retail on the Demand Side

As experiences from other countries have shown, customers’ limited buying power may pose considerable barriers to the expansion of supermarkets. The same holds true for the case of supermarkets in Bangladesh and its capital city Dhaka. But even in regard to the more affluent proportion of inhabitants, customers’ reservations toward supermarkets represent a challenge that should not be underestimated, as the following two subchapters show.

9.2.2.1 Customers’ Overall Limited Buying Power As described in subchapter 9.1.1, Bangladesh’s socioeconomic development has played a pivotal role in setting the initial impulse for the evolution of the country’s supermarket industry. In the course of the past years, Bangladesh has continued its strong development trajectory. From 2011 on, the country has shown an annual GDP growth rate of between 6 and 7.3 percent (World Bank 2018b, n.p.). Between 2010 and 2016, the poverty headcount rate was reduced from 31.5 percent to 24.3 percent (Bangladesh Bureau of Statistics 2017, p. xvii). In July 2015, six years earlier than envisaged in the government’s “Vision 2021,” Bangladesh achieved its goal of joining the group of lower middle-income countries (Bhattacharya & Khan 2018, p. 1). However, Bangladesh’s remarkable ongoing socioeconomic development and corresponding poverty reduction should not obscure the fact that the United Nations still list the country as a least developed country (LDC13 ), and that poverty 13 LDCs are defined as low-income countries with severe structural impediments to sustainable development, considered as highly vulnerable to economic and environmental shocks and to have low levels of human assets (United Nations 2013, n.p.).

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reduction “remains as the major challenge of development in Bangladesh” (Bangladesh Bureau of Statistics 2017, p. 1). Almost one in four people are still living in poverty, and 12.9 percent of the population below the national extreme poverty line (Bangladesh Bureau of Statistics 2017, p. xvii). While the national poverty rate fell in both rural and urban areas, the speed of reduction has been much slower in urban Bangladesh, above all because of slower rates of poverty reduction in Dhaka and increasing poverty in Chittagong. With 7.7 percent of the urban population living in extreme poverty in 2010, and 7.6 percent in 2016, it can be stated that there was no progress in reducing extreme poverty in urban areas. Given Bangladesh’s ongoing urbanization between 2010 and 2016, with 3.3 million people there are now even more people living in extreme poverty in urban Bangladesh compared to 3 million in 2010 (Bangladesh Bureau of Statistics 2017, p. 41; World Bank 2018a, p. 34). It further has to be considered, that Bangladesh’s urbanites spend on average nearly 43 percent of their total expenditures on food and beverages (Bangladesh Bureau of Statistics 2017, p. 25).Thus, even though the modern food retailers interviewed spoke of Bangladesh as “theoretically a 150 million [person] market,”14 with supermarkets’ current focus on the upper-income customer segments and their manifold challenges on the supply side, at least at this point in time, modern food retailers in Bangladesh are thus far beyond the reach of the vast majority of the country’s population (see also Ali & Faroque 2017, p. 295) (Figure 9.5). This has also been reflected in the results of a food consumption survey from 2009, which was conducted among 205 households in nine selected slums in Dhaka in the course of this study’s preceding research project: even though 91 percent of the respondents believed food offered at supermarkets to be of superior quality compared to food from mudir dokans, kacha bazars, mobile hawkers, or the Public Food Distribution System (PFDS),15 97 percent of respondents stated that they had never purchased food from supermarkets. The reasons indicated for the avoidance of supermarkets are not unknown, as they mirror the factors leading to what researchers in former times had referred to as poor consumers’ “low outreach” (see subchapter 5.1.1.2), which tend to go along with shopping from modern food retailers in low-income countries at early stages of supermarket diffusion. Therefore, 96 percent of the respondents thought food at supermarkets 14 The number of 150 million refers to Bangladesh’s population in 2012. Bangladesh’s population in 2018 was more than 161 million (World Bank 2018c, n.p.). 15 Instituted as a rationing system for food from 1943 onward, today, Bangladesh’s PFDS ensures food security by providing food grains to poor households, supplies food grains during emergencies, and strives for the encouragement of domestic food grain production and the stabilization of market prices (Banerjee et al. 2014, p. 161).

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Figure 9.5 Socioeconomic Disparities in Dhaka. The embassy district Gulshan and the slum of Korail. Source: Own picture (05.09.2012)

was very expensive compared to food from traditional food retailers, and 97 percent stated that supermarkets were too far away from their homes to be easily frequented. Not least, given their irregular and insecure low incomes, the vast majority of the respondents, namely 87 percent, maintained close relationships with “their” local food vendors to secure access to groceries on credit. In view of these monetary and spatial constraints, the vast majority of the respondents preferred to purchase their daily food needs from the cheaper traditional food retailers or the PFDS in close vicinity to their households (Bohle & Keck 2010, p. 16; Keck & Etzold 2013, p. 86).

9.2.2.2 Customers’ Reservations toward Modern Food Retail While shopping at supermarkets is, as described above, accompanied by too many constraints for poor consumers, modern food retailers reported a considerable “mental barrier” even among the targeted segments of high(er)-income consumers: “Because supershops are air-conditioned, because there are all those nice facilities, people think: ‘From the moment I go in here, I will be slaughtered.’ This is a challenge we all face together. To bring the people in.” (Modern food retailer F, 02.11.2011)

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According to the modern food retailers interviewed, the government’s decision to increase the VAT rate from 2 to 4 percent on essential products sold at supermarkets has further lowered supermarkets’ price competitiveness, and made customers even less likely to shop at modern food retail establishments, in particular among (lower) middle-class consumers: “Unfortunately, the imposition of 4 percent VAT has built a negative notion of superstores in the consumers’ minds. Many of them are not aware that perishable products don’t even fall under the VAT policy.” (Modern food retailer M, 20.09.2012) “The lower middle-class people don’t want to come to our shops. They don’t want to pay four taka extra for every 100 taka purchase.” (Modern food retailer H, 27.08.2012)

As a consequence, traditional food retail formats such as kacha bazars and mudir dokans are still serious competitors for supermarkets in Dhaka, not only for the low-income customer, but also the middle-class consumer segment (see also Ali & Faroque 2017, p. 297). Given the supermarkets’ ongoing constraints in their supply chains, this not only holds true in terms of price, but also in terms of product variety, quality, and freshness, in particular in the case of perishable products. Not least, traditional food retailers also enjoy a considerable locational advantage compared to modern food retailers: “You will see a small shop at every apartment building. People in our country don’t feel like going to the supermarket – it is not a necessity as yet. Because you can get everything at the doorstep level.” (Food manufacturer B, 26.10.2011)

As already previously described, a consumer’s decision to frequent a certain retailer depends on a bundle of several factors, such as product price and quality, or shopping convenience, e.g. in terms of a retailer’s accessibility, its product assortment, or the store’s ambience. All of these factors finally feed into an individual consumer’s cost-benefit considerations. A study on the shopping behavior of middle-class consumers in Dhaka, which was carried out in the course of this study’s partnering project, found middle-class consumers to be very frugal with the household’s limited economic resources. At the same time, the respondents showed a high concern for the family members’ health and contentment, and therefore responded to attaching great importance to the safety and quality of food. In light of the only scarce leisure opportunities in the hectic everyday life of Bangladesh’s capital, the respondents perceived engagement with international cuisine, and the intake of foreign dishes and convenience food as a major alternative to

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spend their free time. Taking all of those factors into account, middle-class consumers carefully weighed where to purchase which products to achieve the highest benefit in relation to costs (Keck 2015, p. 306 ff). Against this background, it is no surprise that the phenomenon of supermarket “light users,” as are already known from other country contexts (see subchapter 5.2.3), can also be observed in Bangladesh and its capital: “In particular, lower middle-class consumers may purchase one or two products only from our supershops. They buy mostly ready-made meals, snacks, and cosmetics, and prefer to make their other purchases elsewhere.” (Modern food retailer C, 25.10.2011)

However, modern food retailers are well aware that the conquest of the Bangladeshi (lower) middle-class is a significant precondition for the further development of a prosperous supermarket industry: “So far, the upper class and upper-middle-class are our targets. But we are gradually looking how to provide the lower middle-class people the service they ask for. Only then will we be able to further develop this industry.” (Modern food retailer H, 27.08.2012)

And the manager of a single-outlet thought even one step further: “First we will have to be able to procure good products at small prices. Then we can gradually even go for the poor.” (Modern food retailer B, 24.10.2011)

Bangladesh’s modern food retailers apply manifold measures in order to increase their sales volume, say the number of customers and the average amount spent per purchase. To this end, they not only make strong efforts to overcome the constraints on the supply side, but also to mitigate their countrymen’s “supermarket phobia” (Modern food retailer E, 01.11.2011), and to encourage their potential customers to dare to set their feet in the outlets. In this context, advertisement, discounts, and public relations are among the most important and most often applied instruments. At the occasion of BSOA’s celebration of one decade of supermarkets in Bangladesh, for instance, Dhaka’s modern food retailers publicly announced a special two-month discount sale at all of the BSOA’s member stores. And the manager of a two-outlet store recalled: “When I started my business, the beginning was very tough. Because my location is in Mirpur, a middle and lower middle-class area. Only a few customers came to my shop. So, we started a lot of activities, we spread leaflets and banners, we had tomtom

