How Do I Price My Farmers Market Products?
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For farmers market vendors, deciding on the price to charge for various products can have a significant effect on income, sales volume and, most importantly, profitability. It’s likely worth doing some careful research and analysis. Here are some things that farmers may want to consider in setting those prices.
Perhaps the most important consideration is the true cost of bringing the product to market, from purchasing the seed to setting it on the market table. An enterprise budget that includes the costs of all inputs (e.g. seed, labor, irrigation, fertilizer, equipment use, packaging, etc.) provides a systematic means to do so. Templates for creating an enterprise budget for various crops are available from many land-grant universities and Cooperative Extension agencies across the country, including from the NC State Agricultural and Resource Economics Department.
Another obvious factor to consider is what other sellers are charging for same or similar products. Researching the price at different markets and at different times of the season would provide a more comprehensive picture. This could even lead aspiring vendors to conclude that they shouldn’t grow or sell a particular product as it would not be profitable, and thus alter their production plans.
Vendors may also want to have a strategy to make a product stand out from the crowd, thus justifying a higher price. This might be accomplished by offering a product earlier or later than usual, or providing exceptional quality, or having unique packaging, or displaying products in a unique fashion. Telling a compelling farm story could also be a factor, and this might be accomplished by displaying farm pictures on the farmers market table, email newsletters, personal interactions, social media posts, etc.
Granted, there may be scenarios where vendors set prices that are below the cost of production. This could happen for a variety of reasons, including:
- They have another product (or products) that provides adequate profit
- They sell at the market for reasons other than profit (e.g. social interaction, altruism, etc.)
- The product is a “loss leader” for that vendor, which they hope will draw customers
- The vendor had excess production or lower than expected sales volume and is just trying to recoup some of the sunk costs
While it is absolutely the right and prerogative of each vendor to set prices as they see fit, this author would suggest that when vendors set prices with adequate profit margins, there is potential value to the overall health of the market. If the value proposition for the farmers market customer is quality, freshness, community and connecting directly to the farmer, then those benefits could reasonably justify a premium price. If all vendors set prices with that philosophy, then more vendors remain profitable and the market gets stronger. Admittedly, this author is not an economist and stands to be corrected on this argument.
Pricing at farmers markets is undoubtedly a complicated endeavor, and there is no “one-size-fits-all” approach. There are, no doubt, factors to consider that are not addressed here. However, if a vendor hopes to maximize profits, careful thought and analysis will be indispensable.