Why Do Some Farmers Markets Fail?

New, small markets are most vulnerable to closing down.

With the nation’s growing interest in buying local food, many farmers markets are flourishing and the number of new farmers markets nationwide is rapidly increasing. But the untold story is that many new markets don’t succeed — especially small markets, according to Larry Lev, extension economist with the Oregon State University (OSU) Department of Agricultural and Resource Economics.

“It’s not a slam dunk,” Lev told Farmers’ Markets Today. “You can’t just decide you’re going to start a market and assume it’s going to be successful. That hasn’t been the case, and it’s a hid- den risk that’s been unreported.”

Lev was part of an OSU Extension group that conducted a seven-year study of the performance of Oregon farmers markets. From 1998 to 2005, 62 new markets opened in Oregon and 32 did not reopen, for a net statewide gain of 30 markets. So, for every two markets that opened during the study period, one market closed.

The study’s results, which were released last summer, revealed a sharp contrast in failure rates between established markets and new markets. Markets more than four years old almost never failed. Thirty of the 32 Oregon markets that did fail were less than four years old, with 15 — almost half of these failed markets — closing after a single year of operation.

Small markets are at risk

New markets typically generate little administrative revenue and tend to be run by inexperienced managers. Small markets are often run by volunteers or managers who are paid low salaries. Both situations can result in high market manager turnover and limited administrative revenue, which contributes to market failure.

The study indicates that small markets are especially challenged to sustain a balance of supply and demand. Smaller markets with fewer vendors have less variety of products, which can make it harder to attract customers. Without customers, the market can’t attract more vendors.

Small markets are more at risk for failure than larger markets since they can quickly descend into a crisis if even a few key vendors drop out. Lev said the addition of crafts, in certain circumstances, can be critical to making a smaller market viable. He suggests taking a close look at both the demand and supply sides before starting a market.

“Are there customers out there to buy the products, and are there farmers in the area willing to sell at the market? If either customers or vendors have other, more attractive options, the market may have trouble getting established.”

Market organizers need to recognize what the economics are going to be for the market and look at all available resources, Lev added. While grant funding can be very helpful in getting a market started, the market’s sustainability may require ongoing financial assistance from local government, the local business community, individual businesses or a sponsoring organization.

“If a market is managed by a public employee, this frees up vendor fees to be used for marketing and infrastructure to make the market more successful,” he said.

Plan size and management

The study, which recommends planning for size as the first step in creating a viable organization, states: “The planning process should include setting a goal for the market size in general or a goal by year, so that cash flow can match the scale of the market and appropriate management tools can be provided.”

A second recommendation is to provide training programs for new managers and boards of directors, which will help reduce manager turnover. Volunteer market managers have high potential for burnout, so there should be a plan in place to transition to paid manager positions. Lev said this is especially important as the number of vendors reaches more than a dozen and growth requires the manager to work more than seven hours a week during the market season.

Integrated into the community

Once markets have a footing in the community and have made it past the four or five year mark, it’s relatively rare for them to close. “Markets become remarkably resilient,” Lev said. “Communities tend to value farmers markets and expect them to be around, and communities will figure out ways to support their markets. A successful farmers market can become the same sort of fixture in a community as a public library or park.”

Lev and his colleague Garry Stephenson, coordinator of the OSU Small Farms Program, have been training market managers in the U.S. and abroad in research methods. They emphasized that market managers who collect data from vendors and consumers get a better idea of what is going on at their own markets.

“Almost all of the recent markets have been started by community groups,” Lev said. “There is tremendous interest in local food, and because of that, more people are now deciding they want to be involved. That’s different than before.”

To view the complete study, “When Things Don’t Work: Some Insights into Why Farmers’ Markets Close,” by Stephenson, Lev and Linda Brewer, visit the OSU Extension Service website, http://extension.oregon