This study examines consumer preference for local retail shops relative to supermarkets in Tanzania by integrating insights from social capital theory and behavioral economics. It develops a conceptual framework in which trust based relationships, social ties, financial constraints, and convenience jointly shape retail choice in informal market settings. Using cross-sectional survey data from 400 consumers in urban and semi-urban areas of Dar es Salaam, the results show that trust, social embeddedness, and convenience significantly reinforce preference for local shops, while financial constraints reduce preference, suggesting that severe liquidity limitations suppress consumption rather than increase reliance on local shops. The analysis further indicates that trust moderates the effect of financial constraints, and highlights the interaction between relational and behavioral mechanisms. The study contributes to the literature by providing an integrated explanation of consumer decision-making in informal retail contexts and by offering empirical evidence from an underrepresented Sub-Saharan African setting. The findings also emphasize the importance of strengthening community based financial mechanisms and supporting small-scale retailers’ capacity to sustain trust-based and flexible transactions in rapidly evolving urban markets.