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.