Transnational retail, market structure and governance: Challenges for development policy

Bill Vorley, International Institute for Environment and Development (IIED)

Presented at conference Globalizing Retail seminar, University of Surrey, 17-18 July 2006

Abstract.  Much has been written on the rapid changes which have accompanied the expansion of organised grocery retailing into mid-low income countries.  Organised retail drives restructuring, ‘re-governance' and formalisation of agrifood through their marketing and supply chain management strategies.

This presentation focuses not so much on the changes themselves, but on the special challenges they pose for policy formulation, to ensure pro-developmental outcomes, at the producer organisation, government, supply chain, donor, and civil society levels. These are early insights from a multi-country research and policy programme.

Global producer federations such as IFAP are struggling to develop a strategic view of market concentration of the kind found in Europe, and whether it could become the norm in middle and low-income countries. Even in Europe, farmers have yet to find their voice in the new political economy of agrifood, in the face of the mixed blessings of ‘alliance capitalism', their declining political influence, media disinterest, widespread citizen assent with the supermarket model, the dominant policy priorities of low inflation and job creation, and an uncertainty as to which parts of government should be lobbied.

In development agencies, the potential for the new retailers to provide ‘markets that work for the poor' is tempered by a growing realisation that supply chain management demands technology, capital and producer organisation, and is thus remote from the majority of primary producers unless they receive donor subsidies. They also question whether these dynamic modern markets could be a distraction from the main aims of poverty reduction.

Governments are struggling to shape the regulatory context in which transnational retail operates, to produce a positive private sector contribution to sustainable and equitable development. They face lobbies from independent shopkeepers, conflicting scenarios of future market development, and shortage of regulatory tools.

Some of the retailers and large suppliers have a new responsiveness to wider threats to business legitimacy, but these responses have had little to do with international development, where CSR has been inadequate and often tokenistic. One has to look at specific policy contexts, such as in South Africa or India, to find grocery retailers taking concrete steps to present themselves as partners in development.

To date, the internationalisation of retail, both in terms of procurement from North and investment in South, has not been accompanied by the internationalisation of best practice. With cross-border learning informed by research (which challenges the traditions of rural economics), policy at the producer, government and supply chain levels can be anticipatory rather than belated.

Powerpoint presentation available for download here