COVID-19 is changing the way farmers do business. Farmers’ markets and farm stores are closing, so we need to find new avenues to get local products to customers. If your business has never offered delivery before, it is essential to take the right steps to get started.
Before getting started with planning delivery, you must first determine if it’s feasible for your business. Delivery is dependent on three different variables:
- The minimum order value compared to your average order value
- The frequency of orders received
- The geographical location of your customers
1. Minimum Order Value (MOV)
A Minimum Order Value (MOV) is the lowest dollar value that you will ship to your customers. Setting a MOV guarantees a minimum profit per order, while also ensuring that the cost of distributing your product is not too high per order. To calculate your MOV, we've provided a MOV calculator available here. Calculate your MOV and compare this to your Average Order Value (AOV) to make sure your deliveries are profitable.
To calculate your AOV, take the sum of all of your orders and divide that value by the number of orders. If the majority of your orders are above or at your MOV (AOV > MOV), offering delivery to your customers is economically sound.
2. Frequency of Orders
The next parameter that must be considered is order frequency. Generally, the more frequent the order from customers, the smaller the order size. If you have customers ordering multiple times per week, you're going to need a lot of customers in a concentrated area in order to make deliveries profitable. If customers are ordering once a month, chances are their orders will be much higher, and it will be much more economical for you to deliver to them.
3. Geographical Location of Customers
This parameter ties into the frequency of orders. If the incoming frequency is manageable for the time frame, the distance between customers must also be reasonable. For example, if 22 orders a day is feasible for your business, where must those orders be delivered to? 22 orders in 6 different cities may not be possible, or profitable in a day, however, 22 orders in the same neighbourhood is highly profitable.
The key is to get a high density of customers in a concentrated area, and set delivery days to drop off products. For example, you might service city A on Monday and city B on Tuesday. If all of these parameters are manageable—delivery works for your business. If this doesn’t sound feasible to your customers, there are many other ways to get your products to your customers other than direct delivery, such as adding pickup locations.
Now that you found if delivery is feasible for your business, it is essential to determine your delivery costs for your business.
I'm considering using a shipping partner. How do I get started?
If you are looking to offer direct delivery to your business, however, do not have the resources or time to deliver yourself, partnering with a shipping partner is a good option. Here is all you need to know about getting started with a shipping partner:
What is your current distribution plan?
Assess your current distribution plan. What are your customers asking for? Have you considered starting with pickup locations? Determine whether offering delivery is the right step for your business financially at this time.
Are you fulfilling more than 5-10 orders a day?
This is the starting point when you should start considering working with a partner. Depending on your margins and profit, it might be beneficial for someone else to take the load off of you.
Is your business growing or about to spike?
Do you have demand from customers that are out of your local delivery range? If you're in San Francisco and get an order in San Diego, you're not going to start the truck to deliver it. If you find yourself with more and more demand from far away places, calling a local 3PL is probably a good idea.
How do I find the right shipping partner?
If working with a shipping partner is feasible for your business, the next step is to find the right one. When choosing the best shipping partner to work with, here are some questions you should be asking:
- Do they have an enforced non-disclosure agreement (NDA)?
- What are their hours of operation? Do they ship on weekends and holidays?
- What is their capacity? Are they able to meet your delivery demands?
- Are they located in high-demand areas for your business? Do they have to travel far to get to you or your customers?
- Do they have good reviews from other food suppliers similar to your business?
- Do they have experience shipping food products?
- Can they provide necessary documentation regarding food and health safety standards?
- Are they temperature-controlled if necessary?
- How do they compensate for delays in delivery?
- Can they handle unexpected spikes in delivery demand?
- What is the communication strategy in regards to orders, shipping notices, receiving and adjusting notifications?
- What costs are included in their quote? These are some costs that may be added:
- Transportation costs: the cost of picking up the product from you
- Shipping costs: the actual cost of shipping your product to the customer.
- Return costs: the cost if a product is returned from a customer to you.
- Account set up fees: the price of creating an account.
- Minimum costs: this the minimum cost of using the service. This is important to note when having a slow month.
When deciding to work with a shipping partner, talk to them! Be sure to get answers to the important questions. You don’t want a partner that doesn’t work for your business and be left with unfulfilled orders, unhappy customers, and lost sales.
A common mistake made is jumping into business without proper research. Working with a shipping partner can help your business if done correctly. Get ahead, do research, and find the right partner.
What is co-loading and how can it help me?
Co-loading is the coordination of vehicle distribution routes from different suppliers to bring products to their buyers.
Essentially, it is connecting two suppliers that need to distribute their products to the same location, however, do not have the capacity to do it alone. Co-loading is a great solution if you are currently unable to deliver yourself. Consider partnering with a few neighbouring farms or farms that already service the markets you cannot access and consider sharing the load.
