Abstract:
The main objective of this study is to create an understanding of the existing niche market arrangements for high value products and to determine how small scale farmers can tap into and sustain the niche markets channels. The study specifically assessed niche market requirements for fruits and vegetables and the institutional arrangements that develop and sustain trade relations between buyers and sellers. The study also analysed the effects of transaction costs on market arrangements, linkages and relationship among traders, the benefits of complying with the standards and factors affecting such benefits. Both primary and secondary data were collected. Primary data was collected through questionnaires which were administered to the niche markets, niche market suppliers (NMS) and the open market sellers (OMS) through stratified simple random sampling technique with proportionate allocation. Secondary data was collected from niche markets. By using SPSS descriptive statistics analysed the data. Qualitative method using structural theoretical analysis and quantitative methods using t-test and OLS regression were used as tools for analysing the objectives. The study found out that niche markets demanded high quality, mature, colourful and big but uniform size products. To ensure they obtain such quality products niche markets were found working on contractual basis with NMS and pay visits to where NMS source the vegetables. Most niche markets paid the NMS on credit basis. The study found out that selling vegetables to the niche markets generates more profit than selling in the open markets while NMS performing other businesses than fruits and vegetables earn lower profit margins. To earn higher profit margins the study recommended that farmers and NMS should trade directly with niche markets and specialise in the fruit and vegetable business respectively. The government, financial institutions and SACCOS should finance these farmers especially those working on credit basis with niche markets.
