Industry Sector: Farm Shop

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1 Industry Sector: Farm Shop Introduction You have decided that you want to run a farm shop - now decide how you will achieve this and what sort of a shop you will run. Will you: be able to make use of a redundant farm building sell just your own produce or will you sell other locally produced goods from other suppliers process and sell other goods for example cheese, cured ham or sausages sell any non-food items such as crafts, flowers, plants also try trading at a local farmers' market purchase an existing farm shop. (However, you may find that opportunities to buy a going concern are scarce) The course of action you choose will affect the costs you will incur and may also affect how soon you start to receive income from the venture. Cash sales 'Cash sales' means all income from your main business activity which is received at the time of sale. While a certain amount of your customers will pay you in cash, remember that Cash sales also include: debit and credit card payments cheques (if you decide to accept them - many retailers choose not to) To prepare your cash flow, you need to estimate how much income you will receive over the next twelve months, including VAT. To do this you will need to work out how much you are likely to sell. There are a number of things to consider when you make your estimates: Type of business who will you be selling to will your customers be mostly local or do you hope to attract people from further afield will customers be able to reach you easily and have access to sufficient parking how big will your premises be (this will affect the range of goods that you will be able to stock) what will your opening hours be will you open every day

2 will you supplement income by trading at local farmers' markets Your products what type of goods will you stock - for example you may decide to just sell a core range of produce such as fruit and vegetables, fresh meat and meat products will you process any products yourself - for example making cheese, yoghurt and cream to sell will you sell any cooked foods such as home-baked cakes will you concentrate on local specialities or on a range of mainstream goods will your goods be fresh, frozen or a mixture of both are you able to offer organically produced goods will you offer a vegetable box scheme - that is delivering boxes of mixed vegetables to customers on a weekly or fortnightly basis will you sell any craft goods are you prepared for the fact that your stock will vary depending on what is in season at any particular time how will you monitor which are unpopular/popular goods how will you combat customer theft Pricing what will your pricing policy be (don't forget, you must be able to cover your costs, overheads and drawings) how often will you review your prices will you offer discounts and special offers To help with your decisions, click on the checkpoints for guidance. Once you have worked out a Cash sales figure add it to the relevant field in your cash flow forecast. Market research Estimating demand You will need to find out whether there is enough demand in your area for your proposed farm shop. Firstly, check out the competition to see if there are there any existing farm shops nearby. Count these and any other outlets nearby selling similar products, such as delicatessens. Remember to take into account businesses that are not direct competitors - for example large supermarkets such as Tesco and Sainsburys, local greengrocers, market stalls and convenience stores that also sell fresh produce. Consider how many customers your shop needs to attract in order to achieve the turnover you require. Are there enough households locally or will you have to attract customers from further afield? If you are in a tourist area, will you be able to tap into the tourist market during the holiday season?

3 As well as selling your goods directly to individual customers, you might be able to supply other local businesses. Try contacting local restaurants or hotels - they may be interested in having a regular supply of fresh vegetables, organic produce or local specialities. After all, these things are a selling point for them, too. Some farm shops specialise in a particular type of product (for example, cured meats or special cheeses) and offer these via mail order throughout the country. Estimating sales in this case is very difficult - careful marketing will be required and sales may take some time to build up, so it is probably best not to rely on these sales when making your initial estimates. Shop location Unlike most other shops, farm shops are not situated in towns or villages and so may benefit less from passing trade. As your shop is likely to be at the farm, you probably will not have much choice in terms of location. Nevertheless, the position of the shop on the farm premises is important and you may have a certain amount of flexibility in this. The shop should be easy to see and find. Providing easy and well marked access will help to encourage any passers by to stop. Signs should be clear and attractive and parking facilities outside the shop or close by will be helpful. Competition from other outlets may be less fierce the further away you are from large towns and cities, but of course the local customer base will be smaller too. This may not be too much of a problem, however, as people are prepared to travel considerable distances to a farm shop if they think the products and service are good enough. Offering local specialities, organic produce, or your own unique products may encourage more customers to make a special trip to your shop. Research has shown that farm shop customers tend to be from the higher income groups. They are often looking for a helpful and efficient service, good quality food and produce with low 'food miles' which outlets such as the supermarkets can't always provide. If your farm shop is in an affluent area, you may find it easy to attract this kind of customer. In less well off parts of the country, you might have to concentrate on building up sales over a wider area. Why will customers choose your shop You need to make sure that enough customers will choose your shop rather than other food outlets. People buy their food from a wide variety of sources - supermarkets, greengrocers, convenience stores, markets and so on. Try to visit as many of these competitors as possible. Have a good look around to see what range of goods they are selling and what kind of image they project. Make a note of:

