In addition to promoting their brand online, many food companies want to engage in e-commerce, the selling of their products through online channels. Two primary options exist for selling online including through the company’s own website or a third-party online retailer (otherwise known as a marketplace). And, within each of these approaches a number of considerations impact how a food business should go to market. For example, if you’re selling on your own website, will you use an off-the-shelf shopping cart program or create your own? And, if you’re selling through a third-party marketplace site, how will you get your product to the customer?
Online Storefront on Your Website
There are a number of critical considerations in building and maintaining your own storefront including:
Will you offer your full product line up or only a limited set of products?
Setting a minimum purchase amount, based on number of items or a dollar amount, may help ensure online sales are a profitable exercise.
While online sales may enable you to offer customers a lower price than they could find in stores, doing so may offend your retail customers. Consider the risk involved in undercutting these partners. One solution is to offer bundles or sizes not offered at retail to make direct comparisons less likely.
Think about what information you provide to help customers make a purchase. This might include product description, flavor information, product size, price, benefits, use recommendations, etc.
To accept credit or debit card payments, your business will need to obtain a merchant account through a credit card processor. The processing company works seamlessly to charge the customer’s credit card at the time of order and deliver payment to your bank account. While many of the storefront apps in DIY site builders like wix.com offer merchant accounts, many have higher fees than if you would find an account outside of their system.
Delivering the Product:
Depending on temperature state or product fragility, this can be a challenging issue to manage. Not only must you consider how you will package and ship the product, but you must also consider who will manage the actual physical work of the fulfillment process. Additionally, consider where the inventory for the storefront is being sourced and how that impacts your total inventory management.
Note that before you engage in any e-commerce strategy, you must make sure that you are properly licensed to do so. For instance, in Minnesota, if you are registered as a cottage foods producer, you are allowed to take orders of your product via e-commerce, but you must deliver the product to the purchaser in person. In other words, you cannot ship the product, even inside state lines. For more details and to get your questions answered, a good resource includes the Minnesota Department of Ag’s Food and Feed Safety Division. If you are a registered cottage foods producer, you can learn more here: Cottage Food Law Guidance | Minnesota Department of Agriculture or here: Minnesota Farmers’ Market Association – Cottage Foods Law.
Selling through a Third-Party Retailer or Platform
In addition to selling on the business’ own website, selling products through a third-party retailer such as amazon.com or shopify.com is a very common path to e-commerce; and the two do not need to be an “either or” choice. Selling through third party retailers has the advantage of reaching additional customers that may not otherwise have exposure to a brand’s products, either due to lack of distribution in physical stores, geographic limitations or limited traffic to the brand’s own website. However, it also creates additional costs as the online retailer charges for its online space similar to a grocery store. It can also invite increased competition from comparable products.
A number of the same considerations hold for selling through a third-party retailer as do for selling directly through your own website, though there are significant differences. With a third-party retailer, there may be limitations in how many products you can offer or how you can describe and promote your product offering. And you won’t need a merchant account as the retailer accepts the payment and transfers money to your business through an ACH transaction. But the logistics of this solution can be more complex as you may need to determine if you or the retailer is performing fulfillment of product for individual orders.