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Field
Paper Abstract
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Small trading activities are a prevalent form of self-employment in developing countries, but their integration into
supply value chains is not efficient, especially when it comes
to perishable produce. This study tests a novel approach to
improve their efficiency by reducing the time and cost of
sourcing produce by aggregating purchases through the use
of an app and centralized distribution system. Fruit and
vegetable vendors in Bogotá currently travel most days to
a central market to purchase produce, incurring substantial time and monetary costs. A social enterprise attempted
to shorten the supply chain between farmers and vendors
by aggregating orders from many small stores, sourcing
directly from farmers, and delivering them to the stores.
The introduction of this new service was randomized at the
market block level. Initial interest was high and offering
the service reduced travel time for users by almost two
hours a week, reduced travel costs, and increased work-life
balance for store owners. Firms offered the service saved an
average of 6 to 8 percent on purchase costs, and although
some of this passed through into lower prices for consumers,
there was incomplete pass-through, so that markups rose.
However, stores reduced their sales of products that were
not originally offered by this new service, and their total
sales and profits appear to have fallen in the short run, with
service usage falling over time. The results highlight the
potential for new technologies to solve firm coordination
problems, offer a window into the nature of competition
among small retailers, and point to the challenges in achieving economies of scale when disrupting centralized markets
for multi-product firms.
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