NEW MEANING FOR "HOME" SHOPPING.

Order tractor parts without driving into town? Buy seed without stepping into a warehouse? Buy cattle without looking at live animals? With business-to-business (B2B) Internet sales, links to most inputs are just a click away, and agrimarketers are helping farmers get comfortable with the purchasing process so more can experience home shopping via the computer.

Sparks Companies' Bechdol says B2B sites offer farmers tremendous opportunity for industry exchange and the purchase of goods and services. She says that generally inputs are traded through an auction of some type or through direct purchase. Likewise, Bechdol says B2B companies are finding they can add value through increased efficiency and reduced paperwork, as well as improve contact with buyers, tract orders and update inventory instantly.

"In the farm and food sector, the inputs market is a strong prospect for e-commerce because it appears to lend itself well to online business," she says. "(Input sales) have a large customer base, an extensive distribution network and very large transaction costs for information and inventory management."

The Kellogg Foundation's Foster, in "The Impact of E-Commerce on Agriculture, Issues for 21st Century Food Systems," cites figures provided by Frank Beurskens, E-Markets.com director of product strategy, Ames, Iowa:

      In the area of facilitating transactions in 1999, Goldman Sachs
   estimated that 2 percent of ag sector sales were Internet-based. Beurskens
   notes the company estimates that total ag sector sales were $825 billion in
   1999, so about $16.6 billion of sales went through the Internet. Goldman
   Sachs projects 4 percent of agricultural sales will go through the Internet
   in 2000, and 6 percent will trade in 2001.

      `To this point, the lion's share of ag e-commerce has been between
   agribusinesses,' Beurskens says. `Producer activity probably represents a
   fairly small fraction of the $16.6 billion estimate for sales last year.
   Consumers play an even smaller role, evidenced by the fact that Goldman
   Sachs' analysis shows only 0.3 percent of the $552.9 billion in
   food/beverage/tobacco sales in 1999 were Internet-based, for a total of
   $1.4 billion.'

      But Steve Baker (then DirectAg.com vice president of business
   development and now chief operating officer) reported in the March 2000
   issue of Agri Marketing that he expects an explosion in farmer Internet
   buying because farmers already have a 3:1 incidence of purchases on the
   Web, compared with consumers or small businesses. He associates this with
   producer history of catalog and telephone shopping, early adoption of new
   technology and the search for measures that boost efficiency. In addition,
   the Internet is convenient and available 24 hours per day and farmers want
   cutting-edge knowledge with competitive prices.

"By going online, producers will have a range of options for buying ag products and services," says Rooster.com's Carlson. "Producers also will have more control over how they choose to do business while at the same time maintaining strong ties to dealers and cooperatives that they do business with today."

"DirectAg.com's Baker, who is based in St. Paul, Minn., sees other benefits for producers, including increased productivity and profits through reduced input and production costs, greater convenience, and more and better information to cope with the increasing complexity in agriculture production.

"DirectAg.com is building a space where farmers and agribusinesses can create or capture value through more effective and integrated procurement processes," he says. "Virtually all inputs will be available for sale online, but the most successful commerce opportunities will be those that bring value to the producer by the way of improved profitability."

Carlson agrees that any type of input can be sold successfully online, including seed, fertilizer, chemicals and equipment. "One-stop shopping isn't just a vague notion. It's an attainable goal that will connect all members of the ag community to the tremendous benefits of e-commerce," he says.

RESEARCH RESULTS CONFIRM GROWING USAGE

Survey findings compiled by Lynxx Solutions confirm such ideas. Hook says Lynxx conducted surveys earlier this year with soybean growers and cattle producers to gauge their Internet use and interest in purchasing farm-related products on the Internet.

Responses from 195 cattle producers in Missouri, Nebraska, Oklahoma and Texas, with operations ranging from less than 100 head to 500 or more head were obtained. Nearly all cattle producers interested in accessing the Internet also are interested in purchasing farm-related products via the Internet. Hook says 36 percent either currently use or plan to use the Internet over the next year, and 32 percent are interested in purchasing farm-related products over the Internet.