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carts,16 festoons and lots of miking, we gave discounts. Finally, lot of people were encouraged to come to my shop.” (Modern food retailer G, 26.08.2012)

In a similar fashion, modern food retailers organize festive events, be it on the occasion of the launch of a new store, upcoming national and religious holidays, or themed weeks, such as Agora’s “Thai Products Festival,” which was even covered by the media and inaugurated by Agora’s managing director and the Thai ambassador in Bangladesh. Customers are provided with quantity and other discounts, and invited to participate in sweepstakes, whose lucky winners are then awarded in solemn prize ceremonies. Even though modern food retailers are reported to compare their own prices for essential products with the prices at nearby kacha bazars, pricing is only one, and not the major competitive tool. Generally speaking, modern food retailers place their emphasis on a different tactic: “Some supermarkets are offering products at very cheap prices, even lower than at the kacha bazars. They do this because they want to shift customers to the supermarkets. However, this is not our pricing strategy. We think this will happen gradually. We are offering the whole package: you get the convenience, you get the hygiene, like for perishables the better cold chain and everything. But there is a price for it. We really cannot sell things at kacha bazar price. As soon as customers learn about the advantages of the superstores, they will come over here.” (Modern food retailer M, 20.09.2012) “We have to make them [the customers] understand why they should come to our stores. We are not expensive. That’s a wrong perception. We have the same prices as traditional shops. And if we are more expensive, we have a good reason for it.” (Modern food retailer F, 02.11.2011)

Modern food retailers make strong efforts to convey these “good reasons” to their (potential) customers. In addition to advertisements in newspapers, and radio and TV spots, it is particularly the (major) supermarket chains that maintain their own websites and make extensive use of social media such as Facebook and YouTube to praise their virtues. Here, consumers are not only informed on new products in the assortment, upcoming special offers and events, but are also provided with beauty care advices, nutritional recommendations, and recipe suggestions. Appealing pictures and even fancy videos inform customers on the nutritional value of food items, and invite the customers to prepare traditional Bangladeshi dishes and foreign delicacies such as Mongolian fried beef, Afghani Biriyani, or Greek salad and moussaka—corresponding ready-made shopping lists included. In particular, 16 Historic

horse carts, as can still be seen in Old Dhaka.

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customers of the major supermarket chains may further register for electronic newsletters or mobile phone information messages, and address their questions and inquiries to consumer hotlines. In their efforts to draw the customers to their stores, the modern food retailers interviewed reported to place particular hope in the younger generation: “About 70 percent in our country are under 35 years. So there is a big market. This is why we focus on the younger generation. My father did not use to go to the superstores, but I am going. If I am going, my son is also going, and one day his son will also go.” (Modern food retailer A, 21.10.2011)

In their quest to foster and expand their customer base, modern food retailers in Dhaka can already be observed to have entered into a struggle for competitive advantages with traditional food retailers. Here, just as in other country contexts (see subchapter 5.2.3), price, product quality and safety, as well as shopping convenience for customers, have emerged as the most contested fields in this regard. In praising the virtues of modern food retail, Bangladesh’s modern food retailers consequently don’t miss in drawing a sharp contrast with traditional food retail: “As big companies we are always in the focus of the government enforcement agencies. We are complying with every single regulation, be it tax regulations, be it labor regulations – everything. But those [traditional] vendors, they don’t want to take any responsibility!” (Modern food retailer M, 20.09.2012) “At the superstores, you get better value for your money! If you go to the wet market, they will cheat you. With us you get the right quality, the right weight, the right hygiene, you get after sales service, and you get convenience. You get all these things on top for the same price, because if those people at the wet markets cheat you in weight or whatever, in fact it will cost you the same.” (Modern food retailer J, 06.09.2012)

BSOA representatives tirelessly make sure that this message is also heard publicly: in compliance with its working strategy, the BSOA maintains firstrate contacts with local key media—namely the Bengali-speaking newspapers “Prothom Alo,” “Samakal,” “Kaler Kantho,” as well as the English-speaking newspapers “The Daily Star,” and the “Financial Express”—in order “to ensure steady and positive news telecast on the supermarket industry, its activities and achievements” (Bangladesh Supermarket Owners’ Association 2012, p. 11). Or, as the manager of one of the major supermarket chains explained:

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“We want the people to know about the convenience, the quality, the hygiene we offer, the cold chain we maintain. So we try to be in the media whenever it’s possible.” (Modern food retailer M, 20.09.2012)

Consequently, the media not only report on the grand openings of new supermarket outlets, or announce supermarkets’ special offers and events. Newspapers also feature lifestyle articles on the merits of modern food shopping, reports on supermarkets’ measures for supply chain improvement, their fights for food quality and safety, or their role as generators of employment and the government’s tax revenue. BSOA representatives can frequently be found to be interviewed by print media, and even on national TV talk shows where they praise the amenities of supermarkets for consumers and the Bangladeshi society and economy as a whole. At such occasions, they do not miss comparing their clean and modern stores to the “noisy,” “hazardous,” and “unplanned” wet markets, where food is sold in a “dirty environment” in “unhygienic conditions,” and where in particular female customers would have to fear harassment (see e.g. Parvez 2009, n.p.; Munni 2010b, n.p.; The Daily Star 2012a, n.p.). Modern food retailers also apply such comparisons in their advertisement activities, even though they do it in an often-subtler way. Here, the communication of hygiene, food quality and safety standards, or the emphasis of the deployment of up-to-date technology such as digital scales or electronic cash registers, serve as important strategic instruments of product and service differentiation, in particular against traditional food retailers. In addition to the above-described advertisement and public relations activities, several modern food retailers also reported counting on the effect of persuasive personal efforts in their private environment: “I asked one of my friends, who is very educated: ‘Why do you buy meat at the wet market?’ He said: ‘If I buy it at your shop, I have to pay 10 or 15 taka extra.’ So I told him: ‘There are two things you have to think about: Number one is quality and number two is quantity. You do not want to pay 10 taka extra, but by buying at the kacha bazar, you have lost already 20 taka. Because they give you neither the right quality, nor the right weight.’ In that way, I try to convince the people to come to my shop.” (Modern food retailer H, 27.08.2012) “My neighbor is a bank manager. I asked him whether he has seen my supershop. He said ‘Yes, but I don’t go there because it is too expensive.’ I asked him: ‘how can you know if you have never gone there?’ And he said: ‘you know, there is AC and all that, it must be very expensive.’ I said: ‘Ok, tomorrow you come to my shop and check the fresh items.’ The next day he called me and said: ‘You are right, your shop is very nice and the prices are very reasonable.’ Now he is my customer.” (Modern food retailer G, 26.08.2012)

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Being well aware of the public visibility of their ventures and brand names, just as in the US and elsewhere (see subchapter 4.1), modern food retailers in Dhaka and Bangladesh are also applying public relations to foster their image as good corporate citizens, which do not only assume responsibility for their customers, but also for their business partners and the Bangladeshi society as a whole. Besides modern food retailers’ efforts to promote and ensure food safety and quality, the public thus learns about supermarkets’ voluntary activities, such as the free provision of cleaning agents for the proper management of the residuals after the ritual slaughtering in the course of the Islamic Feast of Sacrifice,17 or supermarket owners’ voluntarily not following the common practice of making extra profit by raising the prices of essential food at Ramadan18 . Following the brutal rape and killing of student Jyoti Singh Pandey in Delhi, India, in December 2012, supermarket employees formed a human chain to protest violence against women. In April 2013, supermarkets provided the victims and rescue forces of the Savar tragedy19 with food, drinking water, and medicine, and set up donation boxes in their outlets to collect money for the injured and dependents. To date, modern food retailers participate in activities that sometimes go far beyond their core businesses to demonstrate their sense of responsibility for society and environment. Carefully designed graphics and videos on the ventures’ social media channels inform the viewers of the correct behavior in case of earthquakes, or the prevention of Dengue Fever infections. Shwapno has recently implemented vocational training programs for “gifted children” with autism (ACI Limited 2017, n.p.), and Meena Bazar sensitizes its customers to the need for waste reduction in order to “build a better, sustainable future for all of us” (Meena Bazar 2017, n.p.). Notwithstanding modern food retailers’ positive selfpresentation and corresponding activities, as will be outlined in subchapter 11.2, 17 Eid ul-Adha is one of the most important Islamic holidays and commemorates the willingness of Ibrahim (also known as Abraham) to follow Allah’s command to sacrifice his son. During the feast of Eid ul-Adha, Muslims re-enact Ibrahim’s obedience by sacrificing an animal, such as a cow or goat. The family will then eat about a third of the meat, a third goes to friends and relatives, and the remaining third is donated to the poor and needy. 18 Ramadan is the ninth month of the Islamic calendar and is observed by Muslims as a month of fasting to commemorate the first revelation of the Quran to prophet Muhammad. From dawn until sunset, among others, Muslims refrain from consuming food and drinking liquids. After sunset, fasting is broken with a feast, the so-called Iftar (Arabic for “fast-breaking”). 19 On April 24, 2013, Bangladesh was shaken by the “worst ever mishap in its garment industry” (World Health Organization 2013, n.p.), when a faulty eight-story commercial building named “Rana Plaza,” including a garment factory, collapsed in suburban Savar, Dhaka. Nearly 1,200 people perished in the rubble, while about 2,500 people were somewhat severely injured and/or left traumatized.

