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Save the Georgian Bazaar!

Open-air markets, so called bazaars, are considered by many Georgians to be relics of the past. Progressive people buy in supermarkets with all its amenities: clean areas, shiny floors, the temperature regulated at a convenient level, the products placed in order and often arranged tastefully. Only backward people buy in a bazaar if there is a supermarket available.

This shift in shoppers’ preferences is illustrated by changes in the market structure. Five years ago the only big supermarket in Tbilisi was Goodwill, but the presence of supermarkets increased dramatically ever since, with branches to be found in almost every neighborhood. Currently, there are seven big supermarket chains in Tbilisi: Goodwill, Smart, Carrefour, Spar, Foodmart, Fursheti, and Fresco. Some of them, such as Carrefour and Goodwill, operate hypermarkets, while the others offer just ordinary supermarkets of variable sizes.

What we can see here is reminiscent of how Georgian consumption patterns changed when other posh Western companies entered the market. American fast-food chains offer their French fries and burgers at pretty high prices in Georgia, even higher than in many Western countries, and yet it is often difficult to find a free seat in such places. Across the street, traditional Georgian restaurants offer high-quality, fresh food at much lower prices, but for the uplifting feeling of “eating like the Americans” many Georgians are willing to pay a price premium. Similarly, it seems to be a great feeling to “shop like the French” (in the Carrefour) or “purchase like the Germans” (some supermarkets sell a ridiculously large variety of German products, making one feel as if s/he is shopping in Germany except that prices here are so much higher than there).


PRUDENT PURCHASING

If people are struggling to make ends meet, as is the case for a considerable part of the Georgian population, they should probably not spend extra money for a fancy shopping experience. Going for the cheapest products in the bazaar is the more rational choice for most. Of course, if one is working more than 8 hours a day, shopping in a supermarket helps to save precious time. Yet for those many Georgians for whom time is not that scarce because they are not lucky to have a regular full-time job, searching and comparing prices is advisable.

However, it turns out that price comparisons between supermarkets and bazaars are not as conclusive as one might expect. A test we conducted in January when collecting the prices of khachapuri ingredients (for our famous Khachapuri Index) in a sample of supermarkets and bazaars suggested that bazaar prices were indeed considerably lower: by 10% for eggs and milk, by 13% for butter, by 23% for flour, and by as much as 34% for cheese! On the other hand, yeast, which does not have a large share in the cost of khachapuri, was 10% more expensive in the bazaars.

In March, we repeated this exercise in only two places: in Carrefour, which is considered by many to offer a very good value for money, and the “Dezertirebi” bazaar (close to the railway station). This time we took care to look for the cheapest prices in the bazaar, and yet, contrary to our previous experience, we found the supermarket (Carrefour, in our case) to be cheaper than the bazaar, by 2% for eggs and milk, and by 8% for flour. Bazaars did maintain their competitive edge in cheese (cheaper by 36%) and butter (by 9%).

In March, we also looked at a range of other basic products, and it turned out that all of them were somewhat cheaper in the bazaar, namely chicken (by 1%), walnuts (7%), greens (20%), potatoes (20%), pork meat (58%), and apples (60%).

While the picture is not totally clear-cut, it appears that for these basic products, demanded by all Georgian households, supermarkets tend to have higher prices than open-air bazaars (only in 4 out of 17 comparisons the supermarket was cheaper).


ECONOMIC ADVANTAGES

Besides stimulating competition among Georgian food retailers and in this way keeping prices at bay, bazaars also have positive effects on domestic producers of agricultural goods and the structure of the Georgian agricultural sector.

The bazaar system is a completely non-bureaucratic way to deliver agricultural products to the end consumer. Smallholder farmers grow apples, tomatoes, potatoes, and whatever, and bring them to the market in the morning in exchange for cash (sometimes there are intermediary traders involved, collecting the produce from the villages and bringing it to the bazaar, which further increases efficiency). In this way, bazaars are an easily accessible possibility for smallholder farmers to transform their produce into some monetary income.