Interest to purchase products was fairly consistent between the product categories, between 20% to 25% across all categories. Size of operation did not seem to influence the level of interest in purchasing products.

Hook says 200 soybean growers in Illinois and Iowa were also surveyed, whose soybean acreage ranged from less than 100 acres to 500 or more acres. About 40 percent plan to use the Internet over the next year, but only 30 percent are interested in purchasing farm-related products as such. Interest in buying products on the Internet was influenced by farm size. Only 13 percent of small acreage growers were interested, while farmers with more than 100 acres were nearly three times as interested.

IMPACT ON CHANNELS

"Doing business online is all about giving producers and retailer/dealers additional options for how they want to do business," Carlson says. "The advantage to dealers and cooperatives is that they can shift their businesses into the Internet economy. It gives dealers the opportunity to grow their business online without giving up decision-making control or diluting their brand, reputation or visibility."

Retailers and distributors can also receive marketing support tools, technology services and support for customer relationship management by going online with business. "We complement and supplement the current distribution system," says Baker. "Local dealers and retailers supply needed service and product support, and they are part of how we serve customers. Through the Internet, DirectAg.com builds upon these services by, among other things, providing convenience, allowing product comparison and providing additional and detailed technical information and advice. We focus on creating value, not just reducing costs. We also team up to create marketing programs."

"Producers rely on local dealers for technical support and recommendations. They want to be reassured that if a problem arises with a product or service, they can call their local dealer for one-on-one help," Carlson confirms. "Maintaining this type of commitment to `customer-friendly' service is absolutely critical to the overall success of ag e-commerce. It has to go hand in hand with buying products and services over the Internet."

As more producers check the Internet for products and services, Carlson says Rooster.com's "virtual store-front" will enable dealers to connect with other segments of the ag supply chain, too. "As we've seen, the ag supply chain industry is replete with inefficiencies, including excess inventories, increasing customer service costs, ineffective price discovery mechanisms, unfocused marketing efforts and unbundled product and service offerings," he says. "E-commerce provides a dynamic platform to eliminate inefficiencies and create value for participants."

"The agriculture industry has changed over the last 100 years," adds Baker. "However, the supply chain has not been as quick to change and remains highly fragmented with many inefficiencies. Manufacturers, distributors and retailers need improved, cost-effective ways of attracting, retaining and serving customers."

MARKET INTELLIGENCE

One benefit Baker sees for input manufacturers is that as information flows through the supply chain, they will get more efficient market intelligence and feedback. Regional companies can also expand their geographic reach. In addition, Carlson says manufacturers will get greater control of production scheduling and inventory positioning, which will enable them to more readily identify cross-selling opportunities.

"For manufacturers, the challenge is in understanding end-user preferences and buying habits so they can develop targeted and focused promotional and marketing efforts," says Carlson. "Rooster.com enables manufacturers to upgrade the effectiveness of their promotional and marketing efforts by providing them with more specific, detailed demographic profiles of customers."

Such information and new technology developments will only make buying and selling inputs easier for farmers and the ag supply chain. For example, Farms.com Ltd., based in Memphis, Tenn., in July integrated wireless services into its technology platform.

"Farmers will soon be able to access farm management information or make time sensitive transactions using a handheld device in the middle of a field, in their trucks or anywhere," says Robert Sparks, chief executive officer, Farms.com. Sparks adds that the site will have livestock and grains futures quotes, cash grain bids and industry-specific news available from wireless devices and futures closing prices delivered to digital cellular phones. Access to the service may be limited to producers located near major metropolitan areas at first but should become available to most regions in 12 to 24 months.

"As we move into a world in which consumers require identity preservation and trace-ability coupled with greater quality control, each component of the supply chain must become more reliant and integrated with others," Baker says. "Technology will be the tool used to facilitate this integration. B2B platforms and exchanges will develop rapidly in the months ahead and all suppliers will be challenged to determine how quickly and with whom they choose to align."