Internet and E-Commerce Adoption by Agricultural Input Firms

Agricultural & Applied Economics Association
Internet and E-Commerce Adoption by Agricultural Input Firms

Author(s): Jason Henderson, Frank Dooley and Jay Akridge
Source: Review of Agricultural Economics, Vol. 26, No. 4 (Winter, 2004), pp. 505-520
Published by: Oxford University Press on behalf of Agricultural & Applied Economics
Association
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Review of Agricultural Economics-Volume 26, Number 4-Pages 505-520
DOI:10.1111/j. 1467-9353.2004.00196.x
Internet and E-Commerce

Adoption by Agricultural
Input Firms
Jason Henderson, Frank Dooley, and Jay Akridge
By 1999, most agricultural input firms used company Web sites and adopted some type of
Internet strategy. However, far fewer engaged in e-commerce with most activity occurring
with suppliers (channel partners) rather than with end customers. Firms perceiving greater
logistics and inventory management gains were more engaged in e-commerce activity.
The ease of information access, more product choices, easier product comparisons, and
improved buying convenience were expected to support farmer e-commerce adoption.
However, firm managers indicate that a key to expanding farmers' e-commerce activity
is the ability to build personal relationships over the Internet that satisfy farmers' service
needs.
Thethe
Internet provides new
globe. Agribusiness opportunities
firms, like otherand challenges
businesses, facefor
thebusinesses around
challenge of
changing their business model and practices to incorporate Internet activities.
Agricultural input firms indicate that e-commerce, defined as sales over the
Internet, fundamentally changes the way they conduct business (Ivanic et al.).
The rapid growth in the share of farmers with Internet access, from 13% in 1997
to 43% in 2001, has also fueled firms' interest in e-commerce.
Internet business activities are categorized into two related groups: e-business
and e-commerce.1 E-business is broadly defined as any business activity per-
formed over the Internet, and is not limited to Internet-based sales or purchases.
E-commerce, a subset of e-business, is defined by the sale or purchase of goods
and services over the Internet. E-commerce is an advanced stage of e-business
activity and development, where firms must first engage in e-business activities,
* Jason Henderson is economist, Center for the Study of Rural America, Federal Reserve
Bank of Kansas City.
0 Frank Dooley is professor, Department ofAgricultural Economics and the e-Enterprise
Center, Discovery Park, Purdue University.
* Jay Akridge is professor, Department of Agricultural Economics and director, Center
for Food and Agricultural Business, Purdue University.
506 Review of Agricultural Economics
Figure 1. Stages of e-commerce deployment
Simple Commerce Sites Online

*Orders accepted online Payment
*Security features
*Limited back-end integration Online Ordering
Pre-Commerce Sites
*Business models for online sales Online Catalog
*Off-line transactions
Brochure-Ware Sites
*Web is a pure marketing tool Customer Feedback Forms
*No clear vision on how to
sell products online

Product and Company Information
Source: Based on Williams, Victoria. "E-Commerce: Small Business Ventures Online,"

U.S. Department of Commerce, July 1999.
such as marketing and advertising, before making an e-commerce sale (Williams;

