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How Supermarkets Can End Poverty
Posted by: Lance on Friday, August 01, 2008

I saw a study on productivity growth in the retail sector at the beginning of this decade. It ended up attributing 25% of total US productivity growth in the 1990's to WalMart alone.

Thus, this post on the huge impact of supermarkets in the developing world does not surprise me:
The difference between the benefits of traditional and supermarket retail food sales can be staggering even within the same country. In an unevenly developed country such as India, which is divided between urban chain supermarkets and rural traditional markets, the cost of vegetables is 33% cheaper in the city than for the rural poor dependent on small local stores.

This has larger economic implications than is generally acknowledged, as food purchases consume a far larger share of national wealth in the developing world. In poor countries such as Nepal, food spending can account for as much as 50% of consumption expenditure in middle income households, compared to 15% in the United States. Thereby a cruel kind of trap is created through high food prices, which precludes consumer spending on goods and services that command higher wages than agriculture can provide.
The impact of retail productivity gains on living standards is widely underestimated. In fact, the primary difference in living standards between the US, Europe and Japan is our retail productivity.
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Previous Comments to this Post 

The India example could be explained since the urban situation permits more intense competition and lower transportation costs for distribution from denser concentration of store over the smaller region. Being a Super-Mega-Mart probably will help. But without more data, it would be premature to give them all the credit.
Written By: jpm100
URL: http://
The underlying study behind the post has a lot more data, but it dovetails with all the evidence I have seen on the importance of retail distribution. lee doesn’t directly address it, but there is a huge cost savings due to supply chain management and packaging as well. Countries which depend to a large degree on traditional retail and markets waste enormous quantities of food due to inadequate storage, transportation and lack of packaging for the end user.
Written By: Lance
My understanding is that it isn’t just a conflict between supermarkets on the one hand and “rural traditional markets” on the other in India. Much of the retail commerce in urban India is dominated by small mom-and-pop shops who bitterly oppose the introduction of mass merchants.
Written By: Dave Schuler

That is certainly true, and the post and the underlying study support that.
Written By: Lance

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