Digital Trade in Agriculture – Studies and Possibilities
Online trade in agriculture has taken a big step forward in 2020, according to studies: Covid-19 has given the digital agritrade the boost it needs. In April 2020, the Bitkom 2020 study proved that digitization has arrived in agriculture. It is clearly seen as an opportunity. In May, an international study also showed that farmers' interest to buy supplies online has doubled within six months. Agricultural trade needs this boost: estimates assume a Europe-wide potential of up to ten Billion euros in the online agricultural trade. By 2025.
Management apps, smart tractors, autonomous feeding robots and fleets of weeding minibots – digitization in agriculture has many faces. Countless start ups, university research teams and mechanical engineers have long been dedicating their work to better management, technology-supported soil analysis or more efficient use of the data generated during agricultural work. And while the digitization of agriculture keeps being a hot topic, digital agricultural trade is finally demonstrably catching up. Stationary agricultural trade was previously considered a set process, which is why this area of the agricultural production chain often went unnoticed in 4.0 discussions and modernization programs. This is now changing, because current studies make it official: There is a great deal of potential lying dormant here for market participants.
Digitization agriculture: accepted and anchored in everyday life according to studies
More and more farmers see digitization as an opportunity: according to a survey conducted by Bitkom in 2016, the figure was 66 percent; in April of this year, it was already 73 percent – although the Bitkom 2020 survey does not yet include the effects of the Corona months. Eight out of ten companies use digital technologies at various points in production. 64 percent of companies believe that digital technologies will help to reduce costs in the long term. By contrast, 93 percent of respondents agree that the potential of digital technologies lies mainly in environmental protection and that they can help save fertilizer, pesticides and other resources, for example. And what about the fear of giving away personal farm data? That, too, no longer seems to be a problem.
96 percent of farms in Germany are willing to make their data available if:
it enables them to detect and rectify damage at an early stage.
they could achieve higher prices as a result of the transparency this would provide.
it would reduce their bureaucratic workload.
they could support research projects for the benefit of agriculture.
it would enable them to compare themselves anonymously with other farms.
Study on digital agricultural trade: Farmers choose products and retailers online
In almost all other areas, online shopping has become indispensable. We buy our clothes, smart phones, books and groceries online, via app or on our PCs. There is hardly any company that doesn’t offer its own digital store or sells its products on the large retail platforms. Online retail in agriculture has a lot of catching up to do in this respect. In a representative survey by McKinsey on digital purchasing behavior in European agriculture in fall 2019, it was found that 87 percent of farmers already search for products online. However, only 13 percent actually purchased online, including mostly equipment and very little feed or crop protection products. But 33 percent said they preferred to buy online. Why is there such a big difference? In many ways, the study leaders see the slow development of online retail as a self-inflicted problem: It's simply not convenient enough for farmers to go digital.
Anyone who wants to buy farm inputs online will by no means find the service they are used to when shopping online in other areas. Suppliers of farm inputs are not available 24/7. Product searches do not work well, product information and prices are not up to date. Products might not be comparable at all or only poorly. Questions are not answered quickly enough: According to McKinsey, these are the criticisms of businesses that have already shopped online.
2020 significantly changed purchasing behavior in agriculture
Covid-19 has influenced the purchasing behavior of farmers. In May 2020, McKinsey again asked 100 farms across Europe about the digital purchase of their inputs. With the onset of the pandemic, the number of those eager to buy online more than doubled, from 33 percent to about 70 percent. This increased interest means a great opportunity and better sales prospects for land-based retailers: By 2025, European online trade in agriculture could be worth more than ten billion Euros. For agricultural businesses to actually trade online more easily, they need a convenient digital infrastructure and openness on the part of sellers to display offers and prices online. Manufacturers and retailers must also become more visible online. 92 percent of farmers use their cell phones for research and purchasing: outdated websites that are not easily accessible on mobile devices quickly lead to potential buyers dropping out.
Trust plays a key role in digital land trading
Farmers like to shop online with a clear conscience. In order for them to do so, agricultural retailers need to gain their trust digitally. Although agricultural businesses use various online sources for product research, they are skeptical of company websites, for example. While 68 percent use a company website to identify new products, only 9 percent use it to compare or evaluate products. Neutral sources are the frontrunners, with 81 percent of respondents trusting university research to compare products. If farmers have already used a product and are convinced it is of good quality, 72 percent are willing to reorder the product online. What can agricultural retailers do to get that crucial leap of faith from their customers online?
Possible measures taken by agricultural retailers to build "digital trust":
a professional online presence
well-maintained and up-to-date product information
the embedding of product comparisons and purchase recommendations by independent third parties
the integration of advice and application tips
fast response to online inquiries
Stationary trade still important – online trade as second mainstay
Will digital business replace traditional on-location retail? No. All survey participants who have bought online say they have also used offline channels. For example, a website should make it easy to direct farmers to the nearest store or salesperson. So brick-and-mortar agribusiness will continue to be important. However, digital channels need to be added to business concepts to ensure that no business is lost to the increasing online shopping behavior of customers. Trading platforms such as Agrando, which offer retailers additional sales quickly and flexibly, complement the established analog relationships in land retailing and help it to remain fit for the future.
Digitisation in agriculture, (Digitalisierung in der Landwirtschaft 2020). bitkom 2020, german