Benefits of Direct Marketing
The main attraction of direct marketing, 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. 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.
Also study the customers. How many are there? What is their ethnicity? Are they young or old? Are they 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’ markets sales alone may not generate enough money to make a living, requiring you to look at additional marketing strategies, but they are a good place to start a business.
To find New York farmers markets near you, contact the Farmers Market Federation of NY at (315) 400-1447 or http://www.nyfarmersmarket.com/ or visit the NYS Department of Agriculture and Markets’ website at http://www.agriculture.ny.gov/FandMSearch.html.
On-farm sales can both enable urban farmers to incur a profit as well as to attract visitors to their urban farm sites, subsequently fostering increased visibility and community engagement.
To be successful, you need to enjoy having lots of people at your farm. 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.
Keep in mind that some municipal codes and zoning ordinances prevent the sale of fresh produce and other farm products from residential and other districts, and be sure to check your city’s ordinances before pursuing any on-farm sale endeavor.
Internet and Mail-Order
If you develop unique, high-value products that are easy to ship, this strategy can complement your other direct marketing efforts. Packaging and shipping costs need to be considered but for products that are not bulky or heavy, this can be a profitable strategy. One easy option for getting started with internet marketing is to list your farm on the following free sites: www.localharvest.org or www.nyfarmersmarket.com/.
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, and the up-front money reduces financial and marketing risks for farmers, and customers share in production risks. CSA operations also increase public visits to, and the visibility of, an urban farm. For more information about running a CSA operation in an urban environment, see Factsheet #38, CSA in the City, of this Guide.
Many chefs are looking for fresh, local products to feature in their menus, and urban farmers can benefit from the wealth of restaurants in urban centers. 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% of retail for produce.
Drawbacks include the need for small quantities of some items. 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, and other institutions 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
For more information on direct marketing, contact the North American Farmers’ Direct Marketing Association online at http://www.farmersinspired.com/.