Levebvre, Cassivi, and Lefebvre). Figure 1 illustrates the stages in e-commerce
development.
Government reports indicate that e-commerce is much more prevalent in
business-to-business (B2B) than in selling to end-users or customers (B2C). In
2000, B2B transactions (sales) accounted for 18.4% of U.S. manufactured ship-
ments in the United States while B2C transactions accounted for only 0.9% of
retail trade sales (U.S. Department of Commerce). Both B2B and B2C transac-
tions grew by $47 and $13 billion, respectively, from 1999 to 2000, and continue to
grow.2
Although e-commerce is still a small part of the U.S. economy, its rapid growth
is leading agribusiness firms to adopt innovations that take advantage of this
new economic medium. When combined, the food products and beverage and
tobacco industries are the second largest industry in terms of manufactured
e-shipments, which are sales transacted over the Internet (U.S. Department of
Commerce). These industries outpaced the growth in e-commerce shipments of
the computer and electronic products industry. Agricultural input companies play
an even larger role in e-commerce as chemical and manufactured equipment in-
dustries are the fourth and fifth largest e-shipments industries. Yet, e-commerce
becomes more elusive when moving down the distribution channel. In 2000,
e-commerce only accounted for 1.5% and 3.1% of the sales of wholesale grocers
and farm product raw materials wholesalers, respectively (U.S. Department of
Commerce).
Internet and E-Commerce Adoption 507
As farmers' Internet usage grows, agribusiness firms face the challenge of in-
corporating e-business and e-commerce activities into their business strategies.
Insight into e-business and e-commerce usage is important to understanding how
agribusiness firms can use the Internet to complement existing strategies, and pro-
mote new approaches to doing business. The failure of many so-called "Dot.com"
companies demonstrates the difficulty associated with developing successful
e-commerce strategies. Perceptions regarding farmers' adoption are also impor-
tant as agribusiness firms formulate strategies to conduct e-commerce with their
farm customers.
The objective of this paper is to describe the extent that agribusiness firms use
the Internet, e-business, and e-commerce in their business operations. Based on a
survey of firm managers, we analyze the level of Internet and e-commerce usage
in agricultural input firms and manager perceptions regarding those factors in-
fluencing Internet and e-commerce usage. While most surveys of Internet usage
in agricultural industries have focused on farmers, this paper surveys firm man-
agers. The paper opens by describing the survey respondents. The second section
discusses the use and benefits of Internet and e-commerce capabilities perceived
by agricultural input firms. The third section discusses the factors that managers
perceive to be acting as barriers and catalysts to e-commerce adoption by farmers.
The fourth section presents manager's expectations for future e-commerce growth
before the paper concludes with implications for agribusiness firms e-commerce
strategies.
Characteristics of Respondents
Data on Internet activities by agricultural input firms were obtained from a
survey of executives and managers conducted by the Center for Food and Agri-
cultural Business at Purdue University. Survey questionnaires were faxed and
received by 3,953 agribusiness managers in August 1999. The response rate was
19.1% or 755 responses. After eliminating partial respondents, the number of us-
able responses was 643 or 16.3%.
To identify the baseline use of Internet activities by agricultural input firms, the
survey contained multiple questions regarding firm characteristics, the extent of
Internet activities, and their usage by customers and suppliers. Managers were
also asked about their general opinions regarding e-commerce and about the
perceived barriers and catalysts influencing farmers' e-commerce adoption. All
opinion and perception questions were structured on a 5-point Likert scale. The
survey instrument and additional detail on the sample is presented in Ivanic
et al.
The respondents represented firms in many stages of the distribution channel,

operating in a variety of agricultural input industries, and under a diverse set of
ownership structures. Responses were obtained from managers working for man-
ufacturers (43%), dealers (16%), and distributors (13%). The remaining 28% were
from multifunction firms operating at multiple levels in the distribution channel.
Respondents also encompassed a variety of business interests. Managers with
crop-related business interests (such as chemicals, feed and fertilizer dealers, seed
dealers, and crop equipment) accounted for 38% of the respondents; 11% reported
livestock-related business interests (livestock equipment and animal health) and
12% reported other primary business interests such as consulting, lending, or

general supply. The remainder and the largest share, 39%, reported diversified
primary business interests. Respondents operated under a variety of business
structures. Half of the reporting firms were publicly held companies and almost a
third reported to be privately owned. Cooperatives accounted for the remaining
17%.
The respondents represented firms of varied size and geographic scope.

Roughly 40% of the respondents were small firms (less than $50 million in annual
sales). Over a quarter of the respondents were from medium-sized firms (sales
between $50 and $999 million). Slightly less than a third were large firms (more
than $1 billion in annual sales). The sample was almost evenly split between those
indicating an international or domestic business scope.
A direct comparison between the target population and sample characteristics
is unavailable due to the lack of information on the target population. However,
the respondents represented a broad range of firm sizes, types, products, and
geographic markets. In addition, responding firms represented a range of current
and projected involvement with e-business concepts and technologies. Given the
large number and diversity of respondents, this convenience sample provides
useful insights into the opinions of agribusiness managers about e-commerce in
the fall of 1999.
Internet Usage by Agricultural Input Firms

