Growers are going digital – are ag retailers going with them?

“Disruption” in many forms has been occurring across many business sectors in the past decade. Media, retailing and manufacturing have all felt the tremors of disruptive forces, and ag retail is not immune.

There are a few different disruptive factors currently at play in ag retail, but one that is generally significant is the increasing adoption of digital technology.

As Canadian farmers implement more digital technology and strategies into their operations, it has in turn influenced the type and level of service they expect from their ag retailers. One service offering that growers are increasingly demanding is the ability to conduct transactions through e-commerce.

This is not surprising, considering online purchasing has become nearly ubiquitous across North America, with consumers increasingly favouring online options for their general retail and grocery purchases. International e-commerce leader Amazon reported $232.9 billion USD in annual revenue in 2018, while retail and grocery giant Wal-Mart reported a 43 per cent jump in online sales, primarily online grocery sales, in its fourth quarter ending Jan. 30, 2019.

There is currently no Amazon-equivalent in the agriculture industry, but statistics support a continuous increase in farmers’ interest in online input purchasing in the coming years. This is already having an impact on the way ag retailers traditionally do business.

Emerging Patterns

Cobank, one of the largest agricultural investment banks and loan providers in the United States, reported that 25 per cent of American farmers purchased inputs online in 2017. This figure has shown steady, consistent growth over time – it was 16 per cent in 2013, and in 2015 it was 20 per cent. Cobank and other experts believe this trend will continue.

As the methods by which farmers purchase inputs changes, the competitive landscape is also changing.
E-commerce start-ups like Farmers Business Network (FBN) have expanded into Canada, gaining market share and putting pressure on margins.

New competitors are willing to sacrifice margin to gain market share, and their lower cost models are becoming really attractive looking to farmers.
Reagan Wildeman

“We all know that ag is facing margin pressure at all levels of the supply chain right down to the farm gate,” says Reagan Wildeman, marketing director with WinField United Canada. “New competitors are willing to sacrifice margin to gain market share, and their lower cost models are becoming really attractive looking to farmers.”

According to Cobank, FBN and its contemporaries are eroding profit margins in two ways. First, they are adding pressure by simply existing as another competitor in the space.

Second, and most significantly, when farmers purchase crop inputs through FBN, they are only paying for the product, without any of the services typically bundled into input sales by an ag retailer.

Cobank’s report concludes with the takeaway that by moving toward an omni-channel strategy, ag retailers can weather the shakeup of digital disruption and come out the other side more adept, more efficient and providing better service to their customers. That will mean defining their value propositions and highlighting their current strengths, but also moving with, and ahead of, their customers into the world of digital retailing.

Approaching an Omni-channel Strategy

Nutrien Ag Solutions, which operates over 200 retail sites across Western Canada, emerged as a driving force in the digital arena when the company announced its move toward an omni-channel sales strategy in 2018. The centerpiece of the strategy is an online platform designed to provide customers with an easy-to-use, personalized experience.

We are listening to our grower customers; understanding where the most value is for them – what will make their lives easier. Richard Penhale

“We are listening to our grower customers; understanding where the most value is for them – what will make their lives easier,” says Richard Penhale, director of digital experience with Nutrien Ag Solutions.

When the mobile and web enabled portal launched, growers could access and manage their accounts, pay bills and view weather and market information. Within months of the launch, Penhale says the company incorporated a purchasing component to the platform, enabling growers to purchase inputs from anywhere, with just a few clicks.

As well, Penhale says the company is on the cusp of incorporating individualized input plans based on a grower’s purchasing history into the platform. By tracking which products growers need at certain times of year, Nutrien Ag Solutions will be able to ensure those products are consistently available to the customer through their local retail when they need them. Penhale says this addition will be ready to roll out before the end of the calendar year.

“We purposefully started out with a very simple approach. But within this year alone, we have already made significant leaps in terms of functionality. Over time we will continue to adjust the platform to create a unique set of capabilities, depending on the feedback from our grower customers and our business team.”

Strategic Partnerships

Continually reviewing and adjusting its digital platform may be within the capabilities of a large company like Nutrien, but for many independent retailers, the upfront cost of investing in digital may simply be prohibitive.

Wildeman says this is where strategic partnerships can help independent retailers gain access to digital solutions, allowing them to compete with the large chains. She says WinField United is currently doing exactly that by rolling out their e-business strategy to their independent retail owners.

“We’re accelerating our e-business strategy to empower independent ag retail owners to be prepared for the impact of digital technology disruption,” she says. “Our strategy and approach is built to improve the farmer’s customer experience with their retailer, while maintaining or improving margin quality for the retailers on the products and services that they deliver.”