How do I get started?
Here are the steps to take in order to successfully implement co-loading into your business:
1. Determine your transportation capacity
This step involves determining your ability for distribution. Are you able to deliver your products or are you looking for an outside source to deliver for you? This determines if you are the transporter or a transport user within a co-delivery scheme. Transportation capacity could also mean that you are only able to go to one major city during the week instead of two. Determining these parameters will allow you to know what you need from a co-delivery plan before connecting with other businesses, and will help you plan for either being a party that's looking to save money by shipping with someone else or make money by shipping for someone else.
2. Create a distribution plan
This plan considers the physical distribution structure for your product and considers variables such as food safety regulation, space, and weight, vehicle type, what type of food products to ship with, whether you do pickups or deliveries, etc. The plan should consider every aspect that goes into distribution.
3. Create a schedule
Where and when will you be delivering your product? Create a monthly/weekly (dependent on your delivery frequency) schedule for a 2–3 month period that maps where and when you will be transporting goods. This schedule is bound to change, however, it is important to have an idea on when/where you need distribution. This will also make it easier to coordinate with other suppliers.
4. Find partners
When searching for a co-loading partner, make sure to consider all the variables you mentioned in your distribution logistics plan, like food safety and what type of food products to ship with.
It is also important to consider what their delivery schedule is and if you are able to match up based on yours. Possible suppliers can be found online by following social media pages of like-minded food producers, through online groups (most commonly found on Facebook), from past local markets, and through personal connections. How you find a co-loading relationship is unique to you!
5. Create an agreement and get going!
The most important step for implementing a co-loading plan to your distribution logistics is to put an agreement in place. This is the starting point for making co-loading possible. When you’ve found the perfect partner(s), remember to go back and review your logistics plans, transportation capacities, and schedules to create a unique plan that works for your businesses. Iron out the details and possible situations that may arise. Make sure you know how to deal with potential quality issues and payment terms.
What happens to pick-up locations?
A pick-up location is a predetermined area where a buyer is able to go to collect the items they have purchased from your business. Pick up locations can be a great way to be able to sell your product in multiple locations and serve multiple customers in an economical way, but with increasing concern and pressure to avoid public areas, a pick-up location may seem daunting for your customers.
Here are five tips to avoid contact and continue delivering to your customers:
1. Reassure customers
Your customers want to know that you are aware of the concerns and doing everything you can. Providing them with nutrient-rich food is an important job that can still continue during this crisis. Everyone is scared, so as a farmer you can do a lot by providing support to your customers.
2. Step up your sanitation protocols
In food production, it is essential that you are on top of all food safety and health standards. Also, be sure to communicate this with your customers if questions arise. Make sure you are prepared to answer anything that comes your way. Additionally, always have a bottle of disinfectant or a pair of gloves at the pick-up location!
3. Have everything pre-packaged and ready to go
Ideally, the customers picking up their orders want to be in and out of there as soon as possible. Be sure to have all the orders pre-packaged in bags or boxes, so that your customers can grab and go. It is important to be extremely organized and labeled, so as soon as a customer rolls in, you can give them their package. Be sure to not have any open bags or produce open. This will reassure your customers that their food is ready to eat and will not be contaminated.
4. Pre-pay online
Say no to cash! Handling cash at a pick-up location isn't desirable for you, your staff, or your customers. Make sure your customers pay online before picking up their orders. This makes the pick up faster, easier, and safer for all parties involved.
5. Offer direct-to-door delivery for vulnerable individuals
Offering delivery to all customers is not feasible for many farmers. This is where pick up locations can play a role. However, there are many groups, such as the elderly, that are advised to stay home at all costs.
If it is possible for your business, consider offering delivery to customers that fall within those vulnerable groups. This will allow you to keep those customers and continue to provide these individuals with healthy, and great food.
If you are not yet selling online, now’s the time! With increasing uncertainty related to COVID-19, it is important to stay prepared and have something in place as soon as possible. Whatever delivery strategy works best for your business, be sure to have an ordering system that works.
Local Line is built for farmers doing direct sales. Its easy-to-use platform makes ordering convenient and saves you time on your order packing. It will allow you to stay organized by tracking inventory, orders, invoices, and payments in real-time. Start accepting payments online and coordinating deliveries to give your customers options. As conventional sales channels like farmers’ markets are closing, it’s time to take charge and make new ones.
Make sure you’re ready for this surge in demand. We are ready to help you every step of the way.
Take your farm online today with a free Local Line trial.
Local Line is the best way for your food business to keep operating and selling during COVID-19. Use Local Line to set up an online store and offer home delivery to your customers.
Nina Galle is Local Line's Content Marketer, creating blog posts, templates, free tools, and other helpful resources for local food suppliers.