Building an On-Farm Market

Penn State Extension has worked with many farmers who have started their businesses by attending farmers markets. Those once-a-week, open-air, community farmers markets are a great way for farms to gain or strengthen their marketing skills. You learn how to create displays, have good signage, and interact with customers. If your goal is to always sell at farmers markets, that's fine, but for a few of the farmers, the goal is to ultimately get the customer out to the farm to shop. If that's the case, there are a few things to consider before you hang out the "open" sign.

To be clear, we are talking about something more than a roadside, self-serve stand. We are talking about constructing or converting a building. Farms that have an on-farm market are really one farm with two businesses. One business grows the crops, the other business sells the harvest, and each requires special sets of skills. If we are considering creating a market on our farm, we need to ask ourselves if there is someone within our farm business who has the skills and desire to manage a retail business. Maybe it's an opportunity for the next generation or an in-law, but someone needs to manage the retail business.

It is well worth the time to sit down and ask a few questions beforehand. The first thing to consider is conducting a SWOT analysis, which stands for Strengths, Weaknesses, Opportunities, and Threats. This should be done with the group of people who will be involved in the retail business.

• Strengths--identifying things that we do well.
• Weaknesses--things that need improving or that we don't do well.
• Opportunities--identifying potential revenue opportunities.
• Threats--what are the external factors that may threaten this endeavor?

This exercise will help you decide if an on-farm market is right for you.

Next, we need to look at the community we will be serving. Is there a need? Are we solving a problem? What is the demographic makeup of the community, and will our products match what they want to buy? Do we already have a customer base we can survey to find out what they would like to buy at the new market? What does the competition look like within a 5 to 10-mile radius?

There are many regulations related to operating any small business, and a retail farm market is no exception. Most states have small business development centers that offer publications and workshops outlining these regulations. Potential regulations you may have to deal with include: workers' compensation, unemployment compensation, building inspections, weights and measures, plant pest laws, sales tax, and perhaps others. State departments of agriculture will also have publications that will help you understand and satisfy these regulations.

Depending on the zoning regulations in your area, permits may be required for driveways or entrances to a business; check with local officials or your local state highway office before beginning construction.

Also, check with your local municipality to determine if building/occupancy permits are required for a farm market, and how any existing zoning regulations may affect your plans. Also, in many areas, permits are required before erecting any roadside signs.

If we build it, will they come? This could be an expensive risk. We need to be able to make our best-informed guess on the market potential. Depending on where your market will be located, you should check with your municipality or state Department of Transportation to see if they have traffic counts on the road where the market will be located. Look at the population figures for a five-mile and ten-mile radius of the market. We also need to know what the potential average gross revenue will be.

The University of Georgia Center for Agribusiness and Economic Development has a guide titled "Road Side Stand Marketing of Fruits and Vegetables" that has some useful information on market potential. Looking at existing direct-to-consumer research suggests that a majority of consumers drive less than 15 - 20 miles to purchase produce, which means we'll have to rely on the local community for success.

The guide has an example of estimated traffic for a market that was on a highway that saw 39,470 vehicles per day. If only 2% of those vehicles stopped at the market, that would be 789 cars. If each vehicle had an average expenditure of $10, that would be $7,890 in sales for the day. Now we start to get a picture of the market potential.

Store layout is critical. Will there be a prep area for produce? Where will the refrigeration and cold storage be? Where will customers check out? Ultimately, we want to create a great customer experience so they will return again and again. To do that, we need to think about how our customers will move through the market. It's a good idea to place staples or popular items in strategic places that require the customer to walk past less popular items first, in hopes that they make an impulse purchase. Open plan buildings allow for a flexible floor space that can easily allow for changes in the market layout.

Give plenty of consideration to your displays. Where will they be and what will they look like? We want to create various heights and lighting that will show off our products. Look at the produce section at some newer grocery stores. Chances are, the shelves are black with LED lights. This makes the color of the produce really stand out. Don't forget cross-merchandising to increase impulse purchases. Place apple slicers with the apples. Items like that have a higher profit margin than the produce and will increase our gross sales.

What about the checkout? We recently spoke with a market owner who moved their checkout from the middle of the floor and put it along a wall close to the exit. This freed up valuable floor space and they sped up the customer checkout. How? Traditionally, we see multiple registers with multiple lines of customers. Customers try to figure out which line is the smallest and run to that one. In this case, customers get into one line and there are multiple registers. Customers simply move to the next open register. This speeds up the check outline. We want our customers to linger as long as possible in our markets, but when they want to check out, they want to do it quickly.