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the actual societal and environmental implications of supermarkets “from farm to fork” in Bangladesh and its capital city still deserve a closer, and a possibly more neutral examination. Parallel to their advertisement and public relations activities, modern food retailers continuously work on the improvement of their retail strategies, and the provision of an inviting, comfortable and trustworthy shopping environment for the whole family (see also Figure 9.6), where customers can not only efficiently run all of their errands under one single roof, but may also “escape the hassle and bad air outside” (Modern food retailer H, 27.08.2012).

Figure 9.6 Impressions from Supermarket Outlets in Dhaka. From left to right: A billboard at the entrance of a supermarket outlet; a tasting booth; shopping assistants waiting to serve the customers; cashier with electronic cash register. Source: Own pictures (October 2011 to September 2012)

While the specific facilities and services depend on the individual venture’s resources and retail strategy, the ideal-typical example of shopping at supermarkets at Dhaka is as follows: the customers may leave their cars at guarded parking

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areas, and their children with the child care service at the entrance. If necessary, they may then withdraw money from an indoor ATM and proceed to pick up their shopping basket or to take a trolley. They then stroll along the air-conditioned, well-illuminated and signposted aisles with their shelves, refrigerators and freezers. Nicely decorated showcases not only present the available products in an appealing manner, but also create the illusion of a clean and hygienic version of traditional market stalls. Customers at the meat and fish counters are served by shopping assistants wearing plastic gloves, aprons and hygienic caps, while information boards and clearly visible displayed formalin detection kits foster the supermarket’s promise of assuring food quality and safety. Information labels draw the customers’ attention to special offers, and tasting booths invite them to discover and try new products. Numerous shopping assistants—in some outlets, the author even witnessed one assistant per aisle—attentively wait to give advice, and to weigh and pack the customers’ purchases. At the checkout, customers can collect loyalty points on their customer cards. Thanks to some supermarkets’ cooperation with renowned credit card providers, customers using a cashless payment method can enjoy further benefits such as discounts on their purchases. In some outlets, benches or cafés invite customers to relax and take a little rest after shopping is done. Being well aware of the limited time resources and the sensitivities of some of their customers, in addition to this on-site shopping experience, several modern food retailers also provide their customers with the option of online or phone orders, and home delivery: “High-income customers come around, but not on a regular basis. They don’t have enough time and it’s also an issue of reputation. They don’t want to come to the outlet by themselves. They prefer home delivery, or they will send their drivers or maids with a shopping list.” (Modern food retailer K, 14.09.2012)

Modern food retailers strive for the continuous improvement of their products and services in accordance with their customers’ demands. To this end, modern food retailers not only observe and imitate the activities of other ventures on-site or abroad, but also systematically monitor and adapt their own retail strategies. In addition to feedback forms and customer hotlines, modern food retailers considered their shop assistants’ exchange with customers as an important source of information. The author’s review of the supermarkets’ Facebook pages further revealed that in recent years, Facebook’s dialogue functions have emerged as an important means for modern food retailers to interact and stay in contact with their customers.

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Indeed, modern food retailers’ efforts to make shopping at their stores as comfortable and pleasant as possible are seeming to pay off. In view of Dhaka’s limited cultural and recreational facilities, the process of shopping at supermarkets seems to no longer be only a necessity, but has become an enjoyable pastime for the more affluent proportion of Dhaka’s population (Auer 2012, n.p.). With their neat and clean appearance, supermarkets have become “places of desire” for those who wish to live out a “modern” way of life in the middle of a “non-modern” society (Keck 2015, p. 311). Some observers described these developments with a certain ironic undertone: “One of the ways to be sure that you belong to the upwardly mobile, urbanite class in Dhaka, is to do all your shopping from the fancy supermarkets that have sprung all over town. With their aisles full of products arranged according to genre – grains and noodles, spices, biscuits and chocolates, hair and skin – the illusion of being in a modern, western city is created. Plus, nothing beats the allure and convenience of getting everything under one roof instead of the hop, skip and jump routine in the smelly, grimy, wet bazaars, trying to find each item.” (Amin 2011, n.p.)

Notwithstanding repeated affirmations that modern food retail is “no more a rich man’s club,” (LankaBangla Securities Ltd. 2013, n.p.) critical voices have already expressed the perception of modern food retail as another discriminating social and spatial line of demarcation between the different layers of Dhaka’s society (Auer 2012, n.p.). As the results of this study’s partnering project on the shopping behavior of Dhaka’s middle-income consumers revealed, this perception might not be too far from the truth: in the course of the study, respondents spoke up against providing access to supermarkets for everyone, as this might impair the quality of goods and the shopping environment, and make modern food retail thus lose its “purity” (Keck 2015, p. 314). However, in view of all of the previously-described constraints for the development of their industry, Bangladesh’s modern food retailers currently show no intention of adjusting their retail strategies to the needs and capacities of lowerincome customers, or even the poor. Rather the opposite, modern food retailers have recently seemed to be making strong efforts to further exploit the potential of what observers perceive as one of the “world’s fastest-growing populations of middle- and upper-class households” with a strong affinity for brands and comfortable shopping opportunities (Munir, Muehlstein & Nauhbar 2015, n.p.). Thus, Meena Bazar is reported to have diversified its retail strategy and to have launched two premium outlets in Dhaka’s high-income wards Gulshan and Banani. Here, under the label “Gourmet Bazar,” the chain sells exclusive and organic food to the premium slice of the consumer base (IDLC 2017, p. 19). According

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to the chain’s own statements, both outlets are very well received by the customers (Future Startup 2018, n.p.). Following the several drawbacks on the way toward extensive expansion (see also subchapter 9.2.1.1), under its new executive director, Shwapno has reconsidered its brand positioning, products, and services, and redefined its retail strategy accordingly. Instead of further counting on the comparably small superette-like outlets for price sensitive customers in their immediate neighborhoods, Shwapno now locates its outlets along Dhaka’s high streets, and has upgraded its product assortment, interior, and services (Future Startup 2018, n.p.). According to Shwapno’s management, this new strategy is more profitable, and has even allowed the venture to become Bangladesh’s market leader and “the most recognized and trusted retail name in the country” (ACI Limited 2018b, n.p.). Bangladesh’s third major modern food retailer Agora has recently announced its plans to make huge investments with the aim of doubling its currently 16 outlets countrywide within the next two years (Chakma 2018a, n.p.). Analogous to developments in other countries, an increasingly important role of e-commerce in food retail can already be observed in Bangladesh as well. In 2017, supermarket chain Meena Bazar launched the beta testing mode of its e-store “meenaclick.com” and in that way strives for an “integrated retail experience through both online and offline shopping by 2019” (Future Startup 2018, n.p.). In a similar fashion, supermarket chain Shwapno has recently launched its e-commerce site (IDLC 2017, p. 12). With major supermarket chains investing not only in the development and expansion of their brick-and-mortar outlets, but also the establishment of their e-commerce divisions, they are entering into direct competition with an emerging generation of new entrepreneurs. Thus, in the course of the past five years, several domestic startups such as Direct Fresh, Chaldal.com, Dokani or Khaas Food have been launched to provide Bangladesh’s wealthier urbanite relief from their increasingly hectic lives by offering them the opportunity to order fresh and packaged food, or personal care and household items comfortably and conveniently online or via mobile apps. In view of the widespread use of high-speed mobile internet services, Dhaka’s severe traffic congestion, and the dearth of commercial space, observers expect e-commerce, also in food retail, to significantly gain importance in the years to come (Munir, Muehlstein & Nauhbar 2015, n.p.; IDLC 2017, p. 4; Karim & Qi 2018, n.p.).

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As became clear from previous chapters, all over the world, the emergence of supermarkets has been accompanied by considerable structural changes in the respective local food retail markets. Originally, these traditional food retail landscapes tended to be shaped by atomistic businesses with small inventories and narrow, sometimes even single product line assortments of undifferentiated commodities. Traditional food retail was mainly directed toward a small customer base from the immediate neighborhood and based on a low sales volume. With an increasing spatial diffusion of supermarkets and their corresponding conquest of product categories and (lower-income) customer segments, a decline of traditional food retail formats set in. The formerly atomistic market structure then gave way to an oligopolistic market form with only a few dominant players. While competition in the atomistic food retail markets has only played a rather negligible role, the emerging oligopolistic markets were highly-competitive. Thus, modern food retailers not only competed with one another, but also with the traditional food retailers. In the course of this process, product prices and quality, as well as shopping convenience for customers emerged as the most contested fields of competition. With Bangladesh’s capital city Dhaka witnessing an emergence in modern food retail, it raises the question about supermarkets’ impact on traditional food retail, and the potential future development of the food retail market on-site. The research questions of this thesis in this regard were consequently (see also subchapter 1.2): • Do kacha bazar vendors in Dhaka already feel competitive pressure from supermarkets, and, if so, in what way and to what extent?

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_10

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• How do kacha bazar vendors picture their future in view of emerging modern food retail? • Do kacha bazar vendors in Dhaka (proactively) react to competitive pressures from modern food retailers, and, if so, by what means? To answer these questions, an explorative interview-based survey was conducted among 122 vendors in the five major product categories red meat, staples, fish, chicken, and vegetables at seven permanent kacha bazars in Dhaka (see Figure 10.1 and Figure 8.1).

