RETAILERS EVOLVE AS INDUSTRY PRESSURES INCREASE
Sarah Vacek, Contributing Editor
Opportunities abound for ag retailers following yet another turbulent year, or so leading retailer publication editors say.
We asked Robynne Anderson, editor of CAAR Communicator and Germination; Den Gardner, editor of Ag Retailer; Elliott Nowels, editor of Dealer Progress; Jim Sulecki, executive editor of Farm Chemicals; and Greg Vincent, editor of Dealer & Applicator, to answer four questions regarding the ag industry this past year.
1. What will be the impact of e-commerce on ag retailers? What response do you expect from ag retailers?
Vincent: Dealers have faced similar competition for years from the broker market. Like the broker market, Internet sales will make products more like commodities. It has been proven time and again that farmers are willing to pay for a high level of service and local access. I think you will probably see dealers teaming with online sales organizations to provide services like crop scouting, consulting and custom application. Local dealerships can also use Internet sales organizations to do a better job of managing inventory. For example, if there is an over supply of one product in one area of the country, they can broaden their sales territory to manage inventory.
Sulecki: E-commerce's most immediate impact has been in price leveraging. Even if farmers aren't actually buying product online, they're using the Web to price products and go back to their full-service dealer to negotiate a better deal. Looking more upstream to possible e-commerce with their suppliers, dealers stand to benefit from the inventory efficiencies and information exchange that RAPID promises. Dealers' most immediate questions, though, are, "Who is going to pay to put a widespread bar coding and electronic data interchange system in place, and to what extent will suppliers attempt to market directly to farmers?"
Nowels: In some ways, e-commerce in the next 10 years will be the sort of challenge to dealers that environmental compliance was to them during the last ten. The impact on ag retailers will be increasing pressure to connect with growers - to make customer service a driving and pervasive principle in their companies. There is increasing pressure with e-commerce to bring value to the table or just disappear - bring value to the distribution system or not occupy a place in it.
Anderson: In Canada, several companies are expected to vie for the opportunity to sell direct to farmers online. This will take some market share from traditional retailers. Those retailers who are able to retain strong ties to their local market will be able to adjust best. The most innovative will find ways to use the Internet to better serve their customers including online, 24 hour ordering options.
2. What is the impact of seed and chemical company consolidation on ag retailers?
Sulecki: In the wake of supplier consolidation, number one on the mind of most dealers is the issue of sales reps - they're fewer, they're less familiar to the dealer, and they're typically less experienced than in the past. Dealers are finding they're not being called on as much as they've been accustomed to, and they're not receiving the technical product information they say they need.
Gardner: Retailers still have many choices in the distributors and manufacturers they work with on a daily basis. Some suggest that in five years there will be only one or two crop chemical companies and one or two large seed companies. That's an exaggeration, although the number will be fewer than it is today. But the number of products, whether seed or crop protection products, likely will remain the same, as long as they perform. And, as long as there is product performance and service to back it up, retailers will not be severely impacted by these consolidations.
Nowels: Fewer companies may result in an even more standardized approach to the marketplace where they want to work with fewer, larger, more streamlined retailers. Consolidation will drive more professionalism, but the consolidation question is difficult to consider outside the e-commerce question.
Anderson: The result has been an increased focus on the value of seed and a greater involvement by retailers in this end of the business. Regardless of the biotech furor, seed will continue to grow in importance, and retailers will have to adapt to the information demands associated with selling this input. In addition, expectations of retailers to manage intellectual property issues will grow.
3. What new services do you see retailers offering in the near future?
Vincent: I'm seeing more dealers becoming full-service consultants. Dealerships are involved in all aspects of their customers' businesses. They provide soil sampling services and analysis, GPS services, and consultation on seed selection and on the chemical program that works best with the seed they selected. Many are even providing marketing services for their customers, as part of a bundled program that now includes seed, chemical and fertilizer purchases.
Sulecki: At the organizational level, the most progressive retailers have taken note of the movement to high-value, identity-preserved crops and are contemplating a host of services, including custom harvesting and storage of IP crops. They're also looking to become better acquainted with processors and food companies. The most able dealers have identified that they need to become more active "upstream" in the food production chain.
Gardner: Diversification is the key here. Retailers in the future better be ready to find niches to meet the needs of consumers in rural communities - whether that's lawn/tree care services, convenience stores, fast-food outlets, snow removal in colder climates, etc.
On the other hand, specific to meeting grower needs, crop input financing is one service I expect to see more prominent down the road. If a retailer can provide all the inputs necessary to grow a crop, plus finance the customer at the same time, the bond and loyalty between the retailer and the customer is strengthened.
Nowels: It used to be that we would talk about how hard farming was - hard physical labor. That's changed a lot. In crop production specifically, there's a lot of time off. Once you've had some of that extra time, you look to minimize the hassles you have left. And that's opportunity for retailers. The parts with hassle attached to them, such as handling bulk seed, treating it and delivering it, provide opportunity to retailers.
4. How can supplying companies improve their abilities to market through retailers?
Vincent: Manufacturers need to recognize the expertise dealerships have on staff. An upcoming issue of Dealer & Applicator will have our annual salary survey that includes information on the education of the respondents. Our readers, from the general managers to the custom applicators to the agronomy sales reps, are highly educated. It's not uncommon to have a sales agronomist with a masters degree in agronomy.
Anderson: Manufacturers need to make retailers a better part of the planning process as they roll out new programs. Often retailers are made aware of new marketing initiatives only weeks before farmers. Retailers can strengthen plans and help manufacturers ensure programs are successful. Manufacturers may wish to consider a council of retailers to assist in this regard and better communications with all retailers.
Sulecki: Suppliers shouldn't create the impression of doing an "end around" the dealer by marketing and informing largely or solely to the farmer. As the farmer's main information source, dealers are sensitive to snubs - real or perceived - created by marketing programs that bypass them on the way to the farmer.
Also, seed companies and dealers have not developed a close relationship the way chemical and fertilizer companies have throughout the decades. Seed companies could gain by better informing dealers of their array of technologies, providing more technical information, and offering some type of training.
Gardner: A few ways manufacturers can improve marketing through retailers might be:
* Sharing the investment in new technologies on a local level with key retailers,
* Developing incentive programs with retailers to reward innovation, not just product sales,
* Providing "outside the box" services in areas such as employee hiring, retention and training,
* Creating tools for retailers to tell the story of agriculture and environmental stewardship on a local level, and
* Finding innovative ways to help retailers strengthen the bond between themselves, the manufacturer and the grower. AM