Episode 15: Farm Sales through Online Platforms and CSA During COVID-19
In this episode, we discuss the legal mechanics of online sales platforms and CSA agreements as part of special coverage on COVID-19’s effects on farm businesses with Sarah Vaile, Farm Commons' Staff Attorney.
Sarah: There’s no denying the magnitude of havoc that COVID-19 is wreaking across our globe, and on the farmers that we here at Farm Commons work hard to serve. We all know what’s going on. It goes without saying, but just to recap for anyone who’s been stuck under a rock or on Mars these past few weeks…The way we are able to access our food has drastically changed, and means farmers have to change the way they sell their farm products. Restaurants are mostly closed for dining in and grocery stores, while open, are now scary places to be in. The threat of catching the coronavirus looms large, and is on every shopper’s mind as they touch a head of broccoli or a carton of milk – who else has touched it, and are the dreaded COVID germs lurking there, ready to infect? Even farmers markets, potentially safer, being in the open air and carrying food handled only by known persons in the local community, feel questionable in this landscape of fear.
Eva: With all the policy changes around public gatherings, retails operations, and social distancing, what are farmers to do with regards to sales?
Sarah: I asked myself this question at the farmers market yesterday morning, as I looked around at all the beautiful mixed greens, kale and spinach, huckleberries, wild mushrooms, bunches of beets, bouquets of brightly colored flowers and sunflower sprouts that farmers spent so much time and energy and blood, sweat and tears to produce, and gather and grow and harvest. I felt so much sadness thinking that this might all go to waste as the usually bustling market was but a shadow of its former self, with only the most diehard amongst us showing up to make our purchases.
Then I remembered, farmers are the most ingenious, inventive, resourceful people I know. This is proving to be true as we find our way through this strange new world of social distancing and masks, Purell and rubber gloves. The online farm sales platform Barn2Door says in its website article about tips for farm sales during the COVID-19 crisis that online farm sales have increased 10x and in some cases even 20x in the recent weeks. Barn2Door encourages farmers to keep up the online momentum, and do what they can to make it easy for customers, something they’ve become accustomed to thanks to Amazon, Netflix etc. Offer locations in town for customers to pick up farm products and better yet, deliver right to their door. Offer a “bundle” of farm products such as milk, bread and other staples, which are delivered on a weekly basis. Farmers are quickly learning how to shift their business models, and their responsiveness to the changing needs of customers, and an ever-changing situation, will keep them in business.
Eva: At Farm Commons, we have great guides available for farmers who sell wholesale, providing guidance as they enter into contracts with grocery stores, restaurants, schools, governments and other such traditional, brick and mortar vendors. But, what about when farmers enter into contracts with online platforms such as Barn2Door, Farmingo or Harvie? Are the legal considerations of these sales platforms different than say, through a farmers market?
Sarah: The considerations are different because what these virtual sales platforms do is different than the brick and mortar stores. Like I said, what these platforms offer varies from company to company, but mostly they offer the ability for farmers to sell online – in other words, they provide a landing spot, online, where customers can see the farm products that are available, select what they want, and pay for it. This is very different from a traditional wholesale arrangement where, say, the grocery store, for example, actually takes possession of the broccoli and kale, physically handles it, decides where to place it within the display areas in the store, prices it and so on. Typically the online platform never actually takes physical possession of the farm products, and is not responsible for actually getting the products into the hands of the customers. What the online platform typically does, instead, is provide the software ingenuity that attempts to mimic, virtually, the experience of the customer going into the grocery store and doing the shopping in person. It replicates this experience, as best as possible, in an online setting. The platform also offers the means for the customers to purchase the products easily, through secure payment options. Something a lot of these sites do is the marketing, which involves using a whole set of tools to create a robust online and social media presence for their farm clients. They also handle a lot of the logistics and other administration of sales such as creating invoices and coordinating deliveries.
Eva: What are key questions should farmers be asking when pursuing these new sales platforms?
Sarah: The activities involved in selling farm products online are different than brick-and-mortar and therefore the legal considerations are different too. Oregon State University’s Center for Small Farms and Community Food Systems has developed a helpful guide for selling local food during the COVID-19 crisis. It includes a list of online sales platforms and a list of questions to ask when contacting these different companies to determine if they are the right fit. These questions are also helpful in thinking through the legal considerations of these arrangements, which basically entail being clear about what I, the farmer, am agreeing to do for the vendor, and what the vendor is agreeing to do for me.
You need to talk about money. One of the single most important issues to cover for sure. You need to get clarity around what it will cost you, the farmer, to use the platform. You’ll want to know what the fee structure is. Is it a one-time set up fee upfront and that’s it or do they take a percentage of every single sale? Is there a discount to you once you reach a certain sales volume maybe?
Then you’ll also want to understand how customers pay for your products. Are credit and debit card fees charged to customers or is this something that you, the farmer, have to cover? What are those fees and when and how are they collected? Can customers pay by check or cash on delivery? Can customers pay with EBT or food stamps? Is there a way for you to offer customers discounts, coupons, and promotions? How long does it take for customer payments to deposit into your farm’s bank account? How is sales tax handled on the platform?
You also want to know if this a company you can trust. Do they have a lot of experience? How is their reputation? You might want to ask how long has their online sales platform has been in use and find out how many farmers do they currently serve.
You’ll want to find out how easy it will be to get started, as this is, well, really an emergency situation that requires urgent attention – you need to get online and to your customers right now. You’ll want to find out the details around what it will really take to get started, and if there’s a wait because of the current increase in demand for online sales platform services.
