26: Direct Marketing Options
Direct marketing is a common strategy for beginning and small farmers. The main attraction compared with selling through traditional wholesale markets is that you receive the full share of the consumer dollar and have more control over the price you receive for your products. But with direct marketing, you’ll also incur extra costs – not the least of which is your time. Be sure to evaluate each option carefully as part of a farm business plan.
Farmers markets are a good place to develop your marketing skills, but don’t assume you can rely on them for all your sales. The best markets may be hard to get into, and smaller markets are struggling to remain viable. If you really want to sell at a market, start by visiting markets in your area. Inventory what’s available and note what does not sell out by the end of the day. Don’t grow what doesn’t sell unless you can differentiate your product – for example selling heirloom tomatoes instead of ‘garden variety’ fruit.
Also study the customers. How many are there? What is their ethnicity? Are they young or old? Families or single buyers? Affluent or bargain shoppers? Ask shoppers and vendors what they like and don’t like about the market, and get a copy of the market rules.
To be successful, you need to enjoy interacting with people and be willing to invest the time it takes to pick, pack, transport, set up and sell. To maximize potential returns, you need to sell for as long a season as possible. For produce vendors, this means growing a wide variety of crops. Farmers market sales alone may not generate enough money to make a living, requiring you to look at additional market channels, but markets can be a good place to start a business.
Methods range from simple, self-serve stands to multi-department, year-round farm stores that may include pick-your-own or agritourism enterprises. The higher the overhead, the slimmer the margins will be. But if done right, a successful farm market will attract many regular customers and offer good returns.
Self-serve stands are a good way to assess the potential draw from drive-by traffic. Strawberries, sweet corn, tomatoes, peaches, and pumpkins are crops that stop traffic. Consumers learn about local farms primarily through word-of-mouth. Build a product line based on what customers want, and pay attention to quality. Sufficient traffic may generate enough sales to warrant investment in facilities and staffing.
Pick-your-own (PYO) requires advertising and staffing. It can be very profitable, but risky if it rains every weekend during narrow harvest seasons. PYO can complement agritourism activities where it is one of several activities that families can enjoy.
To be successful, you need to enjoy having lots of people at your farm – and in your fields, in the case of PYO. Risk management and liability insurance is a must. Building loyal clientele is key, and may take many years. Your business plan must be based on realistic customer numbers and sales projections.
Internet and Mail Order
Using online tools to connect with potential customers and to make sales online has never been easier, yet the marketplace is changing very rapidly so it’s difficult to know which options will have staying power. Here are a few things to know about selling online:
- It’s essential to evaluate each website, platform, or online sales tool to make sure it will really meet your needs. If a company is making big promises about how much they’ll help you sell online, research how long they’ve been in business, talk to other farmers who are selling through them (if possible), and find out what will be expected of you. Where will you need to deliver your product? How much will this company charge you for this service?
- You do not need to ship your products if you are selling online. There are many options that allow you to create an online store—either a shopping cart feature attached to your farm website, or a store hosted on a 3rd party platform—where you can set the expectations for customers. You can decide whether you expect people to pick up orders at your farm, whether you will deliver to a specified pick-up spot or bring all orders to a weekly farmer’s market booth, or whether you will ship products directly to people.
- As with any marketing strategy, it’s unwise to rely solely on internet sales. What if the company you’re selling through closes its doors? Consider internet sales to be one prong of your marketing strategy.
If you develop unique, high-value products that are easy to ship, this strategy can complement your other direct marketing efforts. Current customers who love your product can order more and help you market your products through word of mouth. Packaging and shipping costs need to be considered but for products that are not bulky or heavy, this can be a profitable strategy
Note: Internet sales are only considered exempt under the Home Processors Exemption (Fact Sheet #28 in this Guide) if buyers are also within the state.
Ways to Get Started with Internet Marketing
Places to list your farm online to help consumers find you:
Listing for livestock and dairy producers
Listing for any type of farm, may help consumers find you, but you can also use Local Harvest as a sales platform by creating an online store within the site
For livestock producers who sell animals via quarter, half, or whole direct to consumers
Third-party sites that help you sell product online:
Created by a farmer, this low-cost platform has been around since 2013, so it has staying power. Allows farmers to set their own terms around delivery, and is especially useful for products that have variable weights.
