Panelists field WCPA questions Like the railroads a century ago, the Internet must go through a series of trials and errors on its road to becoming accepted as a valued tool by the agricultural community. Those growing pains are under way now.
So noted one of the four panelists facing e-commerce questions during a program segment of the recent 71st annual meeting of the Western Crop Protection Association in Squaw Valley, Calif.
Talking to the obviously interested WCPA gathering were Dale Locken, vice president of retail partnerships for Rooster.com. Rooster provides an e-business platform and infrastructure for agricultural retailers and grain elevators and processors. Fulton Breen, president and CEO of XS, Inc. XS is the parent company for XSAg.com, a neutral trading floor for agricultural inputs, and Nterline, an e-commerce engine that can enable the Web sites of manufacturers, distributors and dealers. Pete Romano, president of Quincy Farm Chemicals, and a second generation independent agri-dealer operating in Washington. And Steve Alexander, vice president of the Western Business unit for Helena Chemical Co.
Telephone to Internet "The Internet is not a silver bullet, it's a tool" noted Breen. He compared the Internet's impact to that of the telephone years ago and continuing today. It is value-driven by the fact that it is layered information which leverages the asset base. "I can show you very clear ways to make money from the Internet," he said.
"For the dealer, I think the No. 1 thing to do is to get connected with his customer base," said Locken, "because about 80 percent of customers want to keep doing business locally. So I'd say use the Internet to create your own local community; connect with them and start exchanging information base with them and get your brand name out in front of them and keep it out in front."
Asked how the Internet with 50 different states with at least 50 different regulations manages all the complexities, Breen said validation is the key. Such things as addresses, bank account information and licenses in each state are validated. "For example, we've knocked out a number of transactions that might have occurred by non-dealer registered sellers trying to meet reverse auctions in California."
There is close to three-quarters of $1 billion in ag chemicals brokered in the U.S. through the traditional telephone brokerage and not traced - an unknown movement of product from one state to another.
"In our Internet system, the complete transaction is captured." The buyer and seller are registered and identified. "We also know the freight since we generate the bill of lading ourselves. We also know if the product is registered in the state or not. All that is in the system." Breen said the power of the Internet is that these things are being done real-time and they are being done in a better way than was done in the past. "That's stewardship. That's what the power of technology can bring to improving stewardship."
Locken said there are more people coming onto the Rooster.com site for information and also an increase in the length of time they are staying at the site. Market research shows the increased usage of the Internet by farmers is definitely on the increase, and Locken said the primary need is for information to make better decisions. Farmers are also using the Internet as a tool for price discovery and, to a lesser extent, as a tool to buy something.
"So there is a big gap between what they are using it for today, which is informational purposes to help them make better decisions, and to actually do something," such as buying.
Offering another view, when moderator Ken Root asked the two retailers on the panel whether farmers are using the Internet primarily for information or price discovery, Alexander said he thinks most farmers are using the Internet now for price discovery, but as more growers become involved on-line, he thinks the primary interest will be for information.
Responding to a question about how the neutral trading platform of the Internet is to the benefit of the distributor when the selling price goes down because of the bidding nature of the offer and transactional costs go up because of the percentage taken by the platform provider, Breen said the environment is being increasingly deregulated from a trade standpoint.
"The grower is a price-taker in that he must sell at whatever price is offered. So he's looking at yield and cost. His need to cut cost is incredible."
Relating to the distributor, Breen said manufacturers are having a huge problem with inventories. They can't manage inventory costs because they can't see the inventory, Breen said.
Fewer distributors "So now you are in sort of a squeeze here. How do you make money given the decreasing number of distributors out there? The ones who will survive are those who add value to both of their customers: the farmer and their supplier customers, the manufacturer." Breen said. He noted the primary drivers are inventory visibility. "You've got to allow access to manufacturer information and you've got to provide a very valuable, cost-effective product offering to your farmers." Lastly, he said, "You've got to start charging for your services. Your services are very valuable and you've got to be confident enough in the services to charge for them. I think that's your challenge."
Root questioned the Internet provider panelists about sales price both on and off the Internet. "Right now it doesn't appear that anybody who buys on the Internet buys for a cheaper price than they could buy from someone else. So is it a given that if you go on the Internet you won't get it any cheaper than you would get it at some other place?" Root asked.
Responding, Breen, said his customers are buying on the Internet at savings which can range from as little as 10 percent to as high as 60 percent. "The savings this year have been about 17 percent" over distributor list prices, he said. "The farmers and dealers are taking advantage of that."