To accomplish this, Wildeman says they have also created an online portal for their retail owners to implement with their farm customers. Through this portal, the farmer can not only purchase inputs, but he or she can also access a more in-depth layer of additional information about products, services, pricing and purchasing options.

According to Wildeman, this allows retailers to tailor specific insights and expertise to segments of their farm customers, based on past transactions and interactions.

“The move to an omni-channel strategy is new for many retailers and it certainly requires a strong understanding of the customer segments within their businesses,” she says. “With a robust pricing and value-based sales approach, you’re more than just another price listed online.”

Defining Value, Digitally

WinField United is currently working with a pilot group of their independents to test the system in Canada. In the U.S., she says a pilot group has already completed testing the system and the feedback has been positive.

“We have a group of retailers in the U.S. who are actively selling product online through our platform,” she says. “Their feedback has been that farmers who have had that digital experience with them really like the flexibility to research, purchase and schedule delivery and pickup. They say that’s really convenient for them.”

Patty Smith, director of business and talent development with Blair’s Family of Companies, says their participation in WinField United’s pilot program is a valuable opportunity for Blair’s staff to learn about using digital retailing to meet their business goals.

“E-business and digital marketing agriculture,” says Smith. “But now that it’s here, we need to embrace it and figure out how to be successful in this space by providing value for the customer and return on our investment to the business.”

Smith says WinField United’s pilot program includes two phases. Blair’s is currently in the first phase, which focuses on using e-marketing campaigns to communicate and strengthen their value proposition to farm customers.

In phase one, Blair’s has run digital marketing campaigns to strategically advertise certain products, services and agronomic expertise. Along with promoting a product itself, Smith says the campaigns also communicate important information about value-added services that Blair’s offers to support that product, both directly and indirectly.

Smith says the response to their campaigns has been excellent, with many inquiries from customers which led to increased uptake on both product sales and value-added services. And most importantly, she said that all product was sold where it was going to add real value for their customers.

“We believe these campaigns have proven value by demonstrating to our customers that Blair’s is not only interested in selling them product,” she says. “We are in the business of helping their farm operations prosper and value-added services help us demonstrate that to our customers.”

In phase two of the pilot program, Blair’s will begin testing the online portal component of the e-business strategy, introducing customized information and purchasing options for their growers. Smith is looking forward to the feedback from customers as they begin working with the platform.

“I think being able to see their account information, look at what is going on in their fields, access high level agronomy information and communicate with Blair’s in a more efficient, streamlined manner will provide significant value to the customer,” she says. “We will also be able to provide a more efficient product ordering process for those who are looking for that level of convenience.”

The Road Ahead

Smith believes that in the decades to come, the move toward e-business and an omni-channel strategy will be looked back on as one of the pivotal decisions the company has made throughout its history.

We believe e-business is one of those grid road strategies that’s helped us be successful for over 70 years. Patty Smith

“Our co-founder Sandy Blair said, ‘When everyone else is taking the highway, take the grid,’” she says. “We believe e-business is one of those grid road strategies that’s helped us be successful for over 70 years.”

Of course, the transition to e-business is not without its challenges. A day in the life of anyone working in ag retail can be hectic at the best of times, especially during peak seasons, and the move toward e-business places more demands onto the schedules of a retail’s current employees.

“Everyone already has extremely full plates and, to make this strategy work, it requires a significant investment of time and people resources to execute on the plan,” says Smith. “When a customer shows interest in a product or service, we respond to their interest in a very timely fashion – within minutes or hours. Responding even 24 hours later is too late. Twenty-four hours is a long time in the digital marketing cycle.”

As well, Smith says that many independents like Blair’s are used to being solidly confident in a new strategy before rolling it out to their customers. In e-business, an initial leap of faith followed by continuous adjustment is required to keep up with advancements in technology.

“You aren’t going to get everything right on the first try, but when you fail, learn from it and move on,” she says. “You can’t wait for everything to be perfect before you put your toes in the water in the e-business space. If you do, often the opportunity is gone before you even realize it.”
Despite the challenges and uncertainty, Smith says the potential benefits to the company and their customers are too great to pass up.

“I think independent ag retails can significantly improve their customer experience by adding digital and e-business elements into their business,” says Smith. “You just need the courage to get in the ring and then be disciplined in your commitment.”

What is an Omni-Channel Strategy?

An omni-channel strategy means using multiple sales delivery channels to provide customers with an integrated retail experience, wherever and whenever they choose to do business with you.