This is similar to the extremely non-bureaucratic Georgian way of organizing the market for taxi services. Everyone who has got a car can attach a taxi sign to its roof and make some money by driving people around. In most other countries around the world, taxi drivers need a license (in Paris, for example, such a license is traded at prices between 200,000 and 250,000 euro). The Georgian approach leads to cheap taxis for everyone and provides many people who have few other prospects in the job market with (small) income. Bazaars are a similarly libertarian but also highly successful “Georgian” way to organize the food market.

In the very long run, the strategic goal of the various efforts to increase productivity in agriculture is to make Georgia an exporter. Yet if Georgia’s access to export markets grows slower than productivity, the country might run into severe problems to ensure the livelihoods of those 50% to 55% of the Georgian population currently working in agriculture. In France, which has the worldwide highest agricultural productivity, one agricultural worker produces roughly the same output (measured in money) as 60 Georgian workers.

Raising agricultural productivity in a country with a large share of rural population and a democratic system of governance is an extremely delicate matter. Fast entry by new high tech producers will trigger mass migration to the cities, which are already plagued by high rates of unemployment and may not be able to provide adequate jobs or housing for the newcomers. What Georgia needs is a gradual transition, whereby smallholder farmers are given the opportunity to develop and integrate into existing or new value chains. This is precisely the aim of such donor initiatives as the EU-funded ENPARD project, which fosters the formation of agricultural cooperatives.

In line with such a “gradualist” approach, the aim should be to progressively substitute imported agricultural goods by domestically produced ones (“import substitution”). Bazaars can be instrumental in this respect, as – due to the lack of bureaucracy, minimum delivery amounts, and long-run contracts – any little improvement in the production process of a farm directly translates into additional income for the smallholder farmers. In the presence of bazaars, adopting new techniques or “process innovations”, such as farmer organizations incubated by ENPARD, will be rewarded immediately, without the necessity for large capital investments and complicated planning.


KEEP IT ALIVE

The existence of bazaars is threatened in three respects, namely preferences of customers (as mentioned above), overregulation, and lack of government support.

While one can hope that the preferences of Georgians will be aligned with their meager budgets (and there is little one can do to influence those preferences), the largest threats are related to government policies.

It is important that in view of all the great opportunities emerging from the Association Agreement (AA) with the European Union, Georgia does not introduce sanitary regulations and bureaucratic requirements which can be easily met by companies in Europe (or advanced Georgian producers) but pose insurmountable obstacles for Georgian smallholders and bazaars. European representatives claim that the AA allows for exceptions and adjustment to local conditions, yet it is important that these exceptions are really made. Overregulation is a great danger for a fragile economy in a developing country, and the government would be well advised to take Montesquieu’s verdict seriously when he said: “Useless laws weaken the necessary laws.”

In addition, bazaars should get the same consideration as other retail businesses in terms of subsidies and infrastructure. In Zestafoni, the bazaar hall was nicely renovated recently, yet in Tbilisi bazaars are not always that attractive. Lack of available parking is a particularly acute problem for many bazaars. We are not arguing that bazaars should be treated preferentially compared to supermarkets, but whatever advantages were granted to supermarkets (and their investors) should also be given to bazaars.

To sum up, Georgia has to develop its economy taking into account its low starting point. In the political debate, one rarely hears an honest admission that Georgia will be a relatively poor country for decades to come. This is true even if the high-flying predictions about future Georgian growth would turn out to be correct, e.g. 6% annual growth until 2020.

In the current situation, and arguably for many years to come, it would be unfortunate for the Georgian economy to dispose of its bazaars.


 

The article was produced with the assistance of the European Union through its European Neighbourhood Programme for Agriculture and Rural Development, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus. The contents are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus.

 

 

 

 

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Guest - Robert Morger on Friday, 13 March 2015 21:34

I agree totally. Also bazaar and street market make a city attraktive and unique, if I could not buy my greens, fruits and puri in front of my door on street or tonebakery there also would be nobody to talk with...already too many shopping cities around , let Tbilisi be unique.

