Pros And Cons Of The Different Ways To Sell:
How To Drive Success: Investigate all the possible ways to sell, then make an objective choice that takes into account the money you’ll get as well as your “style” of doing business.
Selling Through Farmer’s Markets
There are always farmer’s markets around, and they are becoming more and more popular. You apply, pay a fee, meet requirements, and for some markets, show up at an exact specific time and be broken down and out of there by another exact specific time. We were discouraged from joining one farmer’s market because we grew the same produce the originators of the market did, and they didn’t want competition with more sellers of leafy greens. Farmer’s markets are great if you love talking to people, spending time driving to and from, etc. The prices you get can be slightly lower than retail (or else why would people come there instead of the store?), and in some farmer’s markets the prices are mandated to be less than retail. If you don’t want to go yourself, you can meet some sellers who are already there, and arrange for them to sell your produce.
Selling Through CSA’s
CSAs (Consumer Supported Agriculture) are like a subscription book club, only for vegetables and produce. We know of one successful CSA whose proprietress doesn’t even grow any of her own produce; she just buys from farmers and resells it. How a CSA works is that you usually sign up your subscribers before you deliver any vegetables. Often you get full payment for a delivery period (usually eight to twelve weeks, sometimes longer). You can use newspaper ads, word of mouth, press releases, and flyers, and so on to get your subscription list filled.
Then, you deliver vegetables in a predefined amount to your subscribers. You can make it extremely convenient for them by dropping their boxes of produce off at their homes or places of business, and charge more to make up for your cost of doing this. Or you can make it less convenient by having all your subscribers come to your farm on Saturdays to pick up their boxes. The level of convenience is one of the big reasons a subscriber will pick your farm over another; so make it as convenient for your subscribers as you can within reason and within your cost parameters.
You deliver a different selection of produce each time depending on what you’re planting and harvesting at the time. The variety is one of the appeals of CSAs to the consumer; it is kind of like Christmas when you open the box. Good CSAs include recipes with the produce to get the consumer interested in trying new kinds of produce. Because it is convenient and saves the consumer shopping for all those things at the store, especially when you deliver, you can charge the same as retail, or even a little bit more and the consumer is still satisfied with the deal.
Really good CSA’s offer a wide variety of things besides the ones they grow, that they have purchased from other local farmers or processors. They are more like “mini-produce distributors” than CSA’s who only sell their own products. Think of what your customer wants, and try to procure it locally; as locally-sourced produce has a greater sales value than any brought in from a great distance. Get organic cheese and yogurt from a local dairy, honey from a local beekeeper, coffee from a local coffee plantation (Hawaii, right?), hams and bacon from a local slaughterhouse, and so on. The only real limitation here is needing refrigeration and perhaps a Health Department license to sell some of these items.
Farmigo Is Here!
Farmigo is an “online Farmer’s Market”, or cloud-based CSA, which has some really interesting and powerful software for member farmers to use. It keeps inventory of items you enter into it, automatically removing items from inventory when your CSA members buy them. It creates “pick lists” of all the items a member has ordered for that week’s pickup by them, so your employee has an easy-to-follow list to make up the members box from. It acts as an online store with a “shopping cart” that your customers fill. It can create reports for you of sales, inventory, and many other things it is critical for a business owner to know.
Farmigo will work with your existing PayPal account to accept PayPal payments as well as credit and debit cards. Farmigo charges a fee of 2% of the produce you sell, added to the PayPal processing fee of 2.2% to 2.9%, for a total fee of 4.2% to 4.9% of total sales. The payment goes into your PayPal account, and then you need to transfer any funds you require into your business bank account with a manual transfer.
To configure Farmigo to accept credit and debit cards directly (meaning the payment goes directly into your bank account without requiring a manual transfer, as PayPal requires), you need some “web savvy”, or need to hire someone who does. This is because you need a “payment gateway” (Authorize.net is one), and a “merchant account”, which is an “in-between” bank in the cloud that actually accepts the funds and then automatically transfers them to your local bank account. One benefit is that you may get lower rates than with PayPal; you are still charged the 2% by Farmigo, plus whatever your merchant account provider charges. This is not simple stuff, but once it’s set up and your web person shows you how to use it, it’s a breeze, and much easier than trying to do this stuff over the phone!