According to survey respondents, most agricultural input firms used the Inter-
net in their business operations. By August 1999, most agricultural input firms
(78%) had laid the foundation for further Internet activity by developing a com-
pany Web page. Of those without a Web site, over half were planning on devel-
oping a site by 2001. Most of the remaining firms were planning to develop a Web
site, but had not set a specific time frame for development.
Agricultural input firms performed a wide variety of e-business activities over
their Web sites. The most common Web site features were the availability of com-
pany background information and technical product information (table 1). These
features are the first steps toward e-commerce activity associated with brochure-
ware sites (figure 1). Links to trade associations or other data sources and dealer
directories were other common features on agribusiness Web sites. Almost a third
provided advanced Internet features, such as online communities and customized
content areas.
While a majority of firms had a company Web site, few allowed for e-commer
sales to their customers.3 Less than 20% of the agricultural input firms repo
providing online ordering features with traditional means of payment for
customers (table 1). Less than 10% of the firms had online ordering and paym
features available for customers.
Due in part to the small number of firms with e-commerce capabilities,
e-commerce activity between agricultural input firms and their customers is lim-
ited. In 1999, only 6.5% of the respondents generated e-commerce sales (any level)
from more than 5% of their customers (figure 2). Moreover, respondents reported
that less than 2% of total company sales were expected to be placed over the Inter-
net and even fewer sales would be paid for online. However, managers in larger
Table 1. Web page features for firms with a web site, 1999
Percentage
Feature Found on Company Web Page in 1999 of Firms
Provided background information about the company 95.0

Provided technical information about products sold 81.5
Provided links to other data/information sources (e.g., USDA, etc.) 48.0
Provided links to industry trade associations 46.8
Provided a dealer directory (information where products are sold) 41.0
Included areas with content customized to different audiences or 33.7
individuals
Included password protected areas, only accessible to registered members 25.8

Included online communities (e.g., chat rooms, bulletin boards, etc.) 15.6
Provided pricing information about products sold 15.2
Allowed for online ordering, but use traditional means of payment 16.0
Allowed for online ordering and payment 7.3
firms expected a greater share of e-commerce as did managers

international scope. Manufacturing firms and those with multi
distribution channel also expected e-commerce to account for a
their total sales in 1999. Yet, even in these cases, e-commerce
to remain less than 5% of total sales in 1999.
While e-commerce activity between input firms and their customers was limited
in 1999, e-commerce activity was more common between agricultural input firms
and their suppliers. Almost 20% of the respondents reported placing online orders
Figure 2. Agricultural input firm e-commerce usage
25
20
i 15
4*
10
W
Customers Suppliers
Note: Share of firms doing e-commerce with more than 5% of
with more than 5% of their suppliers. The finding that B2B e-commerce activity
with suppliers is more extensive is consistent with other industries. Recall that in
2000, e-commerce accounted for 18.4% of U.S. manufactured shipments but only
0.9% of total retail sales (U.S. Department of Commerce).
To better understand the differences between firms engaging in e-commerce
activity and their counterparts, firms were grouped into e-commerce, Internet,
and no Web site categories. E-commerce firms were defined as firms reporting
online ordering and/or payment features on their Web site. There were 89 e-
commerce firms, or 14% of the respondents. Distributors, manufacturers, and
multifunction firms were more likely to be e-commerce firms.4 E-commerce firms
tended to operate in broad regional, national, or international markets, but also
included firms of all sizes.
Internet firms were those that reported having a Web site in 1999, but without the
ability to accept on-line orders or payments. These firms engaged in e-business ac-
tivity, but not e-commerce activity with their customers. Internet firms accounted
for 63% of the sample and tended to be manufacturing or multifunction firms.
They were also more likely to be large firms operating in large national or global
markets.
The remaining firms were classified as "without a Web site," in 1999. No-Web
site firms accounted for 23% of the sample. These firms tended to be small dealers
operating in local markets.
The varied implementation of Internet and e-commerce capabilities across agri-
cultural input firms is related to differences in the perceived benefits associated
with logistics and inventory management.5 Internet firms and those without a
Web site expected fewer benefits in logistics and inventory management from
e-commerce activity than e-commerce firms (figure 3). A majority of Internet firm
Figure 3. Opinions regarding logistics issues and e-commerce
l:-commenlerce w ill greatly improve I)istrilbution issues %will limit

inventor[ mlinalgement sales over thel Internet
I'1 -'nit uer In1rn't 10 \ 1b Ni 1 '-c1nWin(C I t'nt ) i
40 I, I.
211 20c c ilrc N ~c)ScL-tiiic c ucfct N hSt
ID430
Note: The Person X 2 statistics rejects the null hypotheses that th

questions is not related to the type of agricultural input firm
managers did not feel that e-commerce would improve the firm's inventory man-
agement within three years. Moreover, most Internet firms and firms without
a Web site indicated that distribution issues would limit e-commerce activity. In
contrast, e-commerce firms perceived greater inventory management benefits and
fewer distribution issues that would limit e-commerce activity.
E-commerce Use with Farmers

