Label Equity and Consumer Beliefs about Bidirectional Distribution and Local Food

Team: Garim Lee, Retail Merchandising, University of Minnesota; Hye-Young Kim, Retail Merchandising, University of Minnesota; Kathryn Draeger, Regional Sustainable Development Partnerships, University of Minnesota Extension; Karen Donohue, Carlson School of Management, University of Minnesota; Greg Schweser, Regional Sustainable Development Partnerships, University of Minnesota Extension; Ren Olive, Formerly Regional Sustainable Development Partnerships, University of Minnesota Extension

Program: Retail Merchandising

How do consumers evaluate the locally produced products distributed by a bidirectional distribution strategy based on the product information on the label?

The newly introduced bidirectional distribution supply-chain model “Rural Grocery to Wholesale (F2G2W) Model” is the practice of backhauling locally grown produce on emptied wholesale trucks for redistribution through wholesale markets, using the existing network of rural grocery stores and their wholesale suppliers. This model is expected to offer integrated and reliable access to wholesale markets and small and medium-sized local farms as it will help them access wholesale markets with improved efficiency.

However, academic knowledge of perceived benefits and consumer awareness of a bidirectional distribution strategy of local produce is insufficient. Thus, based on the cue utilization theory and label equity, this study examined the effect of product packaging on consumers’ evaluations of the bidirectional distribution strategy of local products.

The results of a 2x2 online experiment show that ‘locally-grown’ label led to higher environmental friendliness and food quality perception, while ‘bidirectionally distributed’ label led to higher environmental friendliness perception. Despite different underlying mechanisms, both ‘locally-grown’ and ‘bidirectional distribution’ labels led to higher purchase intention, and such effect was the largest in the presence of both labels. Local farms are recommended to actively utilize both labels to draw the desired behavioral responses at most and to increase sales.