COVID-19 has changed the business model for many farmers. As some markets close and traditional sales channels adapt, farmers need to find new ways to reach their customers.
This is where online sales come in. Selling online allows you to reach your customer base without the need for a retail store or market table. With selling online comes home delivery.
We were very excited to ask Darren Stott from Greenchain Consulting for his best tips and tricks when it comes to successfully (and efficiently) offering home delivery to your customers.
As the director of marketing and purchasing at Spud (one of the largest stand-alone organic home delivery companies in North America) for 10 years, and then helping food hubs getting their products into restaurants, institutions, and retailers, Darren has over 20 years of experience in local food.
We asked him for help. Here’s how to successfully, efficiently, and affordably offer home delivery for your farm business:
- Find Your Unique Market Position
- Sturdy Packaging
- Efficient Packing
- Make Routes as Dense As Possible
- Strive for High Customer Retention
- Keep Your Online Store Up To Date
- Don't Grow Before You're Ready
Why should you bother doing it?
First, you need to ask yourself this question. It is not easy to do. You need to be able to manage costs and meet a threshold to make offering this service worthwhile. However, there are many reasons why offering home delivery services are great:
- An additional revenue channel. If you are currently selling at markets or wholesale, offering home delivery is another possible sales channel for your business.
- Offers customers alternative ways to shop from you. In light of COVID-19, many customers may not be willing or unable to shop from you at a market or pick up. Home delivery allows those who are concerned or are in a vulnerable category to buy from you.
- More control over your inventory. An online store allows you to take control of your inventory. You can sell exactly what you have, versus meeting a quota for wholesale, etc.
1. Find your Unique Market Position
There are a lot of grocery home delivery businesses existing and popping up during the pandemic, so the competition is steep. As a small business, you need to find your unique position in the market. How can you compete with larger retailers?
As a farmer, you are offering fresh, local products directly from the farm. Your products are better for people and better for the planet. Use this. Also, do NOT compete on price or convenience. Instead, you are offering a unique, premium product. This is your selling point. Luckily, customers are now willing to order from multiple home delivery services to get the products they want. Your customers will more than likely be ordering from Amazon, Costco, major grocery retailers and other online stores. None of these offer your direct from the local farm product.
2. Sturdy Packaging
Good packaging can make or break your business. The packaging must maintain the quality of the product during transportation. This means that the products remain fresh and at a safe temperature during transit. No dirty or flimsy cardboard boxes. You need to pack in a way that prevents any damage to the product such as wilting, bruising, or breaking. Also, in regards to damaged products, be sure to have a good return or credit policy. Great customer service will keep customers coming back to you.
3. Efficient Packing
Packing is also an essential part of your home delivery business. This needs to be efficient and cost-effective. Darren recommends to layout all products in order over two shelves, in front and behind the packer. This allows the packer to move very little and identify what needs to be packed in the bin. Ideally, you want to be packing at least 7 to 10 bins in an hour (depending on your range of products). Anything you can do to minimize friction and make the packing line more efficient, the better. Additionally, be sure to map out days and certain times of the day for packing. If you work with packers, this allows you to map out when they’re needed. Incentivize packers to be more efficient by offering bonuses if they meet thresholds and disincentivize damaged goods.
4. Make Routes as Dense as Possible
After packing, the delivery aspect of your business needs to be efficient. Densely packing your routes allows you to reach as many customers as possible in a short period of time. Start with only certain neighbourhoods or areas before offering delivery to your entire customer base. You need to ensure that you’ll have a sufficient number of stops in one area to make deliveries worthwhile. Some larger food delivery businesses ask for a certain amount of residents to join before beginning delivery in that area.
Be sure to make deliveries efficient. Ideally, you want to spend between $5-10 per delivery. If the truck is 70 cents and you’re paying staff $15-20 an hour, the cost for that delivery day could be $200-300. This means that you need to do 30 to 60 deliveries a day. Always do your research before offering delivery. You want to be sure the margins are good and you are remaining profitable with each delivery.
5. Strive for High Customer Retention
Home delivery and CSA services are infamous for having bad customer retention with a high turnover of customers each season. There is only a finite number of people that will subscribe to farm to table home delivery services, so you must work hard to keep them. Otherwise you either lose sales quickly or you must spend a lot of money on marketing to attract new ones. Apart from the obvious ones such as good customer service, fair prices, and high-quality products to retain customers, Darren suggests these other tips. For customer service be personable and share your stories, even daily. Get to know your customers as best you can and try and surprise and delight them (e.g. free product on their birthday). Another key tip is to encourage them to place standing orders with you (like a CSA). Spud has been doing this over 20 years and even offers a 5% discount on any item added to a standing order. Finally, automate a campaign to encourage customers to place another order or to return as a regular customer.
6. Keep Your Online Store Up to Date!
A key essential to running a successful home delivery business is to keep your store up to date. Offering out of stock items can have a large impact on the success of your online store. The last thing any customer wants is to have something in their basket that cannot be delivered. Additionally, it puts extra work on you to manage customer success if this is the case. Operate using a live-automatic inventory system, so that when a customer purchases a product the inventory gets automatically updated. Using a Local Line online store, you can do this.
7. Don't Grow Before You’re Ready
A common mistake Darren sees with many businesses getting into home deliveries is growing before they are ready to. Many people jump into renting large warehouse space, buying a new delivery truck, or bringing on too many people too early. Before jumping into anything, look at what you already have and how much time it takes to pack and deliver orders yourself. Look at borrowing or renting a delivery truck on a short-term basis. Growing too early can seriously hurt your cash flow and may not be worth it at the time! Invest some budget (about 3-5%) into marketing and customer retention to ensure sales.
The last tip is for if you offer products from other suppliers. If this is the case, be sure to have long lead times (at least 48 to 72 hours). This gives your suppliers sufficient time to harvest and pack the orders. You do not want to carry any excess inventory.
As a business, you do not lose any inventory and your customers get the freshest product with a longer shelf life. Longer lead times also allow you to offer a wide range of products because your business is not carrying the inventory. The wider the range of products you offer, the more convenient your business is to your customers.
Home delivery can be a tricky but successful business model. It is all about making good margins, efficient packing and routing, and providing excellent customer service. We hope these tricks and tips will help you start or continue to run your grocery home delivery business successfully, efficiently, and affordably.
Thank you Darren for your helpful insight and best practice tips!
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Used by all types of local food suppliers, Local Line helps you accept online orders, communicate with customers, and organize your fulfillment.
Nina Galle writes blog posts, templates, free tools, and other helpful resources for farmers and markets.