Shipping - Make It Profitable & Keep It Green
Living in a one-click culture, consumers expect everything they purchase online to show-up on their doorstep. This includes buyers’ expectations that Food ordered online will arrive at their door - no matter where the Farmer may be located. For Farmers this could mean delivering directly to local doorsteps or driving to a local postal service to have items directly shipped to customers' doors.
At Barn2Door we have onboarded record numbers of Farmers across all 50 states this Spring who are eager to capitalize on the surging demand for local Food --- as now 1 out of 3 Americans are now searching for Food online. While our software supports Farmers shipping direct-to-consumer, we are seeing growing success --- and now readily recommend Farmers --- concentrate on local pickups and local delivery. Read: 5 Easy Steps to Make Direct Delivery Profitable for Your Farm.
Shipping is not a silver-bullet. Shipping is far from risk-free, is a lot of work. Whether you ship or deliver locally, your Farm will still need to build up a customer base over time. While we support several Farms who ship exclusively (and successfully), there are several extenuating factors that can have a negative impact on your bottom-line profitability and the environment. If your Farm is considering shipping as a route to market, consider the following factors.
KEEP SHIPPING PROFITABLE
The most common mistake that Farmers make when it comes to shipping is planning to serve the entire United States. Many Farmers reason, “The US is a big market - why wouldn’t I want to serve any customer who finds my Farm online?”
It sounds reasonable, but there are 5 key problems with an open-ended shipping model to serve the entire country that will significantly impact your cost structure and your margins.
Shipping Zones. Commercial carriers set up shipping zones based on the distance to their distribution facilities, ground transit resources, airports, and fuel costs. The further the zone from your location the more expensive the shipment. Shipping within one zone is most cost effective, shipping across all zones (across the US) is the most expensive.
Ground versus Air. Depending on your Farm’s location and the commercial carrier you choose, the availability and reach of ground-only transit versus air-transit can vary dramatically. The size, weight and perishable nature of your products, can lead to costs of ground-only transit that are only one-tenth (1/10) of the cost versus air transit.
Loss Rates. The more hands and transfers of your Farm products from one vehicle to another vehicle, cargo container, or air transit, will significantly increase your rate of loss. Ground transit is by far the lowest rate of loss (1-2%); whereas shipping across multiple zones that require air transit is the highest (up to 8% in some cases).
Local Competition. Too often Farmers perceive the quality of their product and brand will outweigh the costs and convenience of other local alternatives. Local Farm brands are surging, if your product isn’t local it is at risk of replacement by a local brand with an equal product and no shipping fees. While today your Farm may attract customers willing to pay $100 in shipping for $100 of your products across the country, you are pricing yourself much higher than local alternatives who can offer brand and quality without the exorbitant shipping costs.
Market Awareness. Attempting to serve customers across the entire country is akin to shooting a shotgun at a bullseye on a dart board. In business we call this a ‘spray and pray’ model, synonymous with ‘spending a lot of money, hope it works, with likelihood of little to no results. To achieve market share and customer acquisition, a measured, focused approach will be more cost-and-time effective with better results. Be sure to include your total customer-acquisition-costs (CAC) into your profitability analysis.
The key tactics we see employed by the most successful Farms who ship their products regularly can be summed up in one-word: focus. These Farmers reduce the risks associated with shipping direct by focusing on their own state or nearby states --- where ideally they already have a contingency of Buyers.
Even Farmers we serve in remote locations (e.g. North Dakota), have made shipping profitable by following 3 simple steps:
Start With Ground Transit or Flat Rate. The cost basis for ground-only transit and the loss rates for your Farm products are the lowest in one zone. Build your core base of business in one zone - before you consider expanding. Consider all the metropolitan areas in your ground-transit shipping zone. Flat rate shipping simplifies pricing based on standardized parcel sizes with flat rate pricing, provided by the fulfillment provider (USPS or Fedex). This gives Farmers the ability to manage shipping expenses with greater ease and predictability. Check out this blog to learn more about Flat Rate shipping with Barn2Door.
Narrow Products Available for Shipping. Offer a short-list of products available for shipping that are higher-margin and can be bundled together in a 5, 10 or 20 pound box to ensure the costs of labor, packaging and shipping can be fully-recovered (or passed on to the Buyer as a reasonable % of overall costs). Don’t expand to individual ala carte items until you prove shipping is viable with your highest margin products first.
Build Brand Awareness. Invest in your Farm brand to differentiate your products from other competitors. You can amplify your brand awareness by concentrating marketing spend and influence in a targeted, specific geography. Partner with local businesses to extend your reach and create win-win outcomes for your Buyers.
Listen: MOSES Presentation: Attract Local Customers Online (15-min)
Read: ebook: Shipping: Is It right for your Farm?
KEEP SHIPPING GREEN
When shipping your Farm products, you need to consider Buyer perceptions of your commitment to environmental stewardship - which immediately impacts your brand. Shipping implicates a bigger carbon footprint (distance, vehicles, gas, excessive packaging), and if items are damaged or defrosted --- amazing products are wasted, you kill any chance of turning a profit, and you feed Buyers’ disappointment.
Many Farms we serve share a deep commitment to practices that will contribute to systemic change, including sustainable, organic, regenerative, biodiverse practices and the humane treatment of animals. These commitments resonate with Buyers who care about the quality of your products and the planet.
However, when shipping products, your Farm has to plan (and package) for the worst. Your Farm box may be stuck in a warehouse an extra day, it may be dropped several times, and depending on the season your products could be subject to extreme weather variations (temperature, moisture and humidity). And, don’t forget the Buyer may not be home - magnifying these variables.
Every Buyer interaction with your Farm shapes their perception of your brand. When shipping, the best Farms address 4 factors to reaffirm their commitment to good stewardship.
Minimize Packaging. Your goal should be to make packaging as streamlined as possible - reducing waste and costs to ship your products. Be precise with your calculations for using dry ice or gel-packs to ensure your products stay fresh.
Use Recyclable Packaging. Use packaging that can be recycled. Too often Farmers resort to wasteful, non-recyclable packaging for insulation (e.g. styrofoam). Wasteful packaging will lead many buyers to abandon a second purchase given environmental impacts (and the inconvenience of disposal).
Minimize your Carbon Footprint. Many products that are shipped have a massive carbon footprint, especially when Farmers ship beyond one zone and utilize air transit (which is inefficient). Calculate and minimize the food miles that your products travel, seek out ground-transit options and prioritize shipping closer to home.
Convey Your Commitment. All of your packaging should be branded and tout your commitment to environmental stewardship. Include a dossier explaining choices on packaging materials, shipping choices (e.g. ground only) and the average local food miles that your products have travelled.
Farms that employ these best practices endear customer loyalty and align their fulfillment practices (shipping, delivery and pickup) with the expectations of Buyers. Additionally, you’ll differentiate your Farm from other producers.
Read: The 4 Levers for Your Farm to Succeed Selling Direct: Quality, Price, Brand and Convenience.
Summary
When times are tough, Buyers will opt for less costly and more convenient alternatives to access Food. If your Farm chooses to offer shipping, focus on a combination of the right price, product mix and places to serve where you can still be cost competitive and profitable. Shipping can be done well, but to be competitive and mitigate risks, it is worth evaluating your options to make sure it is done right. We hope this was helpful.
If you’d like to see how Barn2Door could work for your Farm, then watch a 5:40 video.
Or contact us directly to arrange a conversation with a Barn2Door representative who works exclusively with Farmers in your area.