Dive Brief:
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A study from the U.S. Department of Agriculture's Economic Research Service shows that consumers who buy fruits and vegetables from farmers' markets spend more than $10 on average per week than consumers who buy fruits and vegetables from supermarkets — $28.36 and $16.53, respectively, according to The Packer.
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However, though the number of farmers' markets has grown exponentially in the past 20 years — less than 2,000 registered in 1994 to nearly 8,700 in 2017 — the number of consumers who shop farmers' markets is small, less than 5 percent of households per week.
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The study also shows that consumers who shop at DTC outlets do not spend less at supermarkets overall, indicating that DTC outlets do not pose a significant threat to grocery retailers. Still, the growth of DTC outlets underscores a general demand for organic, locally-grown produce and supermarkets are wise to meet this demand to capture those consumers who are willing to spend more.
Dive Insight:
A study from the USDA, "The Relationship Between Patronizing Direct-to-Consumer Outlets and a Household's Demand for Fruits and Vegetables," attempts to paint a picture of consumer expenditures at farmers' markets and other direct-to-consumer outlets versus traditional supermarkets. One conclusion is that while consumers spend more money on produce at farmers' markets, they do not spend less during a grocery visit. Consumers tend to buy more produce from DTC outlets, as well as a higher variety of produce, which could add to their bills.
The study indicates that patronizing a DTC may increase preferences for produce. Notably, consumers are driven to DTCs mostly to purchase fresh produce; 73% of consumers listed this as their primary motivator.
One differentiator that benefits DTCs is their educational activities — about 81% of farmers' markets embrace these types of activities, such as cooking demonstrations or offering recipe cards. According to the USDA study, this has far-reaching benefits such as furthering consumer interest in new foods. It may also prompt consumers to try new types of fruits and vegetables and, ultimately, spend more.
There are a number of drivers behind the increased interest in farmers’ markets, namely a growing awareness in organic, natural and healthy foods; more engagement with sustainability initiatives; a desire to support local farmers; Internet- and TV-driven education about new foods; and millennial preferences for value-added food. The study showed that some households are willing to spend more at a DTC outlet than they would elsewhere because of these factors.
Although DTCs represent less than 0.5 percent of U.S. Agriculture sales, according to the report, consumers who visit DTC’s more frequently could lead to higher levels of fruit and vegetable spending across all outlets as they become exposed to more offerings.
Though the report seems to illustrate there is no real threat posed to supermarkets by DTCs, that doesn't mean supermarket culture hasn't changed to keep up with the very preferences that have led to the growth of farmers' markets. Kroger, for example, offers recipe cards near the meat department. Walmart has invested in products that are grown in the same communities where their stores operate. Natural and organic chains like Whole Foods have grown into national, billion dollar businesses. Some grocery chains have even gone so far as to add farmers' markets. For example, five Utah grocery chains owned by Associated Retail Operations added "Eat Fresh, Eat Local" farmers’ markets in their stores last summer.
Perhaps that is why farmers’ markets have not posed much of a threat — many traditional supermarkets are already meeting demand by taking a page from DTC outlets and offering more locally-sourced options. This seems like a win-win for both types of businesses.