The finding that agricultural input businesses have limited e-commerce ac
ity with their customers despite a large web presence is consistent with U
findings on farmer Internet usage. In 2001, while 43% of farmers had Internet a
cess, only 15% of these farms engaged in e-commerce activities (U.S. Depart
of Agriculture; Morehart and Hopkins). If agricultural input firms are build
a Web presence and farmers have Internet access, why is e-commerce acti
between them so limited?
To address this question, agricultural input managers were asked a series of
questions about the prospects for farmer e-commerce adoption. The first questions
addressed the potential barriers to farmer adoption perceived by agricultural
input managers. The second series of questions addressed the factors agricultural
input managers perceived to contribute to farmer adoption.
Barriers to Farmer Adoption

The lack of Internet access, especially high-speed access, in rural areas is a
potential limiting factor for e-commerce adoption by farmers. In 2000, less than
1% of the towns with fewer than 2,500 people had high-speed broadband access,
well below levels in larger communities (Staihr). The 2002 Farm Bill recognizes
this potential problem and provides funds for broadband deployment in rural
areas. However, the increasing number of farms with Internet access suggests the
lack of Internet access for farmers is diminishing. Therefore, concerns that Internet
access issues limit farmer adoption should be declining.
Even in 1999, agricultural input manager responses indicated that the concern
about Internet access was not limiting farmer e-commerce adoption (figure 4).
However, managers of small firms were more concerned that Internet access was
a barrier to e-commerce adoption than were managers of large firms.
While farmer access to the Internet is a requirement for e-business, the inabil-
ity to adequately use the technology can also limit e-commerce. Wheatley, Buhr,
and DiPietre suggested that the ability to use Internet technology will not limit
e-commerce activity. Consistent with their findings, most managers did not feel
that farmers' abilities to access Internet information would limit e-commerce
adoption. Less than quarter of the respondents said that the inability of farm-
ers to find information conveniently would be a barrier to adoption (figure 4).
Dealers were more likely to report that the inability to find information conve-
niently would be a barrier to adoption relative to other types of firms.
While access to the Internet may not limit farmer adoption, a majority of man-
agers reported that the limited ability of the Internet to offer after sales service
was a barrier to farmer adoption (figure 4). This barrier might be related to the
difficulty of building personal relationships over the Internet. Most agricultural
Figure 4. Barriers to farmer e-commerce adoption
701
Z; 60
40
'
30
- 7t
20
I" I It
Lack o f Inal)ilitN to Inlal)ilit lfor Sccuri\iI Iri% 1ac
I nlerntl find aft ertcr tilc COIOCIrI ( ionccr'l
ldCCC%% inf otrmitat ion it ' ,
Note: Percentage of respondents indicating the factor is a barrier.
input firms (75%) reported that personal relationships were difficult to develop on
the Internet. The difficulties were reported by all types of firms; large and small,
global and domestic, e-commerce, e-business, and those without a Web site. Busi-
nesses operating in local markets where personal relationships and service are
more important reported the greatest barriers to farmer adoption arising from
difficulties developing personal relationships and providing after sales service.
Concerns about the security and privacy of e-commerce transactions were
also identified as barriers to farmers' e-commerce adoption. Almost half of the
managers reported that farmers' concerns regarding the security and privacy of
e-commerce were a barrier to adoption (figure 4).6 Managers in smaller firms re-
ported that security and privacy issues were more important as barriers to farmer
adoption relative to other firms.
Factors Supporting Adoption

While farmers hesitate to use the Internet for e-commerce transactions, they
do use the Internet to gather information. In 2000, only 0.33% of all purchases
and sales by U.S. farms were conducted online (Hopkins and Morehart). How-
ever, a majority of Internet users used the Internet to track prices and to access
agricultural information services. Almost one in three users communicated over
the Internet with farmers and crop advisors or keep records and transmit data
to clients or service providers. The Internet has allowed farmers to make busi-
ness decisions using a wider variety of information. Managers see the ability to
provide information on a wide variety of product choices that allows farmers to
make product comparisons and purchases conveniently as factors supporting the
adoption of e-commerce by farmers.
Thus, it is not surprising that the ability to obtain information was identified as
a major factor supporting farmer adoption. A majority of managers reported that
Figure 5. Factors contributing to farmer e-commerce adoption
Information Product Product Buying

access choice comparison convenience
30.8%
15.6%** 27.3% 29.2% i
26.4% 26.2% 28.4% 30.8%
F 1 Not a factor
the ease of information

