Dealers embrace online technology to stay competitive.

The fact that farmers are beginning to purchase products over the Internet is creating a dilemma for local cooperatives and dealers. For some, it's like having a competitor set up shop on the sidewalk outside their store. For others, it's an issue of profit versus personal service.

"The question is, What if a single dealer began aggressively selling parts nationwide over the Internet?" says Ken Wagner, owner of Heritage Tractor, a Deere dealership in Baldwin City, KS. "I don't think Deere wants that. And I don't think dealers want that. Most of us stick with our trade area. But if someone did it, and a local customer of mine used it, I'd have to ask, Why not us?"

For cooperatives, the main issue is not quite so territorial; it's more a question of service.

"Let's say a producer of ours orders chemicals over the Internet, has them delivered to the farm, then wants us to apply them," says Phil Yakish, president and CEO of Cooperative Plus, Burlington, WI. "In the past, our margin came from the chemical and the application equipment. Without one of those margins, we can't pay for the equipment and the man who applies it. Someone has to pay for that. And that's the dilemma."

Although at this point those examples are hypothetical, be assured there's no shortage of brainpower trained on technological solutions.

Streamlined network. Bruce Senst, director of e-commerce for Agriliance (a limited liability corporation including Land O'Lakes, Cenex Harvest States and Farmland Industries), is immersed in the changes wrought by Internet commerce. Efficiency is job one.

"To remain competitive, we have to remove costs from the system," Senst says. "Right now, a guy on the loading dock waits for the farmer, then notes on a clipboard what was loaded. A few days later someone records it, then a month later it is billed. If you've got 2,500 dealers, how do you control inventory and costs like that?"

The solution, Senst says, likely will be an Agriliance Web site portal where dealers transact business directly with the mother company over the Internet. The goal is a streamlined, efficient network that instantaneously tracks orders, billing and inventory. Farmers will be able to do business directly online, as well. Initially they'll go through the Agriliance portal with links to their dealers, but eventually, Senst says, they'll be able to go through their dealer's Web site.

"This will help our dealers make the transition from basic product supply to true service," Senst says. "We want growers to be able to place orders online, shop around on the site, pay bills, line up financing and schedule applications. Longer term, the local dealer will be able to communicate directly with the growers by sending pest or market alerts. Another service would be to link up a contract grower with a prescription required to grow the crop, or allow the grower to review crop status with an agronomist online. These initiatives will add value to the farmer/dealer relationship, a relationship that is fundamental in agriculture."

Personalized service. Barry Robino, general manager of Grange Cooperative in Central Point, OR, buys that line of thinking. "Since we serve a local geography, personalized service is important," he says. "I'd like to survey all our customers and ask what information they want. Then if a pest problem breaks out, for example, we can zap this information to 200 people instantaneously. Information is how the local dealer provides extra value. Pricing will be competitive, but we don't expect a loss in sales due to e-commerce. We'll use the Internet as a tool to keep those sales."

Time management. Dave Pruess, general manager of Gateway Cooperative in Conroy, IA, envisions the day when his growers will be able to use his database as a time management tool.

"I want a farmer to be able to get into his records at the cooperative and review monthly statements, inspect every sales ticket and book products and applications," Pruess says. "On the grain side, he can look at contracts and deliveries, and forward production information directly to the government office for deficiency payments. And if the farmer is at the government counter, he can get on a computer and pull up that information from us, as well. The government is embracing this technology so far."

Yakish also sees structural changes ahead but plans to evolve right along with them. Sure, he says, some farmers are ordering products online and applying them with their own equipment. But long term he's not concerned.

"Farm size continues to increase," Yakish says, "and as farms get bigger, time management becomes critical. The larger producer can't apply products himself in a timely manner, so I don't think online sales are a negative for us.

"On the other hand, traditional sales channels are changing. Soon a farmer will be able to go on a national Web site and order a ton of fertilizer. The Web site will log his location, determine the best source of supply, then alert the supplier. Then the cooperative has to ascertain whether to do that business. It could become like Priceline.com where the farmer names his price. I don't see that as a negative. We are embracing the technology, not running from it."

A real edge. Wagner also is embracing the technology. He keeps about 50 pieces of used equipment listed in Deere's machinery finder program, and through it he's sold equipment to buyers in six states.

Wagner also has a new Web site that is quickly evolving. "By mid-2001 I want the site to allow my customers to do business directly on the Internet," he explains. "They place an order, their credit card is billed, and we just gather, package and ship. Other industries do that and it gives them a real edge.

"I think e-commerce will help, not hurt. It's less than 2% of our business now, but I think within three to four years we'll be looking at 15 to 20%. It's growing very quickly. Any dealer who resists this technology is making a big mistake."