Figure 10.1 Kacha Bazar Vendors in Dhaka. From left to right: Kacha bazars’ five major product categories meat, staples, fish, chicken, and vegetables. Source: Own pictures (August/September 2012)

The underlying interview guideline was divided into four sections, which, on the one hand, were developed based on the researcher’s literature review and preliminary results from her first fieldwork in Dhaka. On the other hand, the questions

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were deliberately formed in an open way to make sure that knowledge gained through literature and document analysis, as well as interviews with modern food retailers, would not blind the author from factors of particular importance for the case of kacha bazar vendors in Dhaka. The interview guideline was structured as follows (see also annex 2): • The first section of the guideline aimed for an understanding of the general background of the respective vendor’s business activities at the kacha bazar. Thus, at the beginning of each interview, each respondent was asked to indicate how long they had already been doing business in this particular kacha bazar. That way it was assured that the interviewed vendors would have sufficient selling experience on-site to notice a potential difference in their businesses prior to and after the emergence of supermarkets in their vicinity. • Section two referred to the kacha bazar vendors’ procurement activities, and aimed at gaining a basic knowledge on the vendors’ suppliers, and the vendors’ reasons for the preference of these suppliers. • In order to avoid biases of the interviewed kacha bazar vendors, and that way possibly overlook other relevant factors influencing the vendors’ businesses, the interviewers refused to initially directly address the role and potential impact of supermarkets. Instead, in section three of the interview guideline, each of the interviewed kacha bazar vendors was asked if they had felt general significant changes in their business (e.g. in regard to monthly turnover and profit, or customer structure) in the course of the past few years. If the respondent affirmed the question, they were further asked to describe these changes and to explain the influencing factors. Respondents who already mentioned supermarkets at this point in the interview were then led directly to the questions regarding the vendors’ perception of supermarkets as competitors in guideline section four. • If the vendors interviewed had not yet already mentioned supermarkets in guideline section three, the interviewers then drew the vendors’ attention to the questions dealing with competitive pressures from supermarkets in section four. While the issue of emerging supermarkets in Bangladesh and its capital is also gradually but steadily awakening interest in scientific research, the aspect of supermarkets’ impact on traditional food retail seems to be a neglected field of study up to the present day. At least in the course of her desk research on the latest developments in food retail in Dhaka, the author of this thesis neither came across any scientific publications, nor any media reports on the subject matter.

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Thus, the findings of the exploratory survey among Dhaka’s kacha bazar vendors remain the only source of information in regard to supermarkets’ impact on traditional food retail in Dhaka. The relevant findings will be described in the following subchapters.

10.1

General Influencing Factors on Kacha Bazar Vendors’ Businesses

The vendors interviewed had between 5 and 39 years of selling experience at the respective kacha bazar. Only twelve out of the 122 vendors interviewed stated that they had formerly worked at another vending site. The reasons indicated for the change to the current kacha bazar were manifold: e.g., two vendors had formerly worked at kacha bazars in their home villages, and then sought their fortune in the capital. Another vendor had moved to the current kacha bazar because it is closer to his home. One vendor reported that the kacha bazar where he had worked before had been demolished. However, none of the twelve vendors stated to have changed the venue because of increasing competitive pressure from supermarkets. In terms of product procurement, the kacha bazar vendors interviewed stated that they rely on Dhaka’s major wholesale markets. In reply to the question for the reasons of this practice, the vendors above all highlighted the wholesale markets’ offering of a wide range and variety of good quality products, and their long-standing, trusting relationships with specific wholesalers on-site, which would allow them to procure products at “good prices.” Depending on the product category, the most frequently named wholesale markets in Dhaka were: • • • • •

Chicken: Kaptan Bazar, Kawran Bazar, Kochukhet Market, Tejgaon Fish: Jatrabari, Kawran Bazar, Merul Badda Fish Market Red meat: Gabtoli Cattle Market, Jatrabari, Kaptan Bazar, Kawran Bazar Vegetables: Jatrabari, Kawran Bazar Staples: Chowk Bazar, Kawran Bazar, Kochukhet Market, Krishi Market, Shem Bazar

A closer look at the above-named wholesale markets shows certain overlaps, such as Kawran Bazar, Krishi Market, or Babu Bazar, with the wholesale markets that are also frequented by modern food retailers as described in subchapter 9.2.1.1. In regard to the general question of whether they had felt any significant changes in their businesses over the past five years, respondents at Gulshan 2

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Kacha Bazar reported a rise in stall rents of nearly two thirds in the course of the recent past, which would considerably curtail their profits. Furthermore, the numerous food scandals and the corresponding public debates in recent years proved to not have left the kacha bazars untouched. With the goal of combatting food adulteration and contamination, in October 2009, with financial assistance from Standard Bank Limited and Social Islami Bank Limited, the Federation of Bangladesh Chambers of Commerce (FBCCI) launched the project “Formalin and poisonous carbide-free ideal market” in Dhaka. In the course of the project, selected kacha bazars, among them also Gulshan 2 Kacha Bazar and Mohammadpur’s Town Hall Kacha Bazar from the author’s sample, were provided with formalin detection kits in order to check incoming goods for contamination, and to, at best, declare the markets checked as “formalin free” later on (New Age 2012, n.p.; Saha 2012, n.p.). However, nearly right from the beginning, FBCCI’s initiative was not free of criticism. In view of the unmanageable number of kacha bazars in Bangladesh and its capital, the project was criticized for its impracticability and accused of being a “cosmetic operation” (Matin 2013, n.p.). And indeed, there were hints that the supposedly formalin-free kacha bazars were monitored in a rather lax way (Mahmud 2013, n.p.). Nonetheless, among all five product categories considered in the author’s survey, fish vendors were shown to be the most affected by the public discussions on food safety and the municipality’s corresponding countermeasures. Thus, several fish vendors stated that customers would refrain from buying from them as soon as a new case of formalin-tainted fish was made public. Vendors of other products, on the other hand, shared the impression that the detection of formalin at only one stall at a kacha bazar would often lead to the customers’ avoidance of the entire market.

10.2

Modern Food Retailers’ Competitive Pressure on Kacha Bazars

Regarding kacha bazar vendors’ perception of supermarkets, a little less than half of all respondents, namely 59 out of a total of 122, stated not feeling any competitive pressure from modern food retailers. Most of these 59 vendors did not even mention supermarkets before the interviewers explicitly brought up the subject in section four of the interview guidelines. The vendors, however, who indicated already feeling supermarkets’ competitive pressure presented another picture: here, all 63 vendors already mentioned the impact of supermarkets on their businesses right at the beginning of interview guideline section three and the

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corresponding general question on perceived significant changes in the vendors’ businesses over the past five years. Kacha bazar vendors who reported to already feel supermarkets’ competitive pressure on their businesses stated to see in particular a decline in what they referred to as their “VIP,” “best” or “big” customers, say affluent customers who formerly used to buy from them in comparably large amounts. However, none of these respondents knew of a fellow vendor, who had abandoned his or her business because it could not withstand supermarkets’ competitive pressure anymore. Differentiated according to the vending sites, Banani Kacha Bazar and Gulshan 2 Kacha Bazar were the most affected wet markets in the survey’s sample. Here, all 20 vendors across all five product categories who were interviewed at each of the two market sites, respectively, unanimously reported feeling the competitive pressure from the modern food retailers in their vicinity: “The situation is bad now compared to former times. Just look around you, we are encircled by supermarkets! And our sales are decreasing because the customers prefer to go there.” (Vegetable vendor 1 at Gulshan 2 Kacha Bazar, 04.09.2012)

At Gulshan 1 Kacha Bazar, at least 13 out of the in total 20 interviewed vendors reported to have lost customers to the supermarkets. Vendors’ businesses at Badda Notun Kacha Bazar, in turn, showed to be the least affected among the sample. Here, only one staple vendor stated to have lost some of his customers to supermarkets. The remaining 19 interviewees at this market, however, were quite indifferent to their modern counterparts. Hence, interviewed vendors believed customers’ income in Badda to be too low, and supermarkets to be too far away, to consider modern food retailers as competitors. Notwithstanding the survey’s explorative character, these results might suggest that supermarkets’ competitive pressure and impact on kitchen markets seem to depend on the income level of the customer base and the supermarket density in the kacha bazar’s trade area. Thus, in Gulshan 1 and 2, as well as in Banani, with their large proportion of high-income national and foreign residents and a high density of supermarkets in kacha bazars’ trade areas, kacha bazar vendors showed to be most affected. To a slighter extent, the extent of modern food retail’s competitive pressure also seems to depend on the product category. Thus, among all five product categories considered in the survey, vendors of dry and (semi-)processed products—regardless of their location—most frequently stated to have lost customers to supermarkets. The interviewees explained this with supermarkets’ economies of scales in staple food procurement, which would not only provide them with

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the scope to significantly reduce prices, but also to attract customers with special offers.