Managers in distributio
were more likely to repo
e-commerce adoption.
The ability to access info
U.S. farmers. Almost half
product choices supporte
in smaller firms were mo
farmer adoption.
With greater access to in
that the ability to make
almost half of the mana
(figure 5). Dealers were m
did not support e-comm
More than a third of al
factor supporting farme
multifunctions in the dist
more likely to report t
e-commerce adoption.
E-commerce firms repo
tion and improve buyin
Almost three-quarters o
access would be a factor
half of the other firms (f
Expectations of E-commerce Growth

Although e-commerce activity was limited in 1999, managers expected
e-commerce usage to expand among farmers. Most managers disagreed with the
statement that farmers were unwilling to buy products on the Internet. Not sur-
prisingly, managers in firms with e-commerce capabilities indicated that farmers
were willing to engage in e-commerce. In general, large manufacturing and distri-
bution firms with an international scope perceived greater potential for expanded
Figure 6. Factors supporting farmer e-commerce adoption by firm

type
Inlformation Ctan l)e lotainiedl more Buying ov)er the Internet

easily over the Internet is morn e conienient
Oil
344
V44v
211
24 I - II ?N
I.-l.'q)lllllll+'l'.1~'t Inlt~'rllc?l \ Jt. it -l.'qllllllll~'l.C't' I lr c X ~ it )
Note: The Person x 2 statistics rejects the null hypotheses that the responses to these questions
are not related to the type of agricultural input firm at the 0.01 level.
farmer e-commerce adoption relative to other types of firms. Dealers were m

likely to report that farmers were unwilling to make Internet purchases than oth
firms.
In August 1999, despite limited e-commerce activity, respondents generally
expected substantial growth in e-commerce activity. On average, sales ordered
and paid over the Internet were expected to account for less than 1% of total sales
in 1999 (figure 7). Firms expected e-commerce to account for 11.3% of total sales
in 2002. These results are consistent with a Goldman Sachs survey that reported
Internet-based B2B sales would account for 2% of total agricultural industry sales
in 1999 and grow to 12% by 2004 (Goldman Sachs Investment Research).
Large domestic firms with distribution and manufacturing activities in the
distribution channel paced the expected high growth in e-commerce activity.
Manufacturers and distributors had higher expectations for e-commerce trans-
actions than dealers. Large firms expected e-commerce to account for more
of their sales in 2002 than small firms. Domestic firms expected e-commerce
sales to account for a higher share of their total sales in 2000 than international
firms.
Firms with e-commerce sales or capabilities had greater expectations of growth.
E-commerce firms on average reported that 24% of their sales in 2002 were ex-
pected to come from e-commerce, up from the average of 6% in 1999. Internet
firms and firms without a Web site reported that e-commerce sales would reach
14% and 11% of their sales in 2002, respectively.
Finally, managers expected e-commerce activity growth to have large im-
pacts on the distribution channel. The survey results have already shown
that e-commerce firms expected greater benefits from logistics and inventory
Figure 7. E-commerce's share of total sales (Expected share coming

from electronic orders and payment)
12
10
4 -
1999 2002
management. All f
E-commerce manufac
channel, moving from
tribution channel to a
Manufacturers with e
sales would be transa
of their sales would come from more traditional distribution channels. Internet
Figure 8. Manufacturers' expected distribution channels in 2002 by

firm type
6()
(Internec
U No) WcI Site
Manlufaclurer to Ianuiactu rer to Manu tacturer to

