Farmers Market Profitability

Farmers markets (FMs) serve an important role in local food economies. FMs are multi-scalar operations that involve a number of decision makers: farmers, market managers, and local residents. FMs provide economic benefits to individual farmers, as they serve as a marketplace where local and regional growers and producers can sell products to customers, yet, unlike traditional retailers who have devoted merchandising managers, FMs are constrained by a lack of operational efficiencies that would allow FMs to effectively mimic this marketing strategy to increase profitability. The purpose of this study is assess how FM managers can optimize sales revenue at their markets and expand market reach to increase traffic to their markets. We assemble a revenue history from market vendors for the years 2016-2019 and perform a portfolio optimization problem. This approach assumes that a FM’s decision of which vendors to allow to sell at the market is akin to an investor’s problem of deciding which assets to hold in an investment portfolio. In a case study of a farmers market in the Southwest, we find that the current vendor mix is sub optimal and lies much below the efficient frontier. The implications of these results for FM managers is improvements can be made by changing the vendor mix to match one of the portfolios that lie along the efficient frontier.