4 the range of goods they offer the prices they charge whether they sell organic food what their opening hours are the type of customer they attract whether the premises and fittings are modern and smart what level of service they offer You may find it useful to print out the Record sheet to record the results of your research. It will be difficult to compete directly with other food shops by trying to sell similar goods at a similar price. Instead, see if you can identify a gap in the market that your shop can fill - for example, you might find that none of your competitors stock organic produce. Perhaps you can sell different products not available elsewhere - your own recipe sausages and meat products, for example. Specialising like this will distinguish your shop from its competitors and should help to attract customers. If you cannot identify a clear gap in the market, or an opportunity to specialise, you can try to attract customers by emphasizing the quality of your food. In recent years people have become more concerned about food safety and quality. Talking to the person who has produced the food, and buying it direct from them will be very appealing to many people. A welcoming atmosphere and a high level of service will also attract customers, so you should aim to provide these too. Check out future developments Check whether there are any plans to build new road systems which mean that local traffic will bypass your farm. Check too, whether there are any plans to start a farmers' market in your area. Such a market might appear to be a competitor, but you could find that taking a stall leads to extra sales and is a good opportunity to publicise your shop. Find out what people want It is very important that you make sure that there is a market for the goods that you intend to stock. You could carry out some surveys of the people in your local area to find out: what sort of goods they would like you to stock - fresh fruit and vegetables, fresh meat and meat products, organic produce, frozen goods, flowers and so on whether they would be prepared to travel to your shop if they would be interested in regular home deliveries of fresh produce whether there are any local greengrocers, hotels or restaurants looking for a source of locally produced food what they think of your proposals in general what, if anything, they don't like about the existing food outlets in your area

5 Sector trends What has been happening in the farm shop sector Although the large supermarkets dominate the food sector, the number of farm shops has been rising in recent years and there are now several thousand of one sort or another. Farmers have been encouraged to diversify and have often had to do so in order to survive. A farm shop is an ideal way to expand the business and grants are often available to help start one up. Food scares in recent years (for example BSE and worries about GM food) have made many people far more aware of the quality and safety of the food they eat. This has led to an increasing demand for fresh 'wholesome' food and particularly organic produce. Customers are also keen to meet the people who produce their food and many are eager to show their support for local farmers. Similarly, concerns about the environment and animal welfare have encouraged people to buy locally produced and welfare-friendly food. Farms shops are ideally placed to take advantage of this growing market and many established shops have seen an increase in customer numbers in recent times. Farm shops and farmers' markets fared surprisingly well during the economic downturn that began in the late 2000s despite selling many products that are cheaper to buy elsewhere. Both farm shops and farmers' markets are popular with tourists and turnover of the sector may have been boosted by the increased number of people that chose to holiday at home in the UK rather than going abroad, particularly in Farmers' markets The first farmers' market started in 1997, but there are now a significant number around the UK, which reflects the huge increase in public demand for fresh, high quality food. Markets are usually held on a weekly or monthly basis and the emphasis is on quality and freshness. At these markets, local growers and producers sell their own goods directly to the public - everything sold should have been produced by the stallholder. Many farm shop proprietors also take a stall at their local farmers' market and it can be an excellent way of boosting sales and raising awareness of the shop. Vegetable box schemes Vegetable box schemes, like farmers' markets have really taken off over the last few years. Boxes of fresh, seasonal vegetables are delivered directly to customers' doors (or sometimes to a central drop off point). Deliveries are usually made every week, but fortnightly deliveries are sometimes offered. A set price is paid for each box, although the content varies depending on what is in season. Some farms offer boxes which also include fruit, dairy and meat products.

6 Recent developments In recent years there has been: increasing public awareness about food quality increasing concern about environment and welfare issues growing awareness and concern over 'food miles' (the distance a particular food product has travelled between its point of production and point of sale) a fast growing demand for organic food for much of the 2000s, although this slowed somewhat as a result of the economic downturn a call for locally produced goods an increase in the number of farm shops, farmers' markets and vegetable box schemes an increase in customers at many existing farm shops - according to FARMA research, around a third of households now make some purchases from farm shops You will have to decide whether: there is sufficient demand to support your shop you will be able to compete against other shops selling fresh produce in your area there is a need for you to specialise in order to compete more effectively you can identify a particular niche in which you can specialise you will offer organic produce or your own specialities to attract customers from your competitors you will offer additional services such as a vegetable box delivery scheme you will sell other locally produced goods, or just your own you should offer additional products such as plants, craft goods or flowers Keep up to date with the farm shop sector The National Farmers' Retail & Markets Association (FARMA), 12 Southgate Street, Winchester SO23 9EF represents the interest of farm shops in the UK. They publish a journal, Retail Farmer, which is sent free to members at least three times a year. They also send members a weekly e-newsletter. They also run a certification scheme for farm shops and farmers markets, and offer other benefits including training and a consultancy service to help shops develop. Customer profile Your market Your core customer base is likely to be made up of mainly local people. However, some customers might be day visitors combining a trip to the farm shop with a recreational visit to the countryside. You might also attract passing trade if you are situated close to a busy road

