FARMER-TRADER RELATIONSHIPS IN THE INDONESIAN CHILLI MARKETS: THE ROLE OF RELATIONSHIP QUALITY IN MODERN AND TRADITIONAL SUPPLY CHAINS

A decade of strong economic growth, rapid urbanization and liberalization of foreign direct investment (FDI) are transforming Indonesia’s food retail sector. Modern retail markets are reorganizing how food chains operate: requiring product homogeneity, grading, sorting, packaging, and supply consistency. Current literature suggests that improving relationship quality among food chain actors enhances efficiency. In Indonesia, chillies are a priority crop commonly produced by small holders and like many other cash crops several farmer-trader issues emerging in chilli supply chains. This paper attempts to segment chilli farmers according to their perception of the relationship quality with their buyers. Data was collected through a survey of 602 chilli farmers selling to the traditional market channel or supermarket channel in West Java, Indonesia. The segments/clusters are developed based on the perceptions of chilli farmers to three variables in relationship quality: trust, satisfaction and commitment. Price satisfaction and socioeconomic attributes are analyzed to provide further insights. Four distinct clusters are identified. The largest cluster (45% of respondents) considers they have a high level of relationship quality with their buyers/traders.