I agree totally. Also bazaar and street market make a city attraktive and unique, if I could not buy my greens, fruits and puri in front of my door on street or tonebakery there also would be nobody to talk with...already too many shopping cities around , let Tbilisi be unique.
Guest - Adam on Saturday, 14 March 2015 05:02

Bazaars and the smaller street-side marketplaces play a huge role in Georgia's economy (especially in the regions), so it's good to see some much-deserved support for them here!

With regard to 'keeping them alive': (1) While consumer preferences will continue to evolve, it's likely that supermarkets and bazaars/street-side marketplaces will continue to coexist in Georgia, much like they do in other countries. In the U.S., open-air farmers' markets are increasingly popular (McDonalds less so), so it might be a leapfrogging of sorts if Georgia maintains many of its bazaars/street-side marketplaces.

(2) Today we interviewed members of a trout producers' cooperative in Guria and we discovered that no small amount of their fish ends up in the wholesale markets in Batumi and Tbilisi (and then in restaurants and people's refrigerators). I share your hope that they'll be able to continue selling their fish to these markets (or to the intermediary traders) unencumbered by overly burdensome regulatory requirements.

The regulatory burden on agricultural producers brought about by the AA/DCFTA is certainly something to worry about, though I hope that the exemptions for small-scale producers are well-maintained. Perhaps a two-track regulatory regime will evolve, so that on the one hand high-productivity agroprocessing enterprises and cooperatives could successfully meet EU import requirements, while on the other the food regulations would be flexible enough for small-scale producers primarily marketing their products to wholesale markets or to consumers at the farm gate.

(3) There has been some upgrading of the infrastructure for the wholesale market for agricultural products in Tbilisi, though the infrastructure for many of the bazaars around the country is rather dilapidated (and many vendors have to develop/repair their own roofing). In order to enable bazaars to successfully compete/coexist with supermarkets, there certainly needs to be some basic upgrading of these marketplaces around the country.

Bazaars and the smaller street-side marketplaces play a huge role in Georgia's economy (especially in the regions), so it's good to see some much-deserved support for them here! With regard to 'keeping them alive': (1) While consumer preferences will continue to evolve, it's likely that supermarkets and bazaars/street-side marketplaces will continue to coexist in Georgia, much like they do in other countries. In the U.S., open-air farmers' markets are increasingly popular (McDonalds less so), so it might be a leapfrogging of sorts if Georgia maintains many of its bazaars/street-side marketplaces. (2) Today we interviewed members of a trout producers' cooperative in Guria and we discovered that no small amount of their fish ends up in the wholesale markets in Batumi and Tbilisi (and then in restaurants and people's refrigerators). I share your hope that they'll be able to continue selling their fish to these markets (or to the intermediary traders) unencumbered by overly burdensome regulatory requirements. The regulatory burden on agricultural producers brought about by the AA/DCFTA is certainly something to worry about, though I hope that the exemptions for small-scale producers are well-maintained. Perhaps a two-track regulatory regime will evolve, so that on the one hand high-productivity agroprocessing enterprises and cooperatives could successfully meet EU import requirements, while on the other the food regulations would be flexible enough for small-scale producers primarily marketing their products to wholesale markets or to consumers at the farm gate. (3) There has been some upgrading of the infrastructure for the wholesale market for agricultural products in Tbilisi, though the infrastructure for many of the bazaars around the country is rather dilapidated (and many vendors have to develop/repair their own roofing). In order to enable bazaars to successfully compete/coexist with supermarkets, there certainly needs to be some basic upgrading of these marketplaces around the country.
Guest - megiddo02 on Saturday, 14 March 2015 21:46

Thank you, Adam. I am a pessimist by nature, and so I think that the two-track regulatory system could easily bring about all kinds of problematic incentives, e.g. big farms being split up into small units so that they still count as "smallholders". If it is advantageous to belong to the less-regulated "smallholder" category of producers, people will find loopholes to get in there, possibly leading to great distortions.

The regulatory system would have to be set up in a smart way to avoid such problems -- it would be essential that each farm could freely choose in which category it wants to be, and the category must not depend on any parameters of the farm, e.g. farm size. I neither trust Georgian nor EU bureaucrats to get that right.

