Factors influencing the choice of supermarket channel by smallholder vegetable farmer suppliers in Nairobi and Kiambu Counties, Kenya
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The increasing demand for high-value food products in developing countries is creating incentives for expansion of supermarket chains as an alternative marketing system to the traditional marketing channels. However, smallholder farmers especially those in the vicinity of the urban cities and county capital townships in Kenya do not use supermarket channels effectively due to a number of factors. The purpose of this study is to determine the factors influencing the choice of participation in the supermarket supply channel as compared to that of traditional market channel. Data for the study were collected from a sample of 120 farmers - 60 supplying to supermarket supply chains and 60 supplying to traditional marketing channels. Multistage random sampling procedure was used to construct the sample. Descriptive statistics and the logit regression model were used as the methods of analysis. The results reveal that farmers participating in supermarket supply chain have significantly higher value of revenues, farm sizes, number of labourers, labour costs and input costs as compared to those supplying to traditional markets. Ultimately they had a higher gross margin of Kshs 35,346.00 compared to a loss of Kshs 1847.00 realized by the farmers supplying to traditional markets. Empirical results of the logit model indicated that the marginal probabilities for farm size, labour cost, education level, extension assistance, method of supply, group participation and formation of a supply relationship significantly influenced the choice of supermarket supply chain. Hence public and private policy needs to support the development of smallholder technical, social and institutional environments that can help them to get over the scale problem. Supermarkets can help in a number of ways such as providing technical and financial support, reviewing buying practices and treating smallholder farmers as equal partners.