Wholesale Sales are Nearly Mandatory for Maximum Farm Profits
Small and Medium sized farms are BUSINESSES and must be run as a business. With the plethora of fantastically fun farmers’ markets springing up like wildfire, there is a sense of false security that direct retail sales, by being a vendor at a farmers’ market, is the best and most valuable avenue for generating business profit from your farm.
Smart farm businesses diversify their sales mix to add on other forms of profit generation to minimize the high risk of vending at farmers’ markets while still enjoying all the positive benefits that farm markets bring – direct consumer interaction, community involvement, business and branding exposure, and much, MUCH more!
Let’s start with some defining terms.
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services. In general, it is the sale of goods to anyone other than a standard consumer.
According to the United Nations Statistics Division, "wholesale" is the resale (sale without transformation) of new and used goods to retailers, to industrial, commercial, institutional or professional users, or to other wholesalers, or involves acting as an agent or broker in buying merchandise for, or selling merchandise to, such persons or companies. Wholesalers frequently physically assemble, sort and grade goods in large lots, break bulk, repack and redistribute in smaller lots. While wholesalers of most products usually operate from independent premises, wholesale marketing for foodstuffs can take place at specific wholesale markets where all traders are congregated. Traditionally wholesalers were closer to the markets they supplied than the source they got the products.
Wholesale options for local foods is regional specific and TRICKY!
Depending on what area of the country you’re in, wholesaling your locally grown food and products is either embraced with open arms, or shunned as the most evil thing ever conceived! For instance, in a few Mid-Atlantic States, most farmers refuse to sell at farmers’ markets and prefer wholesale only because it is less labor intensive. On the other hand, I know of a few New England states where the farmers refuse to sell wholesale simply because the point-of-sale profit margin seems higher. Why sell tomatoes at wholesale when you could charge double at a farmers’ market? It’s a good question.
Labor is the single most expensive and costly line item on any business’ spreadsheets. Considering that prime costs for all food produced on the farm includes: labor, soil health, seeds, fuel and machinery, gas and transportation, electricity, insurance, and everything else imaginable. Using pretend numbers, say it costs a farmer a total of $0.70 to grow a zucchini for sale at a farmers’ market, and they sell it there for $1.20. That is $0.50 profit per zucchini for the farmer at direct retail.
Remembering that TIME = MONEY. Many farms find themselves spending 3-4 hours of work per each hour of direct selling through their booths. Selling a zucchini wholesale costs less in labor costs. That same farmer may cost a farmer a total of $0.35 to grow a zucchini for wholesale, and it is sold at wholesale prices for $0.85 each. That is $0.50 profit per zucchini for the farmer at wholesale.
Adding wholesaling to a small and medium farm operation’s sales mix is crucial. It is a reoccurring order – a KNOWN sale, a known and reoccurring order that that farm can rely on. The profit margins are comparable to direct-to-consumer farmers’ market sales with less risk, less labor, and guaranteed returns.
The most crucial element is TIME. Selling some of your product wholesale requires less of your TIME. That time could be spent on other revenue generating activities.
Creating 4 Sales Channels for Solid Agricultural Sales: the proper product mix for an agricultural business is to mix and have all 4 modes of profit activities: Direct Retail Sales, Indirect Retail Sales, Wholesale Sales, and Partner-Profit Sales.
Diversifying your Agricultural Sales Mix Blog Series
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