No, farmers didn't flock in droves to buy all their farm inputs online, leaving their local dealers high and dry. It's funny how the prognosticators, and the companies they touted, could be so wrong.
Hindsight being what it is, Wall Street's irrational exuberance inflated the valuations of Internet companies, lighting the fuse of the dot-com bomb. But now the pessimism of the past three-year shakeout across dot-com land is waning and is being replaced by rational thought and realistic expectations.
E-tailers have learned that customer adoption of online buying will take time. However, their new deals, such as online-only discounts and free shipping, may quickly ramp up mouse-driven buying.
Clicking to buy
Witness the past holiday season. Consumers spent more than $13.7 billion online during the 2002 holiday shopping season, according to a report from the Goldman Sachs Group, Harris Interactive and Nielsen/NetRatings. That's an increase of more than 24% over 2001, and if you add in travel booked online, the number jumps to $15.7 billion.
Farmers are buying and selling online, too, but not in numbers akin to the consumer holiday spree. “Until they see greater efficiency benefits toward purchasing inputs, managing data or marketing/selling products, adoption will continue slowly,” says Sally Thompson, who heads Purdue University's Department of Economics. “Adoption in agriculture has not been an overnight, oh-this-is-a-so-much-better-way-to-do-business [attitude] that occurred in some industries. But we're moving toward a time where the next generation of farmers will adopt electronic transactions from an efficiency point of view.”
Some gone, some new
Most e-businesses selling to farmers have found small niches of slow growth, or have dropped out. DirectAg, Powerfarm and Farms are a few of the players that dropped their e-commerce efforts this past year. Web businesses such as XSAg, Icorn, Fielder's Choice Direct and ForTheFarm continue direct sales, and a few companies, such as Redball, have started new online ventures.
The longest survivor in this field is XSAg.com, heading into its fifth year, still bringing together ag chemical buyers and sellers. Fulton Breen, company president, admits its expectations of rapid adoption have been scaled back. “We always thought this e-commerce venture would be a spot market at best, but if we can capture 5 to 10% of the market, that's a $1 billion business. Right now, we're similar in size to a big chemical distributor, when looking at sales volume,” he says.
“Our effort is super-automated now, where two people run the entire business, which has improved our profitability,” Breen continues. “We had 30% growth last year, and look to increase that in 2003. Most of our business is chemicals and 95% of our trades are ‘name your price’ auctions.” The site's traffic continues to be heavy, because many farmers use it for price discovery to help them obtain better deals locally.
Both Fielder's Choice Direct (beginning its sixth season at www.fielderschoicedirect.com) and Icorn (in its third season at www.icorn.com) continue to market corn online. Although their business models differ, both continue to operate without dealers.
Fielder's Choice, started by an entrepreneur and bought by the seed coatings company Landec Ag, claims that its traffic and sales continue to build. “The Internet is just a small part of our business because seed is a consultive sell. Farmers come to our site to get information but then go to the call center to discuss questions and purchases with one of our 30 seed consultants instead of placing the order directly online,” says Bill Gass, vice president of marketing and new business development for Landec.
“These consultants specialize in various areas and, using our system of aggregated data, can make specific recommendations from the 75 hybrids we offer,” he says. “Data come from customers who report back after the season, similar to how book reviews are used at BarnesandNoble.com. And they tell us this feedback is valuable to them. In the future, we expect more and more farmers will place orders online, but it will build slowly over time.”
Family-owned Icorn.com has been quietly doubling its sales every year in a marketing territory of Illinois, Indiana and Ohio. “We're proud to be known as the Internet seed company and we have no desire to expand beyond this geography,” says Icorn President Steve Hilger. “We want to stay close to the customer, stay on top of genetics selections, keep our testing efficient and costs down, and just do a good job in a smaller area.”
Hilger says that seed performance is still the bottom line, and he's proud that the company had 84% customer retention between year one and two and that 95% of those customers increased their Icorn acres. “Our Web site visitors are spending an average of 32 minutes per visit, and much of that is due to our interactive CrossCheck yield comparison guide,” he says. “While we love the efficiency of the Internet and the valuable interactive tools we provide, we know human interaction is very critical, and that's why we try to get to customers' farms and visit with them at farm shows.”
Common products sell
ForTheFarm's strategy of growing slowly has helped it survive. “We aim to target mid- to large-size farmers and offer them the right product in the right size for a lower delivered price,” says Jason Batton, marketing director for owner Select Publishing. “We've learned that it's important to offer a product line that is advantageous to everyone and that the Internet is not poised for the hard sell. That's why 50 to 60% of our chemical sales are made up of Roundup, generic glyphosate and other basic, familiar products that are easy to buy and sell.”
ForTheFarm's success has come from a diversified Select Publishing operation that includes Online Farmer magazine, advertising, postcards, free classified advertising, and a relationship with vendors to be their e-commerce outlet. “One example is our work with Merrick's, to help them sell their animal health products online,” Batton says. ForTheFarm keeps its overhead low, stocks no inventory and distributes goods through more than 200 suppliers nationwide.
A new entrant, Redball LLC, has launched an e-commerce Web site at www.spraypartsrus.com to complement the catalog business it launched in 2001. The site offers critical parts in all major sprayer parts categories, as well as Redball-branded products. Orders typically are delivered to customers the next business day.
A need for speed
AgriStar Global Networks Ltd., which began in 2001 as a satellite-based communications company for agriculture, suspended longtime e-commerce player DirectAg's e-commerce business last fall and will make it a part of www.agristar.com. “Due to cost structure and connectivity issues, we suspended this effort to focus on marketing satellite-based, high-speed Internet solutions for farmers and supply chain groups,” says Kip Pendleton, president of AgriStar.
