Wednesday, June 29, 2011

Subscribe to Community Supported Retailing

A twist on subscription pricing is Community Supported Agriculture (CSA), where a set of consumers pay a fixed fee to have delivery of produce for a fixed time. For example, Whistling Train Farm in Washington State’s Green River Valley has had a CSA program in which 200 subscribers each pay $250 to receive one bag full of fruits and vegetables per week for the sixteen weeks of the growing season. LocalHarvest says there are over 4,000 similar CSA farms in the U.S.
     The CSA subscribers must accept receipt within certain geographical areas in order to ensure freshness of the deliverables. Many CSA programs have now moved beyond produce to include eggs, meats, cheeses, and flowers.
     Actually, the focus on the local could extend further to nonperishable merchandise. Think of it as Community Supported Retailing (CSR). The marketing message throughout is, “Buy local to ensure higher quality in products and higher quality of life for your neighbors.” This distinguishes CSA and CSR from non-local sweet-of-the-month or book-of-the-week subscriptions.
     Advantages to the retailer involve lower risk:
  • Risk of delinquent payments. You receive your money earlier in the exchange process and are more assured of full payment. This might allow you to offer reduced prices.
  • Risk of losing good will if difficulties happen to arise with your production. Your CSR customers feel they are in the endeavor with you. In fact, with the early versions of CSA about two decades ago, subscribers were thought of as purchasing shares in the harvest.
  • Risk of profitable innovations being rejected. Because of the “surprise me” understanding by the purchaser, it’s easier for you to introduce novel items the consumers can try out. This can build acceptance of attractive innovations. LocalHarvest claims that CSA subscribers’ children are more interested in eating previously-untried vegetables because the food was grown on “their farm.”
     But for successful CSR, you also must take steps to avoid the risks of overspecialization. LocalHarvest says CSA programs work best when they are one of many profitability sources. Farmers markets and restaurant sales in addition to CSA subscriptions. Whatever your line of merchandise, diversify the sales channels.
     Cancellations are less likely when there’s community loyalty. Also, because of mental inertia and the comfort of not having to worry about piecemeal purchases, people are unlikely to cancel a flat-fee arrangement midterm. Still, plan for some cancellations. Appeal to a base broader than locals.

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