Super Wal-Mart or Farmers' Market? Part III

This is the final part of my rant on how the industrial food chain can and should be reformed with a new business model that connects consumers with local food producers. People are finally recognizing that food is not just another commodity to be bought and sold soley based on price; food is too intimately related to our culture, the environment, and our health to be controlled by big business.

An Overview of the Business Model

This new retailer must fit into the mainstream market-driven capitalist economy in order to be viable and successful. This means that it should be privately owned and that it should operate based on the profit motive. Cooperatives and non-profits are seldom effective at entering mainstream retail markets because they lack consistent and committed leadership and are naturally averse to risk. Although the retail outlet is privately owned and strives to make a profit, it should operate significantly different than modern grocery retailers. It is essential that the outlet is independently owned by a member of the local community and reinvest in the community in a meaningful and progressive way.

There are two possible business models for this kind of retailer. The conventional model is to contract the purchase of products from farmers at a pre-negotiated price. This would give the retailer more control over price and product selection, but would involve risk if inventory failed to sell. A less conventional approach, which is more in-line with the overall nature of the business, is to let the producers set their own price. In this model the retailer is only facilitating the sale between producer and consumer, like a permanent farmers’ market, but more convenient for consumers and efficient for producers. The retailer would take a percentage from each sale and the unsold product would be returned to the producer. This model would shift more risk to the producer, which increases the incentive to produce an appealing and relevant product. The ability to control the retail price would result in a more efficient use of producers’ time and resources because they could shift production based on the forces of supply and demand. This model gives the individual producer autonomy, control, and a direct connection to the consumer – all of which are far too rare in the modern economy.

Limitations

Seasonality
A grocery store which focuses on local produce will have a limited selection of products due to the local growing season. In some northern locations, there is only a small window for local produce, but some items, such as dairy, meat, honey, jams, etc. can be available year round. The cyclical nature of the product will make it difficult to remain in operation all year and therefore to maintain customer loyalty. Maintaining overhead expenses, such as an expensive lease on a highly visible retail space, will also be difficult if sales are limited for a portion of the year.

Market Size
In order for a business of this nature to be profitable, it must experience relatively high sales volume. Assuming that the market for local food will always be a limited percentage of total food sales, only large markets can support such a retailer. In rural and semi-rural areas, the presence of family gardens, small farms, and farmers' markets meet most of the demand for local food products. Urban and suburban areas are the most likely target for this type of business model.

Possibilities for Expansion and Growth

An additional component of the business could involve a delivery service of perishable goods. Consumers could order products such as milk, bread, produce, and meat via telephone or the internet and have them delivered to their home or place of business for a fee. Discounts for group deliveries at workplaces and for recurring weekly deliveries could add another dimension of convenience. Suppling restaurants is another possibility since acquiring local products from individual producers is cumbersome for all involved parties.


The retail space should be comfortable for people of all political convictions if it is to capture a large market-share, but it could act as a focal point for the local food movement through educating consumers about industrial food production. A community information bulletin, meet the farmer events, books/magazines about alternative food production, and cooking classes are just some ideas that could educate consumers and build customer loyalty.

An eventual offshoot of the retail space could be a restaurant, deli, or catering service that exclusively uses local, sustainable, organic food. This may prove difficult in most locations, but a limited rotating menu could be possible.