Pendleton firmly believes that always-on, high-speed connectivity combined with in-home or in-business networked computer solutions will find broad appeal among individual producers, agricultural companies and even small-town businesses and schools. “Our mission is to create a high-speed network of large groups of top producers, dealers and other channel partners,” he says. “With that in place, AgriStar will provide a comprehensive array of premium electronic information and business services to these top farm operators and their agribusiness partners.”
eBay's on fire
Ebay is the hottest agricultural e-commerce tool on the market right now, according to the Team FIN farmers who use it (see sidebar). Granted, eBay didn't set out to accomplish this; it has just evolved that way.
“Ebay is very reactive to the needs of its users,” says John Levisay, senior manager of the agriculture category, eBay Business. “We wait and see what groups of products seem to take off on their own; then we put category structures around them and services to build them.
“Over the last 18 months we've noticed a lot of traction in the movement of agricultural products, everything from tractors and parts all the way down to repair manuals,” Levisay continues. “So in mid-January we created eBay Business, a new business destination that has an agriculture subcategory within it. All we do is organize categories to make it easier for buyers and sellers to place items, find items and transact.”
And they are transacting. Depending on the day, you can find between 7,000 and 9,000 items in the agriculture category, which grew 80% during 2002. Statistically, eBay sells 3,600 ag-related items per week. Included in that weekly total are per-day averages of 21 pieces of farm-related equipment, 126 parts and accessories, 47 tractors or tractor-related parts and accessories, and 82 operating manuals. Top product brands listed in this electronic marketplace are John Deere, IH, Kubota, Case and Ford.
As a category grows, such as the eBay Motors marketplace did three years ago, the company adds a range of services that customers demand to ensure safe and reliable transactions (above and beyond existing buyer comments and seller ratings), such as licensed inspections, escrow, financing, insurance, vehicle shipping, title and registration and a lemon check. “And most of these ideas come from the customer, which is one of the many reasons why eBay is such a dynamic marketplace, visited by 6.8 million people every day, with more than 62 million registered users,” Levisay adds.
“It's an extremely cost-effective way to sell items, with the top fee being $3.30 to list large items,” he explains. “You get unlimited space and up to 15 photographs to describe your product. If it sells, eBay gets a small piece of commission — a sliding scale of 5.25% for the first $25 in value, plus 2.75% for the amount from $25 up to $1,000, plus 1.5% for the amount over $1,000.”
Not only does this marketplace benefit individuals, but companies use eBay to market their products to the masses, considering it a natural extension of their business models.
Still in their infancy, eBay and other e-commerce sites promise to continue to change the way America does business.
Team FIN e-buyers
We queried our diverse group of Team FIN farmers about buying on the Internet.
Central Illinois farmer Gary Appleby admits he is an eBay addict. “I'm always looking for deals practically every night, from tractor filters to antique tractor parts, and I've bought and sold quite a few things on eBay,” he says. “In fact my wife helped pay for our daughter's college education by buying items at local auctions, cleaning them up and reselling them on eBay. It's an amazing marketplace, and one we're very comfortable with, as we've had only one bad check in six or seven years of using eBay.”
Like many farmers, Appleby is always on the prowl for good used equipment, and the Web helped him buy his Kinze planter and an AgChem Rogator. “We bought the planter through the local dealer, and the Internet played a valuable role in helping us get a better deal since it's easy to find used machinery prices,” he says.
Paul Gervais, who farms in southwestern Minnesota, likes shopping the Internet for used equipment because “you can search a big area in a short amount of time, as well as find an established value of products,” he says. “I bought a used car from a dealer through an eBay auction, but then I went and examined it before I paid for it. It all turned out great.”
Along with perusing the online farm equipment classifieds, Gervais also spends time reading news, checking out the agricultural machinery chat rooms and following the automotive industry at the Car & Driver and Hot Rod magazine sites.
Central Indiana farmer Steve Webb says he is using the Internet more and more and has become quite a scavenger on eBay. “I've bought everything from a chain saw and hydraulic and antique tractor parts to repair manuals and electric motors,” he says. “Several things I've learned by experience, such as watching model numbers carefully, paying attention to shipping costs, and carefully defining my product searches to wade through the thousands of items available. I've found that with eBay, most of the time you can save money, you can find parts and items unavailable locally, and you deal with mostly honest people.”
Tom Henry and his wife Bobbie turn regularly to the Internet to buy electronics, computers and accessories, videos, DVDs and software — all items that they don't have good access to locally living just a few miles from Canada in North Dakota.
Tom visits a lot of ag sites when seeking used equipment. “Last winter I used machinefinder.com to find a 6310 Deere tractor and loader located about 250 miles northeast of here. I e-mailed back and forth with the dealer, then eventually went up and bought it. I've also price shopped chemicals, but never bought any online. And one of my favorite sites is Agsco's site, www.agsupplier.com.”
Northeast Iowa farmer Jeff Ryan, a confessed online “buyer, not shopper” uses the Web to save time and learn of deals.
The ability to check local dealer parts inventory after hours is also handy for Ryan. “Plus it lets me categorize my monthly statement from the dealership and track parts by enterprise, enabling me to watch for potential red flags,” he says.
He adds that he has saved a lot of time by switching to a high-speed wireless Internet connection.
West-central Illinois farmer Kent Lock has slogged through eBay on his slow dial-up connection to buy everything from a pocket knife, tools and ear tags to work boots, clothes and machine parts, and to sell items, too. “It's an amazing marketplace, which I recommend to honest people everywhere,” he says.
He looks at many ag-related sites and finds machinefinder.com and www.agriculture.com to be the best for his needs.