by Are you constantly second-guessing yourself when it comes to setting prices in your farm store? You’re not alone.
Walking the fine line between overcharging and undercharging is one of the toughest parts of owning any retail business — especially when you offer unique, labor-heavy products like farm-fresh produce and meats.
In this blog, we’ll help you feel more confident by sharing everything you need to know about how to price farm products. Keep reading to learn the basics of farm store profitability, common mistakes to avoid when setting prices, and four steps to a winning pricing strategy.
Pricing Farm Products 101
Let’s start with the basics. The number one thing to keep in mind when pricing farm products is that your prices must outweigh your operating expenses to turn a profit.
While it might be tempting to set prices that sound or feel right, you should base your pricing strategy on these three critical metrics:
- Cost of goods sold (COGS): This number represents how much it costs to prepare a farm product for sale. For example, let’s say it costs you $5 to add one pound of ready-to-sell chicken wings to your farm store’s cooler.
- Markup/sticker price: Once you’ve calculated the COGS for your pound of chicken wings, you can mark it up to produce your sticker price. If you’ve decided to add a 40% markup to each of your farm store’s products, you’ll charge around $7 as the sticker price.
- Margin: This metric reveals how much you earn in profit from each sale. In our chicken wing example, your sticker price is $7 and it costs you $5 to produce the wings, so you’ll have a 29% margin and $2 in total profits.
Understanding these numbers and taking an objective, data-driven approach will take the guesswork out of learning how to price your farm products, putting you on a solid path to profitability.
Mistakes To Avoid When Pricing Farm Products
Setting prices for your farm products can be intimidating — which is why many farmers underestimate their value and undercharge for their products.
Let’s look at three common pitfalls to avoid if you want to achieve farm store profitability:
- Relying on intuition: Often, farmers “go with their gut” when it comes to pricing their products, setting prices that seem reasonable. Instead, rely on your COGS and profit margin calculations to help you make informed pricing decisions.
- Matching your competitors’ pricing: Don’t fall into the trap of offering the lowest prices in town. As a farmer, you offer high-quality, local, sustainably-crafted meats and produce — which is why you should charge higher prices than local supermarkets.
- Lowering prices out of fear: You might worry that higher prices will drive shoppers away, but customers who care about where their food comes from and how it’s produced will be willing to pay a premium price — as long as you market your farm correctly.
In short, charge what you’re worth. The right customers won’t balk at premium prices — they’ll be excited to stock their refrigerators and freezers for your premium products.
How To Price Farm Products: 4 Essential Steps
Now that you know what not to do, you’re ready to create a winning farm pricing strategy. Let’s explore how to price farm products in four simple steps.
1. Calculate Your Farm’s Operating Costs
Understanding your operating expenses is the first step toward farm profitability. Knowing the costs associated with each item in your farm inventory is crucial for setting the right prices.
For example, how much does it cost to get one pound of steak ready to sell? Here are a few line items to include in your calculations:
- Land: The lease or mortgage payment on your pastures, plus any maintenance costs to keep your land ready for grazing
- Feed: The cost of any supplemental food or vitamins to support the health of your cattle
- Veterinary care: The cost of routine health checks and necessary medical treatments for your cattle
- Labor: The wages and benefits you pay farm staff for raising and managing cattle
- Maintenance: The cost of building and maintaining barns, fences, and water troughs
- Processing: The cost to transport your cattle to a processing facility for slaughter and butchering
- Distribution: The costs associated with keeping your farm store open and ready to sell to customers
To turn this pound of steak into profit, you need to set a price that exceeds the total cost of producing it — which is why calculating your operating expenses is step one in how to price your farm products.
2. Tailor Prices to Your Sales Channels
You wouldn’t charge the same price per pound for filet mignon and chuck roast, right?
The same principle applies when setting prices for each of your farm’s sales channels. Most modern farmers take an omnichannel approach when selling their farm products — which means customers can shop in person at a physical farm store or shop online and enjoy convenient pickup and delivery services.
These e-commerce options require extra effort and investment. You have to create a system for managing online orders, package customers’ items safely, and ensure each order is fulfilled quickly and accurately.
If you don’t adjust your online prices to reflect this luxury service, your profits won’t keep up with your farm’s actual success.
This is why we recommend tailoring prices to each of your farm’s sales channels. Shoppers can pay the lowest price by visiting your farm store in person, a slightly higher price for pickup orders, or a premium price for the convenience of door-to-door delivery.
3. Rely on a Farm POS System
Relying on handwritten labels and spreadsheets to track pricing information can confuse you and your customers — especially as your harvests change with the seasons.
This is why we recommend ditching these old-school methods and investing in a modern farm point of sale (POS) system instead.
This powerful tool stores and organizes your farm’s pricing information, making it easy to reference and update prices when needed. If you choose a POS system designed for farm e-commerce, you can also set different prices based on your customers’ location and delivery preferences.
Your farm store POS system should also include in-depth sales reporting and analytics. These insights can help you make more informed decisions when it comes to pricing — allowing you to raise prices for in-demand items and offer enticing promotions for slower-moving products.
4. Stay Flexible
Learning how to price your farm products isn’t a one-and-done kind of project.
You need to regularly check your prices and ensure they match the quality of your offerings — especially as your farm expands and you offer new products, adhere to new organic or regenerative standards, and adapt to changing market conditions.
While charging what your products are worth is key, there are a few creative ways to make farm-fresh products more affordable and grow your customer base. Loyalty programs and subscription boxes are both excellent ways to earn steady sales while rewarding repeat customers with a slight discount.
Set Your Farm Store Up for Success With GrazeCart
Ready to increase your farm store’s profitability? We can help!
GrazeCart is a powerful POS solution designed specifically for farm stores like yours. With our software, you can set and adjust prices, get valuable insights from your sales reports, and customize your in-store and online shopping experience. Plus, you can monitor your farm inventory, boost sales with loyalty and subscription options, and enjoy 24/7 support at no additional cost.
Take GrazeCart for a spin by launching your free, two-week trial today.