Ag e-commerce is a tricky business

WEST LAFAYETTE, Ind. – This past year saw many dot-coms become dot-bombs, and agricultural e-commerce sites aren’t immune to the economics of the Internet.

“The sands keep shifting on agricultural e-commerce,” as companies struggle to establish themselves in this new arena, said Jay Akridge, director of Purdue University’s Center for Food and Agricultural Business and professor of agricultural economics.

The online world of agricultural e-commerce has seen major changes in the past months.

“A leading e-business site, Rooster.com, is merging with its sister entity, Pradium; Cybercrop.com is gone,” Akridge said. “Other changes reflect a continued shakeout as these firms look for how to best add value for farmers and suppliers.”

Some success. Still, some segments of agricultural e-commerce appear to be doing well, in large part, because the industry they serve is more specialized and regulated than other fields that business-to-business Web sites generally encounter.

“Take auctions for surplus agricultural chemicals, for example,” Akridge said. “Because of their nature, these sales involve a whole host of regulatory and transportation issues.

“Transporting agricultural chemicals is not a simple thing. And dot-coms such as XSAg.com have put together a nice package that can serve the farmers, but also follow government regulations to deliver the product.”

Staying local is key. Another reason for the continued success of some agricultural Web sites is that many of them are local.

Many local farm dealers now take orders through a Web site or via e-mail, which farmers find to be a convenience during hectic times of the year, such as planting season.

However, even successful agricultural businesses aren’t completely immune to the Internet downturn.

“I don’t think any of those companies have grown as fast as they intended to,” Akridge said. “Nobody has had an Amazon.com-type growth or anything approaching that.”

Still a resource. The bottom line for farmers is that although the rush to the Internet has slowed, it is still an area that anyone dealing with agribusinesses, either buying or selling, will have to deal with.

“It’s easy to overhype new Web sites, as we’ve seen lately, but for farm sales it’s an area that you dismiss at your peril,” Akridge said.

“There’s too much fundamental economics underlying what makes e-commerce successful, and the Web impacts us in so many areas, that nobody can ignore it.”

Still, there are pitfalls, and Akridge said the risks for farmers are much greater than the chances other consumers take.

Big issue for farmers. “Whether or not to buy online is a critical issue for farmers. If a toy isn’t delivered by Christmas Eve that’s bad, but if the soybeans aren’t delivered by planting, that’s an issue on an entirely different level,” he said.

Just as consumers can shop at established stores’ Web sites as well as Internet-only outlets, farmers now can buy from both e-businesses and Web sites developed by more familiar names.

Rooster.com and Pradium, for example, were formed by the cooperative efforts of agribusiness heavyweights such as Archer-Daniels-Midland Co., Cargill Corp., Cenex Harvest States Cooperative, E.I. du Pont de Nemours and Co., and Louis Drefus Group.

The bigger names. “Rooster.com has very significant parents, and the fact that these companies have contributed significant financial backing makes it a Web site that everyone in agribusiness is watching,” Akridge said.

Some businesses offer a combination of local dealers and online services – so-called “clicks-and-mortar” operations – which offer the versatility of choosing whether to buy online or in person, a model that Akridge sees as the future of agribusiness.

“Local dealers and online services will be wrapped up so tightly that it will be difficult to distinguish the two,” he said.

Best of both worlds. For example, a customer might work with a local supplier to purchase a product, but then check the delivery date and technical information about the product on the Internet.

“Will there be a niche market for people who don’t want to use the Internet? You bet. Will there be a niche market for people who only want to buy online? You bet.

“But these will be small markets, and the majority of farmers will be using both regularly,” Akridge said.

Use common sense. Farmers who are buying goods from Internet sites need more common sense and skepticism than they would use in everyday business dealings, Akridge warns.

He recommends that a buyer look closely at the company’s return policy, for example.

“Everybody who has done business on the Internet has been burned at some time,” he said. “If you’re using a new supplier, consider doing a test purchase first.

“Then you can buy a little bit more if the test went well, and see if the company can establish a track record.”

Akridge stresses that whether buyers are looking at a businesses site or an auction site, they should look beyond the cost.

More than prices. “You may get a good price, but you have to look at what you’re giving up,” he said. “This isn’t new; dealers have been offering deals on particular products for years.

“If you have to give up too many services, such as information about the product, that’s not a good deal. That’s common sense, but it’s easy to get lost.”

Likewise, Akridge said auction sites can offer good deals, but only if buyers are willing to put in the time and effort to research prices and the market for the product they’re buying.

“It takes a pretty sophisticated buyer to know when you’ve got a good deal,” he said.