10.2.1 Perceived Competitive Advantages of Modern Food Retailers In reply to the question why customers might prefer to make their purchases from supermarkets instead of kacha bazars, the vendors interviewed, such as those cited below, believed the shopping environment to be by far the main force to attract customers to supermarkets: “Customers don’t come to the kitchen markets because of their bad environment. Here, it smells bad with all the live chicken, and it’s dirty. But supermarkets have a good environment. They are clean, they have AC, and they are nicely decorated. Everything there is computerized. So people prefer to shop at supermarkets, even though the price is higher.” (Chicken vendor 1 at Banani Kacha Bazar, 24.06.2013)

When describing the deficiencies of kacha bazars in terms of shopping environment, the vendors interviewed interestingly used similar terms as the modern food retailers would apply to depict their supposedly “backward” traditional counterparts in the course of their PR and advertisement activities. Thus, the kacha bazar vendors themselves spoke of the “dirty,” “smelly,” and “crowded” setting at their markets. Several of the vendors further expressed their discontent regarding the market sites’ unreliable maintenance and cleaning services, infrastructure deficits such as poor ventilation and drainage systems, and the narrow and crammed passages. A meat vendor at Gulshan 2 Kacha Bazar put the issue in a rather suggestive question: “You have been to the supermarkets. Those places are really comfortable, right? Now just look around you here. Where would you like to shop?” (Meat vendor 1 at Gulshan 2 Kacha Bazar, 04.09.2012, emphasis by author)

Several vendors believed supermarkets’ offer of one-stop shopping to be another important competitive advantage, as customers would conveniently find everything to cover their daily needs in only one single place. Kacha bazar vendors in Gulshan 1 and Gulshan 2, as well as in Banani, perceived the now poor accessibility of their markets to be a further decisive competitive disadvantage compared to supermarkets with their own parking facilities and their proximity to main roads. Thus, with the goal of alleviating traffic congestion, the

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municipality had officially banned rickshaws from the roads that directly lead to the market sites. Since the implementation of this measure, kacha bazar vendors saw their customers face difficulties in reaching the market site, or to find a nearby parking space. After shopping, customers would further have to struggle to carry their purchases to the more distant rickshaw and car parking sites. In addition to shopping environment and convenience, some kacha bazar vendors further believed supermarkets’ “clever marketing techniques” (Staple vendor 2 at Gulshan 2 Kacha Bazar, 04.09.2012) such as intensive advertisement or special offers, themed weeks, and sweepstakes to be another important competitive advantage. However, several of the vendors also had a very critical view on these aspects, as the following exemplary statements show: “The supermarkets sell some products at low prices to attract the customers. On the other hand, they increase the prices of lots of other products. Actually, this is cheating.” (Staple vendor 3 at Banani Kacha Bazar, 24.06.2013) “Supermarkets have nice equipment and light to make their products look better. But in the end, the reality is: they procure from the same sources as we do, but they have a different marketing. Some of the supermarkets even buy their products from us!” (Vegetable vendor 2 at Gulshan 2 Kacha Bazar, 04.09.2012)

Statements such as the last one further confirmed what the author had already previously learned from her interviews with modern food retailers in Dhaka: given the deficiencies and immaturity of their own supply chains, modern food retailers indeed (partly) rely on product procurement not only from traditional wholesalers, but even from traditional food retailers. Numerous kacha bazar vendors confirmed this practice, not without a sometimes ironic or even critical undertone: “Supermarkets procure products only in small amounts, they don’t have enough suppliers to cover their whole demand. And these educated people [the supermarket managers] do not feel comfortable at the wholesale markets; they don’t know how to handle the wholesalers. So they rather prefer to procure their products from us. They come here, choose the best products, and sell them at their stores. That’s easier for them.” (Vegetable vendor 3 at Gulshan 2 Kacha Bazar, 04.09.2012) “Some of the supermarkets around here buy their meat from us. We slaughter the goats and cut them up for them, then the supermarkets collect the meat and sell it at their stores at a higher price. They sell the same meat as we do, but once our meat passes through the supermarket door, it becomes ‘good’ meat.” (Meat vendor 2 at Gulshan 2 Kacha Bazar, 04.09.2012).

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10.2.2 Perceived Competitive Advantages of Kacha Bazars In response to the question of why customers might prefer kacha bazars as destination for their food purchases, in particular, the vendors of perishable products, such as fish, meat, and vegetables, showed great pride and self-confidence regarding the quality and freshness of their products, and believed these product attributes to be their most important competitive advantages compared to supermarkets, where many products would be offered only in frozen or chilled form, and be on display for several days. However, some interviewees also brought up the downside of this aspect: “The supermarkets have all this electrical equipment like freezers, and refrigerators, so they can store products for a period of time and continue to sell from stock. Our financial resources are limited, so we don’t have any storage facilities. We have to purchase and sell our products the same day. As a result, our loss from wastage is high.” (Vegetable vendor 3 at Banani Kacha Bazar, 24.06.2013)

Several kacha bazar vendors further highlighted their benefits in terms of product variety and price. Thus, kacha bazars would not only offer a huge variety of vegetables, but customers would also have the opportunity to compare prices and product quality among the various stalls, and to bargain with the vendors. Many vendors also pointed to their markets’ immediate proximity to the customers’ homes, or to their trusting personal relationships with long-term customers as their additional assets compared to the more distant supermarkets with their rather anonymous atmosphere. Not least, some vendors further believed the comparably formal setting of supermarkets to be an intimidating and impeding factor, in particular for lower-income customers: “The salespersons in supermarkets speak a formal language. Normal or poor people don’t understand their way of talking. That’s why they don’t like to shop at supermarkets.” (Chicken vendor 3 at Badda Notun Kacha Bazar, 17.07.2013)

10.2.3 Expected Future of Dhaka’s Food Retail Markets In response to the question of how they picture the future of supermarkets in Dhaka, none of the interviewed vendors believed supermarkets would not grow any further. Some vendors, such as the two cited below, gave rather indecisive answers by stating that they would not know or have an opinion on that issue:

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“How can I know? I focus on my business and do not bother for other peoples’ businesses.” (Vegetable vendor 1 at Badda Notun Kacha Bazar, 17.07.2013) “I don’t know. Only the owners of supermarkets can say about their future.” (Chicken vendor 2 at Town Hall Kacha Bazar, 03.09.2012)

Most of the interviewees, however, expected supermarkets in Dhaka to spread out further in the years to come. In response to the question of what impact this development might have on kacha bazars, these vendors had different opinions. A few vendors indicated that they could not yet assess what consequences this might have for their businesses. Some vendors opined that, in view of Dhaka’s growing population, there would still be enough scope for both traditional and modern food retailers. Other vendors believed both food retail formats to be complementary sources of food, which could thus coexist without supermarkets necessarily having to eliminate kacha bazars. Two vendors even surprisingly stated to support the further expansion of modern food retail: “Supermarkets should increase. They provide customers with many facilities.” (Fish vendor 3 at Banani Kacha Bazar, 24.06.2013) “We need more supermarkets to fulfill the demands of our excessive population. It will be better for the people and better for balanced prices.” (Meat vendor 3 at Badda Notun Kacha Bazar, 17.07.2013)

However, in the course of the interviews it did not become clear whether these respondents actually held this view, or whether they had answered in a (supposedly) socially desirable way. The by far most often expressed opinion, however, was that with supermarkets being a shopping destination for only the affluent part of the society, modern food retail would not become a serious threat to the kacha bazar vendors’ businesses. Thus, vendors holding this view certainly expected their sales volume and profits to decline to a certain extent, but still be enough to survive and therefore not to worry about the future. Even several of the vendors who had stated that they already feel the impact of supermarkets on their businesses shared this view. However, not all of the vendors interviewed were equally confident. Some of them expressed hope that supermarkets would not expand any further, as the existence of kacha bazars, including their own businesses, would otherwise be in great danger. A few vendors even drew a very pessimistic scenario in which kitchen markets could finally be completely squeezed out of the Dhaka food retail market and disappear forever.

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In view of such a scenario, some vendors expressed the wish that the government should take measures to protect the future of kitchen markets in Bangladesh’s capital. However, by the time the interviews were conducted, Dhaka’s kacha bazar vendors neither took concerted and systematic measures like protests or lobbying activities to achieve this goal, nor was there any indication that they would do so in the near future. Some vendors, such as the one cited below, even communicated their doubts that they could actually do anything to defend themselves against modern food retailers’ competitive pressures: “The supermarket managers are businessmen who know how to handle everything. So we cannot fight them or do anything.” (Vegetable vendor 1 at Gulshan 2 Kacha Bazar, 04.09.2012)

Generally speaking, the vendors interviewed showed considerable restraint in applying (proactive) measures to enhance their competitiveness toward their modern counterparts. Indicating to their different target customer groups and corresponding modus operandi, in particular, those vendors who had not expressed feeling supermarkets’ competitive pressure had a quite indifferent attitude toward modern food retailers. Three vendors, like the subsequently quoted, showed a great belief and trust in destiny, which kept them from taking adaptive measures: “Why should I worry? Rizq1 is determined by God. My business will not be affected by the supermarkets.” (Meat vendor 2 at Gulshan 1 Kacha Bazar, 02.07.2013)

Various kacha bazar vendors believed that investments in their greatest weak spot—the poor shopping environment—could be sufficient to defy the modern food retailers and to retain or even regain their customers. However, only at one out of the total seven kacha bazars considered in the survey, the vendors2 interviewed reported to have already joined forces to repeatedly urge market management to renovate the market building, and that way improve the market’s shopping environment. According to the vendors, despite its promises to the contrary, however, market management has never taken any action. While market management representatives even agreed to be interviewed by the author, they

1 Here,

the Arabic term “Rizq” can be translated as “sustenance,” and is applied to connote means of livelihood and further production, which in Islam are believed to be determined for every individual by God. 2 Here, the author complies with the interviewees’ requests not to mention the name of the respective kacha bazar.