7 and your shop might become a popular destination with tourists if you are in a holiday area. You may also get custom from local businesses such as hotels and restaurants. If you sell any niche products and become known as a source of a local speciality or build up your own range of goods processed on the farm, you could attract customers from further afield and you may consider selling this type of product online or through classified advertisements in a magazine like Farmers Weekly. Your market research should have helped you to identify any gaps in the local market and the type of customer you can target. Cash or cheque Your customers may pay you in cash, by cheque or by debit or credit card. Special offers and discounts You might decide to run occasional special offers. For example, you might offer half price trial boxes if you run a vegetable box scheme, or give discounts to bulk purchasers such as restaurants. Special offers on pick-your-own fruit can help to bring in extra custom. Many shops also give discounts to staff, regular customers, family and friends. Check out the local opposition for ideas and keep a close eye on any special offers you do make to be sure that they are working for you. After all, these kinds of promotions might encourage extra sales, but they will also affect the amount of profit you make on each sale. What to sell The range of goods that you sell is likely to depend to a certain extent on the type of farm the shop is connected to, for example a dairy farm, beef farm, horticulture farm or a mixed farm. In addition, your research may have identified a niche in the market that your shop can fill. For example, you might specialise in organic vegetables, dairy products or meat. Stocking your own special products (such as cheese, home baked cakes, cured meats, fruit juices, ice-cream and so on) could also help to attract customers to your shop. You are likely to buy in a certain amount of produce from local farms or other suppliers to supplement what you grow yourself. You might sell only fresh goods, or a mixture of frozen, fresh and cooked products. Or you may decide to sell only organic produce. The range of food you stock might include some or all of the following: fresh vegetables fresh eggs dairy products (cheese, cream, ice cream, yoghurt) fresh meat

8 meat products (sausages, cured hams and so on) apples, plums, pears soft fruit (strawberries, raspberries, blackcurrants, gooseberries) fruit juice home-made pies and pasties home-made cakes and scones home-made jams, preserves, pickles and fudge Although most of your income is likely to come from the sale of food, you might also consider selling a number of other items. For example: bedding plants cut flowers beeswax candles and polish craft items (for example pottery, wicker baskets, chairs and so on) cider or wine Promoting your shop The right image It is important that your shop projects the right image. Try to offer a high quality, friendly and knowledgeable service, in a relaxed atmosphere. In short, coming to the farm shop should be an enjoyable experience and different from shopping in the High Street. Farm shop customers like the personal contact with people who have been directly involved in the production of the food, so it is vital that you and your staff are friendly and knowledgeable about the goods sold. First impressions are important, so the approach to the shop should be attractive. The shop building and its setting can do much to create the right image. For example, converted farm buildings which are carefully updated can retain much of their rural character. The inside should be clean and bright, but natural materials such as wood and stone can work well. Any signs used should be easy to read and kept clean. The layout of the shop and the way the food is presented is also very important. Farmhouse furniture and wicker baskets could be used for displaying goods. Try to keep a spacious feeling inside the shop to encourage people to browse at their own pace. The National Farmers' Retail & Markets Association (FARMA) has a range of banners, signs and carrier bags which can be printed to include your own label. You could also consider applying for the Association's certification status. This is granted if the required standard is met at an inspection which focuses on quality, service and value. 'Les Routiers' encourages all its member hotels and restaurants to seek out locally produced foods and certified farm shops are listed, free of charge, in its guide book.

9 Advertising your shop Whatever the characteristics of your shop, you must make sure that your potential customers know about you and the range of goods you offer. Word of mouth recommendation is very effective, but can be a slow process. You may need to promote your shop by advertising to your potential customers. Press releases to local papers, adverts on local radio, in newspapers and magazines and leaflet drops can all build up awareness of your shop. They do, however, cost money so you will have to judge whether the potential benefits are worth it. Signs and posters are cheap and can be effective. Taking a stall at a local farmers' market can be a good way of starting to build up a customer base - make sure you provide promotional leaflets on the stall with details of the shop. Note that FARMA can help its members with publicity material and press releases. Many farm shops have a web page and members of FARMA are listed in the association's directory and linked to from their website. Some shops sell their products online and this can be particularly effective if you are are planning to stock unusual or unique product ranges. Additional attractions It may help to have additional attractions to encourage people to make a journey to your farm. Perhaps you could set aside an adjoining area as a tearoom, which people could use after shopping. Many farms which have a shop also offer pick-your-own fruit and vegetables when they are in season - this can be a great draw. Other attractions you could consider providing include farm tours, nature trails or perhaps even a 'maize maze' - these have been used to great effect at some farms and generally create a lot of interest. Pricing policy People are likely to visit your shop for reasons of quality (and for the experience), rather than purely price. Farm shops are specialist retailers selling fresh, high quality goods - your customers will know this and will be prepared to pay accordingly. Nevertheless, it is important that your goods represent value for money - many farm shops pitch their prices around supermarket levels. Organic produce generally commands a higher price and if you are selling local specialities or home cooked products you are also likely to be able to charge more than competitors charge for similar, mass-produced items. Getting the price right is very important. You must make sure that the difference between the cost price and the selling price is enough to cover all of your operating costs, including your own drawings.