You also want to get a handle on the issue unique to farms and your farm products. What is the process for providing all the information to the vendor about what farm products you have for sale? How will you update your product list and pricing? Will you be able to set inventory limits so that you don’t oversell products? Is it possible to create pack lists directly from the sales platform? How about labels for your farm products? Does the platform provide any assistance around the logistics of delivering farm products?
Then there are the technology questions. How will the online sales platform integrate with your current website? How does the customer interface work? Is the platform easy to use on a Smartphone? Is it possible to integrate the platform with your existing accounting software? What kind of IT support does the company provide when all of this gets too confusing?
Having an online sales platform has an added bonus of capturing sales data in one place, electronically. But, you might want to ask, How is my farm’s sales data used and/or shared? And, if this is something you might do only temporarily, What happens to my farm’s sales data if I stop using your platform?
Many of these questions can be found in demo videos or FAQs on the platform website, but others can only be answered through talking directly to someone from the company, and they usually are readily available to talk to you. Like most software programs and other online tools, they will ordinarily include a contract for you to sign, online. It can feel tedious to read through the whole contract, but like any contract, it’s a good idea to take the time to read it and understand what you are agreeing to. And always ask. If there’s something you don’t understand, do take the time to get an explanation. Even in these times of crisis, where it feels like you have no time to read the fine print.
Eva: Many farms are also shifting to the CSA - community supported agriculture model, can you tell us more about that model?
Sarah: The shift from selling in brick-and-mortar stores (or open air farmers markets) to selling farm products via online storefronts is all about making it easier for your customers to buy your products. Shifting to a CSA model is another way farms are shifting their sales models to make it easier for their customers in these COVID times. I’m sure most of you listening right now are familiar with the CSA model but for those who may not be, CSA stands for Community Supported Agriculture. The basic framework of the community supported agriculture or CSA model is that customers sign up to become “members” of the farm’s CSA program, and these members pay money upfront, before the farming season even begins, to receive a share of farm products usually on a weekly basis throughout the farming season. Typically the farmers dole out their products into boxes for each of their members, who all receive the same kind and quantity of produce and other farm goods. The customers pick up their CSA box at a designated location, sometimes on the farm, sometimes at a drop point in town, at a designated time each week.
Eva: Why do you think CSA is a good fit for farmers and consumers during this time of COVID-19?
Sarah: This is a really workable model in ordinary times, and is attractive for both farmer and customer – the farmer gets money upfront during the lean times of winter and early spring, and can adequately plan what to grow based on CSA demand. The customer gets a steady supply of fresh, nutrient-packed local farm products throughout the season. The CSA model provides security for both farmer and customer. In the COVID times, this security is even more welcome. Plus, like the online storefront, the CSA model offers the ability to get farm fresh products without having to go to the store. It’s a win-win for everyone.
Eva: What are important legal considerations farmers should pay attention to with CSAs?
Sarah: There are some legal considerations with the CSA model that farmers should be aware of as they look to shift to this model. One is: How much risk are the customers taking on in this arrangement? Another great feature of the CSA model for the farmer is that in a typical CSA model, the customer shares the farmer’s risk. What I mean by that is that farming is a risky business. There’s no guarantee that what the farmer plants in the spring is going to make it to bountiful harvest time. Natural disasters happen. Disease sets in. Predators sometimes don’t mind fences. Your customers have paid a pretty penny in the beginning of the year to be able to share in the expected harvest later. But what if there’s no harvest to share in? In the traditional CSA model, the farmer says, “I’m so sorry but I used all your cash, dear member, to buy all the seed and pay my workers to plant the seeds and weed and water and who knew there’d be a tornado that wiped this all out. Thanks for investing in my farm and taking this risk. We’ll try again next year.” In that model, the member is out of luck – no cash, no food.
Many people will be willing to enter into an arrangement like that, understanding that farming can be risky, but usually they will get their food in the end. They don’t mind investing in small-scaled, organic agriculture despite the fact that they may lose out in the short-term. However, if this is not communicated clearly to the CSA members, and the tornado happens and the members get no food, you can be certain that you will have some disgruntled members. So, to avoid this misunderstanding and bad result, farmers should be clear about how risk is being shared, and whether refunds will or will not be issued if there’s no farm product to share with members. Farmers can choose to share risk any way they wish – it just needs to be communicated clearly to members.
Another consideration is around the legal right to farm product. This issue surfaces when CSA members don’t pick up their CSA box within the designated pick-up window. Say that pickup time is every Thursday in the park between 4-7pm. What happens when a member misses that window and their CSA share is left in the park after dark? Legally speaking, who does it belong to now? The answer is whoever the farmer and member agreed it belongs to. If the farmer never clearly communicates the answer to the member before this happens, this can lead to extreme frustration and disappointment for the customer. The member who realizes at 8pm that night that they didn’t get their box, may be very sad to learn that their box has been donated to the local food bank.
Eva: What Farm Commons resources should farmers look to?
Sarah: Farm Commons has a great resource for farmers looking to shift to the CSA model. On our website you can find a CSA Member Agreement Workbook. It contains a lot of helpful guidance to create a member agreement as well as sample agreements from simply online forms to more comprehensive contracts appropriate for a brochure or other written form.
Disclaimer: We are working hard and fast to get information together about COVID-19 related programs to share with the farming community as quickly and accurately as possible. Please note that things are rapidly shifting during this time and what was accurate info 2 days or 2 weeks ago may not be accurate tomorrow. As such, please look for our most recent updated information on all COVID-19 issues. As always, the above communications are delivered for educational purposes only and do not constitute the rendering of legal advice.
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