Shortening Supply Chains: Experimental Evidence from Fruit and Vegetable Vendors in Bogota

Fruit and vegetable vendors in Bogota travel most days to a central market to purchase produce, incurring substantial costs. A social enterprise attempted to shorten the supply chain by aggregating orders from many small stores and delivering orders directly from farmers to vendors. We randomized the introduction of this service at the market-block level. Initial interest was high, and the service reduced travel time and costs and increased work-life balance. Purchase costs fell by 6%-8%, there was incomplete pass-through into lower prices for consumers, and markups rose. However, stores reduced sales of products not offered by this new service, and their total sales and profits appear to have fallen in the short run, with service usage falling over time. The results offer a window into the nature of competition among small retailers and point to the challenges in achieving economies of scale when disrupting centralized markets for multiproduct firms.