I)istlilbut to I)caler i)ealer to Iarmer lFarner
to larmier
manufacturers and those without a Web site expected a much lower share of their
sales would be transacted directly to farmers in 2002.
Implications
This study uses survey data from 1999 to analyze Internet and e-commerce ac-
tivity in agricultural input firms. While the data may be dated for the fast-paced
e-commerce economy, the thoughts and impressions of managers at that time of
the survey guided the development of Internet and e-commerce strategies that are
being implemented today in agricultural input firms. Insight into the paths that
firms have traveled in building e-commerce strategies is important to understand-
ing today's Internet and e-commerce strategies. The benefit of this study is that
it serves as a baseline of Internet and e-commerce usage that will provide some
historical comparison for future research. For example, future research could fo-
cus on how e-commerce growth has developed to determine if the expectations
of 1999 have emerged.
In 1999, most agricultural input firms were active participants on the Internet,
but few engaged in e-commerce activities with their customers. E-commerce was
emerging as a supply-chain activity. Firms upstream in the distribution channel
were much more likely to be engaged in e-commerce activity than their down-
stream counterparts. Agricultural input firms were doing more e-commerce busi-
ness with their suppliers than with their farm customers. Most e-commerce firms
expected big shifts in the distribution channel to direct marketing to capture the
perceived benefits in logistics and inventory management from e-commerce ac-
tivity.
Future growth in e-commerce activity is most likely to occur in existing dis-
tribution channels where personal and business relationships have already been
formed. Managers, especially at the local level, indicated difficulty building per-
sonal relationships over the Internet. But in existing distribution channels, these
relationships have already been formed and participants are looking for mech-
anisms to improve the flow of information throughout the channel. The largest
benefit of the Internet is the ability to access and exchange information. Farmer
usage is a prime example of how the benefits of information access are driving In-
ternet adoption. The greatest benefit of e-commerce to agricultural input firms, at
least in the short term, is improved logistics and inventory management through
better information sharing, not the ability to build new customer relationships
and enter new markets.
Will e-commerce become a dominant source of agricultural sales to farm cus-
tomers? During the first quarter of 2002, e-commerce retail sales across all U.S.
industries were up 19.3% from the first quarter of 2001, well above the 2.3%
increase in total retail sales (U.S. Department of Commerce). Agricultural in-
put firm managers indicated that e-commerce activity with farmers is expected
to follow a similar increasing trend. But firms wanting to expand e-commerce
sales to farmers must address the security and privacy concerns that make farm-
ers hesitant regarding e-commerce. Firms must also overcome the difficulty of
building personal relationships and providing after sales service over the Inter-
net that served as barriers to farmer e-commerce adoption in 1999. If firms can
build on the information benefits-access to information, more product choices,
and easier product comparisons-that are attracting farmers to the Internet,

e-commerce activity should expand. Ultimately, business is about relationships.
For e-commerce activity with farmers to boom, agribusiness firms must find a way
to build and maintain relationships on the Internet that satisfy the service needs of
farmers.
Acknowledgments
The views expressed are those of the authors and do not necessarily reflect the positions of the
Federal Reserve Bank of Kansas City or the Federal Reserve System. The authors gratefully acknowl-
edge the comments provided by the journal reviewers.
Endnotes
'The U.S. Department of Commerce defines e-commerce as "the value of goods and ser
online. The term "online" includes the use of the internet, intranet, extranet, as well as p
networks that run systems such as Electronic Data Interchange (EDI)." E-business is defin
process that a business organization conducts over computer-mediated networks."
2While the $13 billion in B2C growth is small compared with B2B growth, it was a 92%
over 1999 B2C levels.
3Since the sample includes multiple stages of a supply chain, customers and suppliers could cover
a wide range of firms-manufacturers, distributors, dealers, other intermediaries, and farmers. How-
ever, for some survey questions, the customer was defined as an "end-user customer." See the survey
instrument in Appendix A. Information on the types of customers was not obtained in the survey
instrument.
4Multifunction firms are those indicating they performed multiple functions in the distribution
channel. For example, a firm that classified itself as a manufacturer and a distributor was classified as
a multifunction firm.
5Business analysts indicate large potential savings from B2B activity. At the time of the survey, B2B
activities were expected to reduce processing costs between 10% and 25% and product costs by 20%
(Goldman Sachs Invvestment Research).
6Security and privacy concerns are not expected to be unique to farmers. While comparable statistics
for other consumers were not uncovered by the authors, the number of Congressional bills concerning
privacy and security issues of the Internet suggests these issues raise concerns among a variety of
consumers (see Phillips Business Information).
Appendix A: Survey Instrument
1999 Center for Agricultural Business Internet/E-Commerce Survey

Help us better understand your company's use of the Internet and Electronic Commerce
When completed, please fax your response to:
Center for Agricultural Business

Purdue University
All responses will be kept completely confidential.
You and Your Company 3. Your company is best described as a: 0 all that apply.
O Manufacturer 0 Dealer
O Distributor 0 Other:
I. What is your osition/area of responsibility within your

company? appropriate response.
4. Your company is: check appropriate response.
O President/CEO/Owner
O A cooperative O Publicly held
O Privately owned 0 Other:
O Vice President/General Manager/Division President
O CFO/Controller/Treasurer/Finance
O Marketing(Manger, Director, Product)
5. The scope of your operating unit's distribution of
0 Sales/Sales Management
O Production/Operations/Distribution/Logistics products/service is: 0 appropriate response.
O Human Resource Manager O Local 0 National
0 Research and Development O State-wide 0 International
O Other: O Regional (multiple state)
6. What is your gross annual sales of your operating