Thank you, Adam. I am a pessimist by nature, and so I think that the two-track regulatory system could easily bring about all kinds of problematic incentives, e.g. big farms being split up into small units so that they still count as "smallholders". If it is advantageous to belong to the less-regulated "smallholder" category of producers, people will find loopholes to get in there, possibly leading to great distortions. The regulatory system would have to be set up in a smart way to avoid such problems -- it would be essential that each farm could freely choose in which category it wants to be, and the category must not depend on any parameters of the farm, e.g. farm size. I neither trust Georgian nor EU bureaucrats to get that right.
Guest - Eric Livny on Saturday, 14 March 2015 05:38

I believe that the coexistence of modern and traditional sectors is a common theme in development research. It is typical of bureaucrats (of the EU/Brussels species or any others) to ignore the people on the street in their policy designs, but, knowing Georgia and the Georgian spirit, I would think any Georgian government that tries to impose phytosanitary restrictions (and inspections) on the open-air markets and small market places will last about a week. Maybe even less.

I believe that the coexistence of modern and traditional sectors is a common theme in development research. It is typical of bureaucrats (of the EU/Brussels species or any others) to ignore the people on the street in their policy designs, but, knowing Georgia and the Georgian spirit, I would think any Georgian government that tries to impose phytosanitary restrictions (and inspections) on the open-air markets and small market places will last about a week. Maybe even less.
Guest - Simon Appleby on Saturday, 14 March 2015 20:53

Governments tend to dislike traditional wet markets as most transactions are done for cash and tax evasion is widespread. One might argue that this tax evasion serves a useful social purpose in keeping food prices for low income people modest.

There are actually sound food safety reasons for preserving traditional bazaars. The best poultry and fish stalls stock live animals, which are slaughtered and dressed under the customer's gaze, and so freshness is not in dispute. A good rinse of commodity under the tap at home and proper cooking methods result in fewer food poisoning incidents than chilled product if this mode is properly executed. In contrast, until recently many smaller corner stores, and not a few supermarkets, were accused of turning refrigerators off at night to save power, and so chilled chicken and fish from such outlets has been suspect in consumers' minds in comparison to product killed in front of them at the basroba.

Serious pork and beef buyers know the routines of slaughtering and transport for the better vendors in the basroba, and know that early morning is the best time to secure cuts from carcases that have been killed on the same day.

Customers can buy primal meat cuts and do their own sub-primal breakdowns with more precision than a poorly trained supermarket butcher can. They can also secure bulk discounts and free items for repeat custom, which is not as easily done in a supermarket. As a society where personal relationships are so important, the network of regular fresh produce vendors built up by a Georgian household over time are in important part of the household's social interactions that cannot be easily replaced by a supermarket. If we look abroad, even in very affluent, service industry-dominated societies like Japan and Hong Kong, wet markets remain an important part of the retail network for low and middle income families.

Governments tend to dislike traditional wet markets as most transactions are done for cash and tax evasion is widespread. One might argue that this tax evasion serves a useful social purpose in keeping food prices for low income people modest. There are actually sound food safety reasons for preserving traditional bazaars. The best poultry and fish stalls stock live animals, which are slaughtered and dressed under the customer's gaze, and so freshness is not in dispute. A good rinse of commodity under the tap at home and proper cooking methods result in fewer food poisoning incidents than chilled product if this mode is properly executed. In contrast, until recently many smaller corner stores, and not a few supermarkets, were accused of turning refrigerators off at night to save power, and so chilled chicken and fish from such outlets has been suspect in consumers' minds in comparison to product killed in front of them at the basroba. Serious pork and beef buyers know the routines of slaughtering and transport for the better vendors in the basroba, and know that early morning is the best time to secure cuts from carcases that have been killed on the same day. Customers can buy primal meat cuts and do their own sub-primal breakdowns with more precision than a poorly trained supermarket butcher can. They can also secure bulk discounts and free items for repeat custom, which is not as easily done in a supermarket. As a society where personal relationships are so important, the network of regular fresh produce vendors built up by a Georgian household over time are in important part of the household's social interactions that cannot be easily replaced by a supermarket. If we look abroad, even in very affluent, service industry-dominated societies like Japan and Hong Kong, wet markets remain an important part of the retail network for low and middle income families.
Guest - megiddo02 on Saturday, 14 March 2015 21:50

Simon, while I do not agree with your technocratic approach to taking animals' lives, I do agree with you that seeing animals being slaughtered will educate people. When they buy their meat in the supermarket, they do not realize it was a living being they are eating. When they would see it being slaughtered, many people -- at least in advanced countries -- would shy away from this kind of nutrition. Not sure if that was your intention though...