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held the view that they cared well for the vendors’ interests, but that there was no need for renovations or other activities to make the market site more appealing. In the few other cases where vendors reported of adaptive measures toward supermarkets, the focus was on individual low cost and easy-to-implement activities. Given their limited financial resources, the interviewees showed a certain restraint toward investment in technical equipment, such as showcases, fridges, or ventilators. For the same reason, none of the kacha bazar vendors interviewed applied strategic advertisement or public relations in order to better compete with their modern counterparts. Instead, some vendors reported about their stronger efforts to tout their wares in the direct encounters with their clients: “I try to motivate my customers: I tell them that they can see the live chicken here. At the supermarkets, everything is frozen and you never know for how long it has already been on display.” (Chicken vendor 1 at Banani Kacha Bazar, 24.06.2013)

Several vendors started to enhance their efforts to maintain and foster good relationships with their customers by being friendly and attentive, and by trying to make shopping for their customers as comfortable as possible. In particular in Gulshan 1, Gulshan 2, and Banani, this included vendors and their assistants carrying their customers’ purchases to the now more-distant rickshaw sites or car parking spaces. Even though some vendors reported attempts to slightly lower prices for some of their products, the majority of the interviewees hardly saw the scope of attracting customers with appealing discounts.

Summary of Key Findings and Implications for Further Research and Practice

11

For a fairly long time, food retail markets in the Global South have been shaped by a multitude of small traditional entrepreneurs such as wet market vendors, small-scale grocers, and street hawkers. Since the early 1990s, the emergence and expansion of modern food retail has implied a sometimes-drastic change from this formerly atomistic to a rather oligopolistic market structure. Given the continued, yet often significantly reduced existence of small traditional ventures, these restructured markets are now characterized by the dominance of a comparably small number of large and powerful national and transnational supermarkets. From the early 2000s onward, these restructuring processes and their corresponding development relevance have been attracting the interest of researchers, policymakers, and development practitioners as well. While this has resulted in some “pioneering” countries in this process, in particular in Latin America and Southeast Asia, already receiving considerable attention, “latecomer” countries such as Bangladesh have so far rather remained neglected “blind spots” on the research map. Even though a more recent rise in academic publications on modern food retail in Bangladesh may be interpreted as awakening interest in the subject matter, the emergence and expansion of modern food retail on-site, and in particular its structural implications for the local food retail markets, have remained under-researched issues to this day. Against this background, this thesis represents a descriptive case study, which aimed to provide an empirically grounded picture of the actual structural changes in the food retail market under the influence of emerging supermarkets in Bangladesh’s capital city, Dhaka. To this end, this thesis focused on the two perspectives of supermarkets, and of kacha bazars, as an exemplary traditional food retail format.

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 C. Hobelsberger, Restructuring of Food Retail Markets in Countries of the Global South, Handel und Internationales Marketing Retailing and International Marketing, https://doi.org/10.1007/978-3-658-33315-7_11

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On the level of supermarkets, the thesis strived to answer the following questions: • When, why, and how did supermarkets emerge in Dhaka? • How did supermarkets in Dhaka develop over time, and what does the current supermarket landscape look like? • What development potential and what constraints do supermarkets currently face in Dhaka, and what strategies do supermarket managers implement in order to exploit this potential or overcome these constraints, respectively? On the level of kacha bazars, the focus was on the following questions: • Do kacha bazar vendors in Dhaka already feel the competitive pressure from supermarkets, and if yes, how and to what extent? • How do kacha bazar vendors picture the future of Dhaka’s food retail market in view of emerging modern food retail? • Do kacha bazar vendors in Dhaka (proactively) react to competitive pressures from modern food retailers, and if yes, by what means? To answer these questions, the thesis took an approach of triangulating document analysis with empirical fieldwork in the form of semi-structured expert interviews and qualitative observations on-site in Dhaka. The previous theoretical and conceptional reflections on markets and market structures, the fundamentals of retail management and modern food retail, and modern food retail’s emergence and structural impact on food retail markets in the eastern and western hemisphere provided an important basis for the generation and the assessment and classification of the empirical results achieved. The following subchapters provide a discussion to summarize the thesis’ key findings, and finally point out the consequent practical implications and need for further research.

11.1

Summary of Key Findings

Traditional food retail in Dhaka and Bangladesh shows many similarities with traditional food retail in other countries prior to the emergence and dominance of supermarkets. Thus, traditional food retail is characterized by countless small individual or family businesses such as grocery shops and roadside stores, kacha bazars, street stalls, and mobile street hawkers offering narrow or

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even single product line assortments with mainly undifferentiated commodities. Product procurement from producer to retailer traditionally takes place via a highly-fragmented, atomistic distribution system with several intermediaries involved. In this atomistic setting, the launch of Dhaka’s first supermarket outlet in September 2000 marked Bangladesh’s entrance into the era of modern food retail. As in many other countries before, socioeconomic development provided an important stimulus for the emergence of modern food retail. Thus, Bangladesh’s considerable annual GDP growth rate in the preceding years had led to an increase in real per capita income and new food shopping and consumption patterns, in particular among the more affluent urban population. Consumers had become not only less price sensitive, but also more oriented toward food quality and safety. A growing number of women starting paid employment, as well as a shrinking average household size, had further led to an increasing lack of time, which was not only reflected in a rising demand for higher shopping convenience, but also in modes of time-saving food preparation and thus an increased consumption of processed and ready-made food. Frequent media coverage of food scandals, public discussions on the increase of widespread diseases, and not least customers’ exposure to global consumption patterns and lifestyles through the media, internet, and stays abroad had further enhanced these trends. Animated by these developments, and by their own personal experiences with modern food retail abroad, in the course of the years following the opening of Dhaka’s first supermarket outlet, further domestic entrepreneurs ventured out to close the perceived gap between newly emerging consumer demands and the actual food supply from traditional food retailers. In their strong efforts to capture the promising and yet untapped business opportunities of modern food retail, Bangladesh’s modern food retailers even envisioned their country emerging as the leader among the latecomer countries of the so-called “supermarket revolution” in the Global South. To this day, Bangladesh’s modern food retail industry is a “homemade” development that does not feature any foreign transnational supermarket chains. Having arisen from quite an euphoric gold-rush atmosphere, modern food retail’s development in recent years has, however, significantly lagged behind the industry representatives’ initial great expectations. Notwithstanding modern food retailers’ considerable achievements in the first decade of their existence and their great efforts to push the development of their industry further forward to the present time, modern food retail is being confronted with considerable hurdles on both the supply and the demand side, some of which even seem to have been aggravated in the recent past.

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On the supply side, the highly-fragmented, atomistic traditional distribution system causes supermarkets difficulties in their product procurement. With modern food retail not yet being a normal feature in the country by far, the industry still suffers from a lack of know-how on modern food retail management techniques and a shortage of skilled labor. Bangladesh’s demanding business environment in combination with unfavorable governmental regulations not only challenges domestic players, but also deters transnational modern food retailers from entering the country, making them apply a wait-and-see approach instead. That way, one of the most important drivers of the so-called “supermarket revolution” in other countries, namely foreign direct investment, has not yet unfolded. On the demand side, supermarkets encounter not only customers’ overall limited buying power, but also reservations toward modern food retail and corresponding shopping practices, even on the level of high(er)-income consumers. The combination of these factors on the supply and the demand side leads somewhat to a vicious cycle: supermarkets can hardly expand to an extent that allows them to achieve the buying power and large-volume purchasing capacity necessary to exercise the required supply chain control to exploit economies of scale to deepen the market segment of affluent consumers, and to also penetrate the lower-income customer segments. As a consequence, modern food retailers are not only still far beyond the reach of the vast majority of the country’s population, but also struggle to maintain and even expand the number of their high(er)-income customers. Bangladesh’s modern food retailers are trying to tackle these challenges with various strategies. Similar to modern food retailers elsewhere, the major supermarket chains in particular have rolled out their own customized procurement systems by establishing direct relationships with preferred suppliers and implementing private standards along their supply chains. Offering staff training courses and even recruiting foreign consultants and stimulating the development of relevant academic curricula at local universities are activities to address knowledge gaps in modern food retail and the lack of skilled labor. With the goal of countering customers’ reservations toward supermarkets and creating loyalty toward their stores, modern food retailers are continuously working to improve their retail strategies, and are applying tools such as advertisement and customer loyalty programs extensively. Via public relations, which are done with the intensive involvement of the relevant local media, modern food retailers are not only differentiating their products and services in sharp contrast to traditional food retailers, but also striving to foster their image as good corporate citizens who make a significant contribution to Bangladesh’s socioeconomic development. On the government and