2. What are your company's primary business interest(s)?
company.V only one in each column, based on 1
0 those your conmany is involved in and ('IR(LE your figures.
operating unt'.s business interest.
Operating Total
O Advertising 0 General Supply Unit Company
O Animal Health 0 Government Agency 0 t 0 Less than $10 Million
O Association 0 Grain Merchandising/Processing O 0 $10 Million-$49 Million
O Chemicals O Lending O O $50 Million-$99 Million
O Consulting 0 Livestock Equipment o O $100 Million-$499 Million
0 Crop Equipment 0 Seed O O $500 Million-$999 Million
O Education 0 Trade Publications
0 O $1 Billion or more
O Farming/Ranching 0 Other Media
O Feed 0 Other:
" Fertilizer
General Opinions
1 Please give us your opminion on each o!fthe jo/llowmng ,ta
Strongly Agree to Strongly Disagree -d -
Electronic commerce will fundamentally change the way we do business in o

years.
The emergence of e-commerce will greatly reduce the role for local dealer
E-commerce will improve my company's ability to manage inventory leve

Information about increasingly complex products is difficult to pr
Farmers are unwilling to buy products on the Internet. O 0 O O O0
Personal relationships with customers are difficult to develop over the Internet. O O O O O
Distribution (logistics) issues will limit sale of my industry's products over the Internet. O O O O 0
Use of Internet and Electronic Commerce 10. Several reasonsadoption

have been suggested as possible barriers to fanner
of e-commerce. For each of the following potential barriers,
rate the barrier on a scale from "Not a Barrier" to "Major Barrier."
7. What proportion of your customers: appropriate response.
appropriate response.
none 1-5% 6-15% 16-25% 26-100%
Communicate
company by with your 0 Barrier
e-mail 0 0 0 BNot. a Maior
Barrier
Place orders for products Ol El O O 0 O Farmers do not have Internet access. O 0 1 0 O
over the Internet (but still Farmers lack the required trust to make El 0 0 l "
make payment by mail or Internet purchases.
traditional means) The Internet limits limited ability to provide 0 O l O -
Place orders and make O El OE O El product recommendations to fanners.
payment for products The Internet offers limited ability to provide O O 0 [] r
over the Internet after sale service to farmers.
Farmers are unable to find desired 0 0 0 0 0
informnnation conveniently on the Internet.
8. What proportion of your suppliers, does your company: Farmers question the security of
approprriate res.ponse. Farmers question the security of e-commerce. O ] 0 [0 -
none 11-5% 6-15% 16-25% 26- 100%? Farmers question the privacy of e-commerce. 0 0 0 l -
Communicate with your E0 O O 0 0O
suppliers by e-mail I I. Several reasons have also been suggested that suppor
Place orders for their o El O O O of e-commerce and purchasing over the Internet by f
products over the Internet the following select why farmnners will buy over the Inter
(but still make payment reason on a scale from "Not a Factor" to "Major F
by mail or traditional appropriate responses.
means) Not a Maior
Place orders and make El El El El El Factor Factor
payment for their Prices for products will be lower if E O [0 [
products over the Internet purchased over the Internet.
Information can be obtained more easily ElO O l -0
9. s,Does,
If all ofour
thefinn haveund
featmres a web site?web
on your El Yes Elproduct
No overchoices
the Internet.
site, over theMore Internet. will be available El 0 - O -0
O Technical information
Buying
about
over
the
the
products
In
th
El Pricing infornnation for the

over the Internet.
product
[ Background information about your company
O A dealer directory (infonnation on where your pro
O Links to industry trade associations Currently Three