Simon, while I do not agree with your technocratic approach to taking animals' lives, I do agree with you that seeing animals being slaughtered will educate people. When they buy their meat in the supermarket, they do not realize it was a living being they are eating. When they would see it being slaughtered, many people -- at least in advanced countries -- would shy away from this kind of nutrition. Not sure if that was your intention though...
Guest - Eric Livny on Saturday, 14 March 2015 21:40

I've never been to Tokyo's Tsukiji fish market (presumably the largest fish market in the world!) http://en.wikipedia.org/wiki/Tsukiji_fish_market#/media/File:Tsukiji_Fresh_Tuna_Auction.JPG, but know it to be a major touristic attraction.

I've never been to Tokyo's Tsukiji fish market (presumably the largest fish market in the world!) http://en.wikipedia.org/wiki/Tsukiji_fish_market#/media/File:Tsukiji_Fresh_Tuna_Auction.JPG, but know it to be a major touristic attraction.
Guest - Salome on Thursday, 19 March 2015 23:34

Very interesting piece underlying importance of bazaars and street markets. Although one can think of some positive features of bazaars (as the authors did), I should admit that I always try to avoid shopping at bazaars. That's because there is a lot of trash, cats and dogs walking around food products in bazaar. Food safety and hygiene rules are completely ignored. There might be few bazaars in Georgia similar to the one illustrated at the picture. Majority of bazaars are very different from what is on the picture.

As it was stated, bazaar is one of the ways for farmer to sell its produce, however it is not the only way. Contract farming for example is possible in case of supermarkets, when supermarkets can have contracts with the groups of farmers who ensure stable supply of products in exchange for cash. This requires some discipline and maybe a bit of bureaucracy, but might lead to more sustainable results in the long run. When farmer comes to bazaar and sells his produce through intermediary, the procedure is simple on one hand, but on the other hand there is no formal contract which ensures more or less stable market for farmer. That's why dealing with supermarkets might be more beneficial for farmer in the long run.

Comparison of bazaars with taxis is interesting. However the result of unregulated taxi market is that there are a lot of dangerous taxi drivers in Tbilisi and some of them do not even know how to drive properly. A lot of car accidents are caused by this fact.

Going back to food safety and hygiene, I would like to note that waste management is a quite serious problem for Tbilisi (and other Georgian cities as well) and open air bazaars make the situation even worse.

Very interesting piece underlying importance of bazaars and street markets. Although one can think of some positive features of bazaars (as the authors did), I should admit that I always try to avoid shopping at bazaars. That's because there is a lot of trash, cats and dogs walking around food products in bazaar. Food safety and hygiene rules are completely ignored. There might be few bazaars in Georgia similar to the one illustrated at the picture. Majority of bazaars are very different from what is on the picture. As it was stated, bazaar is one of the ways for farmer to sell its produce, however it is not the only way. Contract farming for example is possible in case of supermarkets, when supermarkets can have contracts with the groups of farmers who ensure stable supply of products in exchange for cash. This requires some discipline and maybe a bit of bureaucracy, but might lead to more sustainable results in the long run. When farmer comes to bazaar and sells his produce through intermediary, the procedure is simple on one hand, but on the other hand there is no formal contract which ensures more or less stable market for farmer. That's why dealing with supermarkets might be more beneficial for farmer in the long run. Comparison of bazaars with taxis is interesting. However the result of unregulated taxi market is that there are a lot of dangerous taxi drivers in Tbilisi and some of them do not even know how to drive properly. A lot of car accidents are caused by this fact. Going back to food safety and hygiene, I would like to note that waste management is a quite serious problem for Tbilisi (and other Georgian cities as well) and open air bazaars make the situation even worse.
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