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authorities’ level, it is particularly the “Bangladesh Supermarket Owners’ Association” that lobbies for supermarkets’ interests and more favorable conditions for modern food retail’s further development. Nonetheless, in the course of modern food retail’s first nearly two decades in Bangladesh, several players have already fallen victim to the prevailing unfavorable conditions. In particular, smaller ventures were and are struggling to survive among the more powerful and resourceful major supermarket chains, and the lowcost operations of traditional food retailers. While some of these smaller ventures could not sustain the pressure and were squeezed out of the market, others became acquisition targets from larger competitors. That way, a certain consolidation in Dhaka’s modern food retail industry can already be observed, and modern food retail is principally shaped by the three major supermarket chains Agora, Meena Bazar, and Shwapno. Even though Dhaka’s modern food retailers are experimenting with different retail strategies, and thus with corresponding outlet sizes, pricing strategies, services, and product assortments, given the challenges described above, it can be stated that supermarkets have not established themselves as shopping destinations for the masses at present. On the contrary, major chain Shwapno’s recent modification of its original retail strategy to be a supermarket “for the common people,” to a supermarket with an upgraded product assortment, interior and services can be interpreted as a signal that the provisional retention of the focus on the more affluent customer segments seems to be more promising at this juncture. Thus, despite modern food retailers’ assertions to the contrary, Dhaka’s supermarkets—in proportion to the total population—currently serve only the tiny niche of comparably affluent customers. It therefore comes as no surprise that supermarkets’ competitive pressure and impact on Dhaka’s traditional kacha bazars is still very limited so far. At least this has been indicated by the results of the exploratory study among vendors at kacha bazars as the exemplary traditional food retail format. The survey revealed that supermarkets’ impact seems to be highest in retail areas with a high density of high(er)-income residents and modern food retailers. To a much smaller extent, supermarkets’ impact also seems to depend on the product category, whereby vendors of perishable products were less affected than staple vendors. One explanation for this might be that supermarkets, through vertical integration and direct sourcing from manufacturers, have already achieved certain competitive advantages in the product category of staples, while this proved to be much more challenging for the case of perishables. Kacha bazar vendors who reported to have already noticed supermarkets’ competitive pressure claimed to have witnessed, in particular, a loss of their affluent customers. Generally speaking, however,

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the kacha bazar vendors interviewed were not too worried about their future, even though the vast majority believed modern food retailers were expanding further. Pointing to their own competitive advantages and the fact that affluent customers made up only a small proportion of their customer base, even the vendors already affected hardly showed (proactive) measures of adaption or even activities of resistance against modern food retailers, as could be observed in other countries. It therefore seems that competition between supermarkets and kacha bazars has been rather unilateral so far. Thus, while modern food retailers are already making strong efforts to differentiate themselves from traditional food retail by publicly praising their virtues, kacha bazar vendors have remained rather passive. Based on the findings of this study, the following preliminary conclusions can therefore be drawn: for almost two decades, an expansion of modern food retail in Bangladesh and its capital city has clearly been under way. In this context, Dhaka, as the country’s capital city and political, economic, and cultural hub, and with its with comparably dense concentration of affluent local and foreign consumers, can be considered the cradle of this development. Here, modern food retail in Bangladesh took root and over the years, expanded to other bigger cities throughout the country. That way, analogous to other countries in the Global South, Bangladesh shows the typical wave patterns of spatial supermarket diffusion within a country. However, even though supermarkets have already become an inherent part of Dhaka’s food retail market, compared to other countries in the Global South, one cannot yet speak of a “supermarket revolution” in Dhaka, and even less in Bangladesh as a whole. In accordance with its assignment to the last geographical wave of modern food retail diffusion in the Global South so far, it can therefore be stated that, with only 1.5 to 2 percent estimated market share, Bangladesh’s supermarket industry is still one of the smallest in the world. With a current estimated market share below 2 percent, compared to roughly 5 percent in 2013, contrary to modern food retailers’ hopes and corresponding predictions, supermarkets’ market share in the capital city Dhaka has not only not grown significantly, but even shrunk to a certain extent. Nonetheless, considered individually, modern food retail in Dhaka already shows certain oligopolistic features. Thus, modern food retail is principally shaped and dominated by the three major players Agora, Meena Bazar, and Shwapno. Furthermore, Dhaka’s modern food retailers show the interdependent behavior typical of players in oligopolistic markets: being competitors on the one hand, modern food retailers pay close attention to the activities of the other supermarkets, which may lead to the emulation of other players’ successful practices, as well as the development of own unique selling points. On the other hand, in particular via the “Bangladesh Supermarket Owners’ Association” as the supermarket

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industry’s most important lobbying body and platform for collaborative learning and knowledge exchange, modern food retailers somewhat behave cooperatively in their quest to develop their industry further and to fight for their common cause. In the overall picture, however, given the numerous considerable hurdles to their further development and expansion, modern food retailers still play too marginal a role to exercise considerable market power in Dhaka’s food retail market. It is for this reason that one cannot yet speak of a notable structural change from an atomistic to a rather oligopolistic market form. The future developments in Dhaka’s food retail market depend on various factors that are still difficult to predict, but deserve further observation. Being based on extensive primary data, the exploratory findings of this thesis on the first nearly two decades of supermarkets in Dhaka and their structural implications for the capital’s food retail market provide a valuable base for further research in a dynamic field that can be assumed to be gaining great importance in the years to come. The following subchapter highlights the research foci and practical implications which, from the author’s point of view, should receive special attention in this regard.

11.2

Implications for Further Research and Practice

As experiences from a multitude of other countries have shown, the restructuring processes in food retail markets that are implied by the emergence and expansion of modern food retail and their effects on other members of the local food distribution channels—be it producers, traditional food retailers, or consumers—can be profound. Similar to the proponents of modern food retail in the decades following World War II, according to their own statements, Bangladesh’s modern food retailers are convinced and highly committed to bringing “positive changes” to all parties in the domestic food distribution channels, not least to the government, and in that way make a significant contribution to the country’s socioeconomic development. So far, initial indications for the case of Bangladesh, and in particular its capital city Dhaka are only just beginning to emerge. The actual specific positive or negative effects of modern food retail on individual actor groups, however, still remain to be seen and will also depend on further developments that have yet to be observed. Consequently, a considerable research agenda looms up ahead. That way, the example of the country of Bangladesh shows that latecomer countries of the last wave of the so-called “supermarket revolution” so far also, or even a

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fortiori, deserve closer attention—even though, as previously indicated, the research interest in the subject matter seems to have already passed its zenith. In this context, further research in Bangladesh should be dedicated to the following aspects. Further Development of Modern Food Retail Obviously, the future implications of emerging supermarkets in Bangladesh and its capital city depend on the further development of the modern food retail industry. Therefore, follow-up research should first and foremost address the question of how and with what success modern food retailers will tackle and overcome the above-described current obstacles and challenges—be it in regard to supply chain deficiencies, unfavorable regulations, or customers’ tendencies toward modern food retail. Attention should thereby also be paid to the emerging field of online food retail. Thus, just as currently in many other parts of the world (see subchapter 4.1), an increase in the importance of e-commerce can also be seen in Bangladesh, and in particular in its capital. Not only have the three major supermarket chains Agora, Meena Bazar and Shwapno recently rolled out corresponding online sales platforms in addition to their brick-and-mortar businesses. In parallel, new players like Direct Fresh, Chaldal, Dokani or Khaas Food have ventured out to conquer this retail channel. With brick-and-mortar food retail in Dhaka being in the focus of this study, this new trend in food retail could only be merely touched upon. The question therefore arises, how and with what effects will it unfold. Modern Food Retail’s Impact on Domestic Producers and Farmers Another important field of research lies in the examination of supermarkets’ actual impact on domestic producers and farmers, and in particular smallholders. Here, Bangladesh’s modern food retailers consider themselves as “change agents” and “silent catalysts” of the domestic agro-food industry, which bring manifold benefits to the various actors involved. And indeed, modern food retailers’ supplier development programs and contractual arrangements give suppliers a chance to achieve higher incomes, and to benefit from knowledge transfer, increased productivity, and access to new markets. On the other hand, asymmetrical power relations can make producers fully dependent on their clients, and, for instance, put them under severe price pressure. Given their still limited buying power, Bangladesh’s modern food retailers to a certain extent currently depend on cooperation with smaller producers and farmers. With the increasing growth and therefore buying power of the supermarket