Either of these options allow your customers the convenience of ordering from their web-based smart devices, so now it’s easier for anyone with an Ipad or a smart phone to be a customer. This is how smart businesses set up their CSA’s.
Roadside stands (either your own or another grower’s) and pick-your-own operations provide opportunities to receive what are essentially retail prices for your produce. However, to offset those higher prices received, you will also have additional expenses for advertising, building (or leasing) and maintaining a facility, and paying employees to service your customers. With the right location and low enough operating costs, a farm store can be a really profitable way to sell your produce.
With pick-your-own operations, you may save on harvest costs, but you must be willing to accept waste and possible damage and contamination from untrained people in your growing area. You also need to be able to handle the occasional lawsuit from someone who stubbed their toe on a lettuce.
Selling To Wholesalers Or Distributors
In wholesale marketing, farmers often contract with shippers to market and ship the produce for a predetermined price. If you do not use a contractor and ship your own crops to a wholesale market yourself, your product will be subject to the greatest price fluctuations. Marketing cooperatives generally use a pooled cost and price compiled daily, which spreads price fluctuations over all participating producers.
The good thing about selling to wholesalers and distributors is that they will take large quantities in single deliveries, and often will pick up produce at your farm, which saves you delivery time and expense. Another good thing about selling to wholesalers and distributors is that they consolidate produce they purchase into large shipments, then resell to areas that can be quite distant, that you couldn’t afford to ship your small amount of produce to yourself. This opens up potential markets to you for produce you couldn’t get rid of locally.
Example: In Hawaii, we are blessed with a 365-day growing season and can grow basil year-round. The average price in the Seattle produce market for organic basil is $13/pound, year-round. You might not be able to get rid of 800 pounds of basil a week here in Hawaii, but you sure as heck can in Seattle! If you sell to a local distributor who ships a plane’s-worth a week, you may get better prices than shipping that small amount yourself. Ask wholesalers and distributors what they can’t get, or what’s expensive and scarce at certain times of the year, and then grow that. This is the successful strategy of “sell it first then grow it“.
The bad thing about selling to wholesalers and distributors is that they pay half of retail or less for the produce. You figure it out; what’s more appealing to you? More money for more work or less money for less work?
Selling To Retailers
Local retailers are another possible market, but they will pay about the same as wholesalers and distributors, ie half of retail or less. Selling to retailers is like selling to wholesalers and distributors except they usually will only take smaller amounts, which means you have more delivery costs to get rid of the same amount of produce. If you have a local retailer near you it may be a great relationship to have because your delivery costs will be low. Ask retailers what they can’t get, or what’s expensive and scarce, and then grow that if it makes economic sense. Remember, sell it first, and then grow it.
Selling To Restaurants And Hotels
Restaurants and hotels buy from retailers, wholesalers like Costco, and from distributors, at prices that range from full retail down to wholesale plus a bit. If you sell into this market, you will get at least this price range for your product, plus a little more if you deliver directly. This is much better than wholesale. Some really smart farmers establish direct relationships with this market where they custom grow what the restaurant or hotel chef wants. If the chefs get specialty items, delivered fresh, with a varied selection that changes frequently throughout the year, they are often willing to pay slightly more than retail. This is a great situation to be in and can really justify the extra delivery expense for the farmer.
How Big? Size Your Operation Correctly For Your Market
While you’re researching what market you want to sell into, you also research the quantities required to compete in that market. Wholesalers won’t pick up 40 pounds of something each week, but they can get excited about 400 pounds. Retailers usually take deliveries in the 10-50 pounds per week range. They won’t take 500 pounds a week of anything; but you may be able to sell 500 pounds a week of a single item between six or eight retailers.
When you have an idea how much of what you’re going to be able to move, add 10-15% for wastage, then you’ll have an idea how much your system needs to produce. You can size the system accordingly, after you do your Micro System test grow right away when you get home from this course and operate it for a few months to see what grows well in your area and climate and how much is produced per week. After a few months of test growing, you will have good thumbnail estimates of yields for the different stuff you’ve grown, and can project how much you’ll be able to deliver from a larger aquaponics system.