years from
0 Links to other data/information sources (e.g., USDA, universities) now
O Online ordering (but traditional means of payment) Order placed on the Internet, but
aytent by mail or traditional means % %
El Online ordering and payment Order placed and payment made on
the Internet % %
EO Online communities (i.e., chat rooms, bulletin boa
centers, virtual coffee virtual coffee sho
O Areas with customized content to different audien
Currently Three
A password protected area, only accessible to registered customers years from
or suppliers now
S Other (please specify): From manufacturer to distributor to
SOler (lease s dealer to fannrmer % %
If no, does our company expect to develop a From manufacturer to dealer to
web site? I appropriate response. fanner % %
E NO
l NYES, in 1999 From manufacturer to fanner
Elt YES, TOTAL
YES,in2000 in w 100% %100%
%
El YES, but not sure when
References
Goldman Sachs Investment Research. "B2B: 2B or Not 2B?" November 1999.
Hopkins, J., and M. Morehart. "Farms, the Internet & E-commerce: Adoption & Implications." Agricul-
tural Outlook. Washington, DC: U.S. Department of Agriculture, ERS. November 2001, pp. 17-20.
Ivanic, R., J. Akridge, F. Dooley, C. Ehmke, and S. Wall. "E-commerce Strategies Among Agricultural
Input Firms." Staff paper no. 01-9, Cent. Food Agri. Bus., Purdue University, July 2001.
Levebvre, L., L. Cassivi, and E Lefebvre. "E-commerce Transition Model for Supply Chain Manage-
ment." J. on Chain and Network Sci. 1(2001): 23-32.
Morehart, M., and J. Hopkins. "On the Upswing: Online Buying & Selling of Crop Inputs and Live-
stock." Agricultural Outlook. Washington, DC: U.S. Department of Agriculture, ERS. September
2002, p. 4.
Phillips Business Information. Electronic Commerce News, vol. 6, no. 1, January 2001.
Staihr, B. "Rural America's Stake in the Digital Economy." The Main Street Economist, Center for the
Study of Rural America, Federal Reserve Bank of Kansas City, May 2000.
U.S. Department of Agriculture. Farm Computer Usage and Ownership. Nat. Agr. Statist. Serv., 1999,
2001.
U.S. Department of Commerce. "E-Stats" 2002, available at www.census.gov/estats
Wheatley, W.P., B. Buhr, and D. DiPietre. "E-commerce in Agriculture: Development, Strategy, and
Market Implications." Department of Applied Economics Staff paper P01-06, University of
Minnesota, July 2001.
Williams, V. E-commerce: Small Business Ventures Online. Washington, DC: U.S. Department of Com-
merce, Office of the Advocacy, Small Business Administration, July 1999.

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Agricultural & Applied Economics Association

Internet and E-Commerce Adoption by Agricultural Input Firms

Internet and E-Commerce

Jason Henderson, Frank Dooley, and Jay Akridge

Figure 1. Stages of e-commerce deployment

Simple Commerce Sites Online

sell products online

Source: Based on Williams, Victoria. "E-Commerce: Small Business Ventures Online,"

such as marketing and advertising, before making an e-commerce sale (Williams;

The respondents represented firms in many stages of the distribution channel,

12% reported other primary business interests such as consulting, lending, or

The respondents represented firms of varied size and geographic scope.

Internet Usage by Agricultural Input Firms

Provided background information about the company 95.0

Included password protected areas, only accessible to registered members 25.8

firms expected a greater share of e-commerce as did managers

Figure 2. Agricultural input firm e-commerce usage

Note: Share of firms doing e-commerce with more than 5% of

Figure 3. Opinions regarding logistics issues and e-commerce

l:-commenlerce w ill greatly improve I)istrilbution issues %will limit

I'1 -'nit uer In1rn't 10 \ 1b Ni 1 '-c1nWin(C I t'nt ) i

Note: The Person X 2 statistics rejects the null hypotheses that th

E-commerce Use with Farmers

Barriers to Farmer Adoption

Figure 4. Barriers to farmer e-commerce adoption

Factors Supporting Adoption

Figure 5. Factors contributing to farmer e-commerce adoption

Information Product Product Buying

15.6%** 27.3% 29.2% i

26.4% 26.2% 28.4% 30.8%

the ease of information

Expectations of E-commerce Growth

Figure 6. Factors supporting farmer e-commerce adoption by firm

Inlformation Ctan l)e lotainiedl more Buying ov)er the Internet

farmer e-commerce adoption relative to other types of firms. Dealers were m

Figure 7. E-commerce's share of total sales (Expected share coming

Figure 8. Manufacturers' expected distribution channels in 2002 by

U No) WcI Site

Manlufaclurer to Ianuiactu rer to Manu tacturer to

and easier product comparisons-that are attracting farmers to the Internet,

Appendix A: Survey Instrument

1999 Center for Agricultural Business Internet/E-Commerce Survey

Center for Agricultural Business

I. What is your osition/area of responsibility within your

6. What is your gross annual sales of your operating

Electronic commerce will fundamentally change the way we do business in o

E-commerce will improve my company's ability to manage inventory leve

Use of Internet and Electronic Commerce 10. Several reasonsadoption

El Pricing infornnation for the

O A dealer directory (infonnation on where your pro

O Links to industry trade associations Currently Three

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