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industry, however, smallholders are likely to be excluded from modern food retailers’ supply chains, which may result in an undesirable loss of employment and income. This issue likewise deserves consideration. Modern Food Retailers’ Impact on Traditional Intermediaries and Wholesalers Traditional wholesalers not only make an essential contribution to megacity Dhaka’s daily supply of food, but—not least because of their broad network of (intermediary) suppliers—have also shown a remarkable resilience toward disturbances (Keck 2016, p. 192f). Modern food retailers’ activities to modernize procurement systems according to their specific needs may also have considerable effects on the numerous wholesalers and intermediaries that can usually be found along traditional food distribution chains. Thus, in order to ensure lower transaction costs, smoother coordination and better control over products and specifications, supermarket supply chains are typically centralized and short. To this end, suppliers that, from a supermarket’s point of view, fail to create any added value tend to be cut out. While the remaining suppliers have the chance to develop further, to increase their sales and to benefit from a steadier demand, the intermediaries excluded may lose their livelihoods that way. Further research should therefore also consider modern food retailers’ impact on traditional intermediaries and wholesalers. Modern Food Retailers’ Impact on Traditional Food Retailers Evidence from other countries has shown that, at a certain point, the expansion of supermarkets is mirrored by a decline in traditional food retail. As the author’s explorative survey among kacha bazar vendors in Dhaka revealed, with modern food retailers catering to the only small niche of more affluent customers, supermarkets’ competitive pressure and impact on kacha bazars seems to still be very limited so far. The author is not aware of any more recent study on the subject matter, however. It is consequently not possible to make a well-founded statement on supermarkets’ current impact on kacha bazars and the vendors’ corresponding coping strategies. Given the fact that supermarkets in Dhaka have not witnessed a large boost in the past five years since the author’s survey was conducted, it can be assumed that supermarkets’ overall impact on kacha bazars still remains low. This assumption, however, remains to be verified and further investigated in the course of a subsequent large-scale study. Follow-up research should examine supermarkets’ impact on other traditional food retail formats equally, which were not within the scope of the present study. Thus, already in 2012, the first hints were noticed that mudir dokans in close proximity to supermarkets had either vanished or taken adaptive measures in order

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to survive alongside their modern counterparts. Similarly, street vendors were observed to leave out certain neighborhoods that were no longer profitable, as the local customers had switched to supermarkets (Auer 2012, n.p.). Modern Food Retailers’ Impact on Consumers Because of their strong focus on ensuring food safety and quality, Bangladesh’s modern food retailers have a great potential to actually increase these attributes. With efficiency being an elementary component of modern food retailers’ strategies, supermarkets may also make an important contribution to the reduction and stability of food prices. In providing comprehensive information on their products, supermarkets can foster a “consumer literacy” (Altenburg et al. 2016, p. 28), which allows consumers to develop and enhance their health, food safety and quality awareness, and to make more informed decisions about their purchases. Depending on the products and corresponding information provided, supermarkets may positively or negatively influence nutrition that way. On the upside, modern food retail may encourage consumers to diversify their diet and to consume more nutritious foods. In the opposite case, the low-cost provision and heavy promotion of processed food may encourage greater consumption of highcalorie, nutrient-poor food, and thus further contribute to the current problem of widespread diseases such as diabetes, obesity, or hypertension. Further research could therefore delve into the question of whether, to what extent, and under what conditions modern food retailers actually make a contribution to enhanced food safety and quality, lower food prices, or healthy eating habits. Another open question remains in regard to the exclusion of lower-income consumers from supermarkets’ potential benefits. As previously outlined, critical voices already perceive modern food retailers as another discriminating social and spatial line of demarcation between the different social strata in Bangladesh’s society. In the sense of Prahalad’s (2006) “bottom of the pyramid,”1 further research could thus deal with the question of how modern food retail business strategies could be modified in such way as to also allow poor consumers to enjoy lower and more stable food prices, or safer products. Modern Food Retailers’ Environmental Impacts In addition to the rather social potential impacts of modern food retail along the food distribution channel, follow-up research should also cover the issue of 1 Here,

the “bottom of the pyramid” (BOP) refers to the largest but poorest socioeconomic group at the bottom of the world population’s wealth pyramid. Being largely excluded from formal markets, according to Prahalad (2006, p. 21ff), the BOP shows a strong demand for innovative products, services, and technologies.

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its environmental effects. Bangladesh’s supermarkets can already be observed to present themselves as “good corporate citizens,” which among others also take responsibility for environmental issues. This not only manifests itself in product procurement, as for instance through corresponding standards and control of compliance in the case of Meena Bazar’s organic farming activities, but also on the consumer level, e.g. with supermarkets sensitizing their customers as to the need for waste reduction. Consequently, supermarkets in Bangladesh can be important promoters for an enhanced environmental consciousness and corresponding activities. On the other hand, experience with supermarkets in many other countries has shown that modern food retail may also be the instigator of environmental problems. The high use of non-biodegradable packaging materials and extensive food waste are much discussed issues in this regard (e.g. Teller et al. 2018). Furthermore, modern food retailers’ supplier development programs may correlate with the increased use of resources, such as fertilizers, pesticides, or water, as higher productivity levels are required (e.g. Altenburg et al. 2016, p. 30). Not least, offering a broad assortment of products available year-round goes along with the increased national and international transport of goods, which causes higher carbon emissions (e.g. Tidy, Wang & Hall 2016). Here, future research may not only examine the specific case of modern food retail’s environmental effects in Bangladesh, but, based on the numerous experiences from other countries, could also propose and promote solutions as to how to avoid or at least mitigate them early on. The Role of Political Decision Makers in Food Retail Modernization As previously shown, political decision makers play a decisive role in steering not only modern food retail’s expansion within a country, but also corresponding restructuring processes in local food retail markets, and their positive and negative effects for several actor groups along the food distribution channel. For instance, governments may provide incentives for modern food retailers to include smallholder farmers, producers, and processors in their supply chains. In more extreme cases, they can even make supplier development mandatory. Governments may further support the development of efficient, quality infrastructures by defining standards, corresponding monitoring mechanisms, and certification schemes. Not least, governments may enhance the adaptive capacity, and that way the competitiveness of traditional wholesalers and retailers, e.g. via capacity building or investments in infrastructure. As interviews with policymakers and authorities could unfortunately not be realized in the course of the research project underlying this study, the political

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perspective on the emergence and implications of modern food retail in Bangladesh and its capital could only be explored via document analysis and interviews with other experts (see subchapter 8.2). The findings obtained did not provide a clear, and even a rather contradictory picture. On the one hand, policymakers seem to appreciate modern food retailers’ visions and (potential) contributions to Bangladesh’s socioeconomic development. On the other hand, modern food retail seems to have not only been denied the announced support so far, but to even have suffered from unfavorable regulations. At this point, however, it is to be critically noted that the information obtained in the course of this thesis could not be triangulated with original statements from political decision makers and authorities. Thus, policymakers’ motives, actual points of view and long-term visions for the further development of food retail in their country and its capital have remained untapped, while the information obtained might be distorted by the subjective perspective of the available information sources. Here, it also has to be considered that, according to its work strategy, the Bangladesh Supermarket Owners’ Association maintains good contacts with important local media. Subsequent studies should therefore explicitly consider the political perspective on modern food retail in Bangladesh via primary sources. The Role of Foreign Direct Investment Even though developments in Bangladesh’s food retail and consumer goods markets and the corresponding business opportunities are not going unnoticed abroad, given the numerous persistent challenges for modern food retail, transnational supermarket chains still shy away from entering the Bangladeshi market. Thus, from the current point of view, it seems as if Bangladesh, other than countries in the earlier waves of the so-called “supermarket revolution,” is not about to expect a tidal wave of foreign direct investment in modern food retail in the near future. Foreign direct investment, however, proved to be the most important driver for the rapid expansion of modern food retail in many countries in the Global South, and can likewise be expected to have a considerable impact on Bangladesh’s food retail markets and food distribution channels. Thus, the question arises, when and under which conditions will transnational supermarket chains enter the Bangladeshi market. The previously outlined fields for further research should then be reconsidered under the new premise of foreign direct investment. As could be previously shown, governments around the world have applied different approaches in dealing with foreign direct investment in food retail. The activities have ranged from the two extremes of a laissez-faire approach, which gave rise to the expansion of transnational supermarket chains in many Latin American countries, to a protectionist approach shielding national food retailers

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from foreign competition, as could be observed in India. In the first case, the radical opening of national markets to foreign supermarket chains greatly enhances the risk of massive job losses, as traditional food retailers, small suppliers, and intermediaries have limited opportunities to adapt or profit from technological learning. It therefore comes as no surprise that this approach has been fiercely opposed in many countries, and, in some cases, has even led to violent conflicts (Altenburg et al. 2016, p. 33). While Bangladesh’s modern food retailers showed themselves to generally welcome the entrance of transnational supermarket chains as a significant boost to the development of the country’s modern food retail industry, it also became clear that they would not accept their foreign counterparts getting offered preferential treatment. Thus, under certain circumstances, Bangladesh’s government may likewise expect “indigenous retailer resistance,” at least on the part of supermarkets. In the second case of the protectionist approach, efficiency gains to be obtained from modern forms of food retail are unlikely to materialize. Not least, protecting national food retailers from foreign competition may deepen the productivity gap between national and transnational players, which increases the costs of adaptation when markets open up at a later time. From a development policy point of view, a sequenced approach that lies between the two above-outlined extremes therefore seems to be the most preferable and promising option, as it aims to exploit the productivity gains of modern food retail while at the same time supporting local players in adapting to the respective structural change. In this context, development experts call for the elaboration of farsighted comprehensive and holistic national development strategies instead of ad-hoc isolated solutions (Altenburg et al. 2016, p. 33). Interestingly, to a certain extent, this claim echoes the recommendations that were already submitted in the course of the debate on modern food retail’s role in economic development in the period after World War II. With modern food retail in Bangladesh still being at a rather embryonic development stage, there is still time for policymakers to accompany and steer restructuring processes in a way that maximizes the corresponding opportunities while, at the same time, mitigating undesirable effects. As evidence from other countries has shown, this is, however, a challenging task that requires a thorough understanding of how modern food retail may affect the different players along food distribution channels. In this, the present thesis as well as the suggested further research can make a substantial contribution.

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