You must be willing to ship if you use this site
This platform has been around for many years and connects farmers to wholesale buyers
This site allows groups of farmers to come together to create an online farmers’ market with customer orders placed in a certain time frame, and then farmers fill the orders and deliver to a specified site.
Create an online store on your website:
Community Supported Agriculture
Community Supported Agriculture (CSA) operations typically provide a weekly ‘share’ (box) of produce to customers who pay for their shares at the beginning of the season – usually $300 to $600 per household. The up-front money reduces financial and marketing risks for farmers, and customers share in production risks. Sometimes customers help harvest and pack shares in return for a discount. Depending on the operation, customers pick up shares at the farm, a central distribution point, or pay extra for home delivery.
One challenge is to have enough different crops each week so customers feel like they are getting their money’s worth. CSA farmers often grow more than what their customers need and have additional outlets for surplus produce. Sometimes several farms collaborate to offer a wider range of products including fruit, eggs, meat and more. Starting small and keeping customer turnover low is a good way to grow the business while minimizing risks.
A key advantage to a CSA is that you know how many customers you have early in the season, have their money in hand and can produce accordingly. This makes financial planning easier. However, in many parts of the state, the CSA market is saturated, and existing businesses are struggling to retain their members.
Many chefs (especially from higher-end restaurants) are looking for fresh, local products to feature in their menus. You will find that chefs are as busy as farmers. Develop a personal relationship with chefs, find out what they want and grow a wide range of products for them for as long a season as possible. You need to offer exceptional quality clean products that are delivered on time (avoid mealtimes). Restaurant sales need to be an intentional strategy, not a way to dump surplus product. Most chefs will pay about 75 percent of retail for produce, though if they are ordering small quantities, you may be able to charge them full retail price.
Watch that delivery costs and time don’t eat up profits, and be clear on payment terms. Once a relationship is solid, less face time is needed.
Sales to Food Retailers
Increasingly small food retailers are interested in sources of locally grown food. One option is to contact retail farm markets in your area. Many do not grow all they sell. Also, check out food cooperatives, natural foods stores, and independent groceries. Most will only pay wholesale prices found at regional markets.
Everything else, from convenience stores to super-centers, is a chain and each has unique purchasing requirements. Some purchasing decisions are made at the local store level, but most require approval from higher-ups. Start with local store managers. For produce, a head buyer is usually involved. It is most common for retailers to buy seasonal produce. Very few handle local meats, cheese, eggs or other products.
Food retailers expect local prices to be in line with wholesale prices. Understand buyer expectations and prices before agreeing to delivery. Some may reject product on quality or simply because they have a better supply and price elsewhere. The advantage of selling to food retailers is that you can move more volume to fewer buyers, reducing your marketing costs. But the disadvantage is that it can be a fickle, price-driven market. Be sure to spread your risks.
Institutional Food Service Sales
Some schools, nursing homes, hospitals, prisons, etc. can purchase local products. But many are part of a buying consortium and have a single goal: keeping costs low. Meals are often pre-prepared or ready-to-serve, using few fresh items. Institutional food sales also come with institutional barriers, including regulations and requirements that dictate their purchasing practices. One way to tap institutional markets is to go through the distributors who sell to them. This adds a middleman and reduces returns. High quality, volume sales, standard packaging, and reliable delivery will be required.
For more information:
|Cornell Small Farms Program (CSFP)||The CSFP offers several online courses covering different aspects of marketing.||http://smallfarms.cornell.edu/online-courses/|
|Guide to Marketing Channel Selection||This publication is a decision-making aid for new farmers and for those considering marketing through a new channel, whether wholesale or direct. The guide focuses on describing the marketing of fresh-market produce, however, many of the principles apply to the marketing of other agricultural products including cut flowers, meats, honey, maple syrup, and dairy products.||http://smallfarms.cornell.edu/files/2014/07/Guide-to-Marketing-Channel-1ib5phn.pdf|