A Comparative Study of the Retail Margin and Efficiency: Municipal Green Grocery Centers vs. Green Groceries (Case Study of Mashhad County)

An increase in marketing costs raises marketing margin which causes a reduction in marketing efficiency. In this study, in order to analyze the marketing structures of municipal green grocery centers and the groceries nearby, the two functions of marketing margins and marketing efficiency were estimated. The study data was collected through questionnaires from all municipal green grocery centers and some neighboring groceries selected by simple random sampling in the summer 2012. The results showed that, for all products in both municipal green grocery centers and neighboring groceries, marketing margin has a positive relation with retail price, and thus, reduction in marketing cost should be seriously considered. Regarding the vegetable products, expansion of production facilities that are centralized, stable and close to urban consumption centers (radial rings around cities) is the key to reduce marketing cost, and as a result, to improve the efficiency. Regarding the fruit products, improving transportation, market regulation and mediated reduction are the keys for reducing marketing costs and efficiency improvement. The results showed that the averages of the price inefficiency, the technical inefficiency and the total inefficiency are more than 66 and 36 percent for the municipal green grocery centers and groceries, respectively. Applying strategies for more competitive markets reduces marketing costs, and thus, both price and market efficiencies improve. The high level of technical inefficiency reflects the high waste cost relative to the marketing margin. Therefore, in addition to reducing marketing costs, it should be considered to reduce waste materials, using appropriate packaging, refrigeration and suitable transportation systems in the marketing path.
JEL Classification: Q13, P42
Keywords:
Municipal Green Grocery Centers, Retail Margin, Mark up Model, Technical Inefficiency, Price Inefficiency