Exploring different recurring revenue models for today’s farms
Farms today have many choices when it comes to their sales channels. Direct-to-consumer (DTC) sales through farmers markets, traditional CSA programs, subscription-box services and/or online sales are becoming the norm for many. A study conducted by the Canadian government found that in 2020, 13.6 percent of farms in the country reported direct sales, up from 12.7 percent in 2015. This rings especially true in farmers located near densely populated areas, where this percentage rose up to 20.9 percent.
When it comes to finding the right sales model, the choices for farmers can seem overwhelming. Should you opt for a traditional CSA program, where your customers receive a standard box over the season? Do you embrace the subscription model? How much flexibility do you offer? Is there a new model you haven’t explored yet?
The decision isn’t straightforward, as each option has its own advantages and drawbacks. In this article we’ll explore new and old CSA models that offer flexibility to both the farmer and the consumer.
Understanding the CSA Landscape
Before we delve into the CSA versus subscription debate, let’s clarify some key terms and concepts. What is a CSA? How about a buy-down CSA? Or a meat subscription? What about a veggie share?
In reality, they all generally mean the same thing. In any scenario, the customer signs up for a designated period of time to receive products directly from the farm. CSA programs were first designed for the customer to buy a share at the beginning of the season as an initial investment in the farm. In return, the customer would receive a rotating box of vegetables based on what the farmer harvested that week. Some CSAs even offered pick-your-own programs in which customers would harvest their own shares.
Today, we see all kinds of CSAs. Traditionally a model for market gardeners, these days you can find meat CSAs, egg shares, dairy shares, flowers — you name it. Due to the ever-changing definition of these terms, you really can make your CSA or subscription model whatever you want.
The Important Question
The question you need to ask yourself is, Do I want to offer my customers flexibility or not?
The answer to this question really molds the parameters of your program. By flexibility, we mean:
- Can your customers choose what’s in their box?
- Do they have a certain amount they have to spend with each order?
- Can they skip or cancel their box delivery?
- Is there a set “season,” or can they join and cancel at any time?
If your answer to any of these questions is yes, there are two ways you can proceed. The first: consider a buy-down CSA model.
The Buy-Down CSA
In this model, customers pay an upfront share for the period of the CSA — e.g., a summer share or a fall share or a winter share. Throughout the season, each week, they are able to pick what they want in their order within a certain limit (perhaps up to $40 per week). Over time, their share credit gradually declines. This model combines the benefits of traditional CSAs with the added flexibility of choosing what to receive each week.
Why do customers love it?
To begin with, they get full flexibility. Traditional CSAs often have low retention rates, in part because customers don’t always get what they want each week or feel that they’re wasting product when they get something they don’t actually like. With a buy-down model, customers can fill their carts with exactly what they want, week after week. There’s also a great opportunity for an upsell if your customers spend their credits before the season is over.
Also, you, as the farmer, get the same upfront payment you know and love from the CSA model. The strength of the CSA model is getting guaranteed cashflow from your customers at the start of the season. This is especially powerful for newer farms that are starting out.
Setting up for Success
This model may sound great, but how do you actually do it?
To start, you need a way to track customized orders week after week. With increased customization comes increased complexity. To navigate incoming orders, track shares, and manage packing and fulfillment, use a farm-focused e-commerce platform to get organized.
The first step is to set up online ordering. You want to treat your CSA ordering like a regular storefront. Upload all your products into your e-commerce platform and allocate pricing and inventory. You can make your storefront private and invite your CSA members to sign up for their orders.
Once they have paid their shares for the season, add their store credit to their account. Each week, when ordering opens, send an automated email to your CSA list, have them input their orders, and they pay with their store credit. As the weeks go on, their credit will be automatically tracked and deducted from their account.
Finally, when ordering closes for the week, you can download pick and pack lists directly from the orders table and get your orders ready for pickup or delivery.
The Subscription Model
The subscription model is also beginning to increase in popularity. In this method of CSA sales, the parameters become a little more flexible. Customers do not have to pay upfront for the whole season; they may be able to join or leave the subscription at any point, and it doesn’t necessarily need to be a “box.” You could offer a milk or egg subscription, or a bouquet subscription, or microgreens — the options are endless.
Why offer a subscription model versus just having online sales?
First, subscriptions offer a regular ordering cadence. Instead of reminding customers to shop each week, you ensure customer retention by offering a subscription program. This is especially helpful with wholesale customers such as chefs or grocery retailers. They often want the same order week after week, so having an automated standing order ensures your sale and guarantees their inventory.
Depending on the parameters of your subscription model, you can also offer a la carte add-ons for your subscribers. In addition to their subscription order, you can allow customers to shop your retail store and add additional products on a one-off basis.
For example, maybe each week they get a meat subscription from you, but this week they want to add eggs or dairy to their order. Subscriptions can be as flexible as you want them to be. You can allow subscribers to easily skip, add, or cancel an order as per their needs, enhancing customer satisfaction.
Finally, similar to the upfront payment of a buy-down model, the subscription model offers a predictable and recurring income stream, providing valuable cash flow predictability for your farm.
Getting Creative with CSAs
We’ve only covered a few of the many ways you can set up a unique recurring ordering system for your farm. The beauty of a CSA is it doesn’t have to meet a rigid definition — it evolves and changes as we do. Many farms across the country are embracing a variety of models. Here are a few for you to discover.
Nose-to-tail model: Some ranchers and livestock farms adopt a nose-to-tail approach where customers get a variety of prime and non-prime cuts. Pricing varies on the weight and payment terms. If customers pay upfront for 12 months, they get a 10 percent discount; for 6 months they get 5 percent.
Combination model: Others offer a combination of both CSA and subscription models, allowing customers to choose between an upfront payment at the beginning of the season or a monthly, automatic recurring payment operating as a subscription.
Flexible start dates and ordering frequencies: One meat producer has taken flexibility to a new level by allowing customers to start their buy-down CSA at any time. Furthermore, they provide flexible ordering frequencies, allowing customers to order weekly, bi-weekly or monthly.
The chef subscription: Subscription models don’t only have to be direct-to-consumer. Many farmers are opting to offer subscriptions, such as microgreens or dairy, to their wholesale customers, including chefs. Think of it as a modern standing order.
Selecting the right approach to selling your farm-fresh products — be it through a CSA, a subscription model, or something completely new — is a pivotal decision that can significantly impact your farm’s success. Each model offers its own set of benefits and challenges, catering to distinct customer preferences and operational needs. By carefully considering your customer base, your product offerings and your financial goals, you can make an informed decision that ensures the growth and sustainability of your farm.
Nina Galle is the brand manager at Local Line, a software platform that makes flexible CSA options possible. For guidance in choosing the best model for your farm or to explore the features that Local Line offers, go to site.localline.ca.
