The Evolution of E-Commerce in Agriculture

David Lazarenko

I In business, as in life, there are very few truly revolutionary events that forever change what was or what will be. With its history of disrupting nearly every industry it has penetrated, e-commerce continues to be one of these lasting forces. And with its ongoing progression into agriculture, it is increasingly imperative that agrimarketers and agribusinesses alike understand the changes that e-commerce has and will continue to bring to our industry.

The Past: eBusiness Basics

When you hear the term “e-commerce”, you probably think first about online, consumer-oriented stores like Amazon or eBay. While these may be the “poster children” of e-commerce, they paint a very limited picture of what it truly entails. In reality, e-commerce is defined as any commercial transaction conducted electronically, and therefore includes things such as online trading, digital subscription services and even email and text-based transactions. So, when you consider the larger definition of e-commerce, you can see that its presence in agriculture is not as new as one might think.

In reality, e-commerce has existed in agriculture for at least two to three decades, playing pivotal roles in areas such as grain trading, precision ag and data subscription services, financing and banking, and even retail transactions. One of my favorite examples of how e-commerce has assumed this under-the-radar role in agriculture, arose some five years ago during a roundtable discussion with a dozen North American crop input dealers. Each expressed that they had yet to see e-commerce impact their business in a meaningful way. However, as the discussion progressed, nearly all agreed that the majority of their business with grower customers had moved to email or text-based interactions, meaning that commercial transactions were indeed being conducted electronically. E-commerce was already a big part of their businesses—just not in the way they initially thought.

The behind-the-scenes nature of e-commerce’s presence in agriculture is typical in early evolutionary stages in non-ag markets, as well. While we may believe that ag has been uniquely unaffected by e-commerce to date, this simply isn’t accurate.

E Commerce

The Present: Early Mainstream

As has been the case in non-ag industries where e-commerce is at a more mature state of evolution, ag is now starting to see more visible signs of customer-facing e-commerce, with systems being put in place to support, replace and/or disrupt the sales channel. In ag, this applies mainly to the various stages in the purchase and flow of agricultural products and services:

  • From manufacturers to wholesalers/distributors
  • From wholesalers/distributors to retailers/dealers
  • From retailers/dealers to farmers/ranchers

Not surprisingly, the current developments in this “early mainstream” stage of ag e-commerce again mimic what other industries have seen before us: the rise of a select few e-commerce players each following very different business models and go-to-market strategies. This is again common for this stage in e-commerce evolution, given that there is no existing ag-specific track-record or benchmark on which to base an e-commerce business model/strategy. Therefore, only a small handful of businesses are willing to take the risk, while the vast majority will “wait and see” before committing to the approach that ultimately proves most successful. Even amongst those who are entering the e-commerce market early, there is a large discrepancy between the risk and reward profiles, and the pros and cons of the business models/strategies they are pursuing (each of which is relatively common in e-commerce):

E Commerce Table
Risk Reward Chart

The Future: Consolidation, Omni-Channel Experiences and Customer-Centricity

While it can be difficult to predict the future state of any industry, one of the benefits of our somewhat late entrance into mainstream e-commerce is the fact that we can again look to other, more digitally progressive industries to see “what’s next”. Even more applicable is the identification of e-commerce milestones and trends in progressive industries that target the same end-customer as agriculture, namely the rural farmer/rancher audience.

As such, by looking into the progression of e-commerce in industries like Outdoor Lifestyle/Recreation and Personal/Commercial Banking, we can clearly predict that the following trends will likely penetrate ag in the not-so-distant future:

1. Consolidation – By consolidation, I don’t simply mean the merging of multiple e-commerce entities into a select few (though some of that will happen), but more so that ag will likely see some elimination and downsizing of retail alternatives, both physical and e-commerce. This will be driven by the fact that of the four e-commerce business models highlighted above, clear winners and losers will begin to emerge, so the successful models will become more prominent and grow while the others will fade away. Likewise, as these successful e-commerce models emerge, they will continue to cannibalize a certain amount of sales from brick-and-mortar stores, meaning that fewer physical retailers/dealers will be required, as well.

2. Omni-Channel Experiences – As other industries would indicate, e-commerce will not eliminate physical retail altogether, as there is generally a point of balance that the two achieve based on continued customer preference, the need for certain levels of “hands-on” product interaction and the facilitation of distribution. That said, much like your customer experiences at The Gap, Cabela’s or even Disney World would dictate, the need for these physical and online environments to be connected and to deliver a single, seamless purchase experience will increase. And this goes well beyond having a customer account and purchase history available for reference in-store, as true omni-channel experiences track, understand and engage the customer in appropriate ways throughout their buyer’s journey. As such, it means that ag will be able/required to identify and engage customers in different ways whether they’re in the awareness, consideration or decision stages across both physical and online platforms.

3. Customer-Centricity – While customer knowledge is required for creating and optimizing omni-channel experiences, customer-centricity goes much deeper and fundamentally requires ag organizations to be willing to measure and adapt their businesses and business models to meet the ongoing needs and desires of the customer. This is something that ag has not typically done well, as in many ways farmer/rancher customers are still required to abide by and accept the business models provided by the industry and channel (with things like the Canadian Wheat Board being great examples of a channel-centric point of view). That said, the move to providing true e-commerce solutions to these customers is a step in the right direction and hopefully just the first of many.

If you are interested in entering or navigating your agribusiness through the emerging e-commerce reality in ag, please feel free to contact us.


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