B2B Agriculture E-Commerce Primer

1. B2B Agriculture E-Commerce Primer Prepared by Department of Food & Resource Economics, University of Delaware, CANR, and Innovative Exchange, Inc.

2. Overview: What is E-Commerce? Popularly, e-commerce is thought of as conducting business over the Internet. To put it all in perspective, lets address “commerce” first. The Elements of Commerce When you get down to the actual elements of commerce and commercial transactions, the details boil down to a finite number of steps: • Product or service • Place from which to sell • Marketing • Accept orders • Accept payment • Fill orders • Accept returns • Customer service

3. Overview: What is E-Commerce? E-Commerce Sales Channel In an e-commerce sales channel you find all of these elements as well, but they change slightly. You must have the following elements to conduct e-commerce: • A product • A place to sell the product • A way to get people to come to your website • A way to accept orders – normally an online form of some sort • A way to accept money – normally a merchant account handling credit card payments • A fulfillment facility to ship products to customers (often outsourced) • A way to accept returns • A way to handle warranty claims if necessary • A way to provide customer service

4. Overview: What is E-Commerce? B2B & B2C Firms that do business on the Internet, whether exclusively or part of a broader business, generally fall into two categories: B-to-B and B-to-C. • B-to-B is short for “business to business” and applies to transactions between firms • B-to-C, or “business to consumer” describes firms that sell goods or services to a final consumer, usually a member of the general public.

5. Overview: What is E-Commerce? E-Commerce Hype A huge amount of hype surrounds e-commerce. Given the similarities with mail-order commerce, you may be wondering why the hype is so common. The Dell example: • Dell is a straightforward company that, like a host of others, sells custom-configured PCs to consumers and businesses. • Started as a mail-order company that advertised in the back of magazines and sold its computers over the phone. • Dell’s e-commerce presence is widely publicized these days because Dell is able to sell so much merchandise over the Web. • Dell sold about $14 million in equipment every day in 2000, and 25% of Dell’s sales were over the Web.

6. Overview: What is E-Commerce? E-Commerce Hype The Dell example Does this matter? • If Dell were to lose 25% of its phone sales to achieve its 25% of sales over the Web, then it is not clear that e-commerce has any advantage, unless: • What if the sales conducted over the Web cost the company less? • What if people buying over the Web tend to purchase more accessories? • What if, in the process of selling merchandise over the Web, Dell lost no sales through its traditional phone channel?

7. Overview: What is E-Commerce? The Lure of E-Commerce • Lower transaction costs • Larger purchases per transaction • Integration into the business cycle • People can shop in different ways; websites offer these new features: • The ability to build an order over several days • The ability to configure products and see actual prices • The ability to easily build complicated customer orders • The ability to compare prices among multiple vendors easily • The ability to search large catalogs easily • Larger catalogs • Improved customer interactions

8. E-Commerce and Farm Direct Marketing Throwing Numbers at You… 2007 Farm Computer Usage and Ownership (US Department of Agriculture) • Farms using computers for their business increased 3 percentage points from 2005 to 35 percentage points in 2007. • In 2007, 80% of U.S. Farms with sales and government payments of $250,000 or more have access to a computer, 78% own or lease a computer, 66% are using a computer for their farm business, and 75% have Internet access. • For farms with sales and government payments between $100,000 and $249,999, the figures are: 70% have access to a computer, 66% own or lease a computer, 51% are using a computer for their farm business, and 61% have Internet access. • For farms with sales and government payments between $10,000 and $99,999, 62% reported having computer access, 57% own or lease computer, 36% percent use a computer for their farm business, and 53% have Internet access.

9. E-Commerce and Farm Direct Marketing Throwing Numbers at You… 2007 Farm Computer Usage and Ownership (US Department of Agriculture): • High-speed Internet has become much more available to Internet users in the farm sector since 2005. • The proportion of operators using DSL doubled between 2005 and 2007, to 27 percent versus 13 percent. • Cable, satellite, and wireless were each reported as the primary access methods on 7% of U.S. farms with Internet access, with satellite and wireless methods both at virtually double their 2005 levels. • Dialup was again the most common method of accessing the Internet, with nearly half (47%) of U.S. farms still using it, down from 69% in 2005. • A total of 55% of U.S. farms now have Internet access, compared with 51% in 2005. • Conducting business on the Internet and usage of toll-free customer service numbers in MD&DE, 5% in 2007 • 63% of farms have access to a computer in 2007, compared with 59%in 2005.

10. E-Commerce and Farm Direct Marketing Food and agriculture products can pose particular challenges E-commerce in Agricultural Industries: • Shipping • Seasonality • Convenience vs. personal connection • Consider the costs

11. E-Commerce and Farm Direct Marketing Other Approaches for E-Commerce in Agriculture Augmenting existing customer relationships and making it easier for these local customers to patronize your business. B2B: • Direct sales to restaurants • Direct sales to other farm markets • Direct sales to schools, hospitals, & other institutions • Corporate gifts B2C: • Farmers’ market preorders • Delivery services • CSA (Community Supported Agriculture) shares • CSA weekly extras

12. E-Commerce and Farm Direct Marketing Identify Internet Marketing Objectives Before getting started, it is important for marketers to identify Internet objectives and determine what can be gained by direct marketing farm products on the Internet. • Save time • Save labor • Save money • Save materials • Advertise • Sell product

13. Internet Market Planning & Aspects of E-Commerce Plan Ahead – Business Plan, Marketing Plan & Internet Marketing Plan Starting any new enterprise can be risky. Before investing money, time, and energy in an unconventional agricultural business, new entrepreneurs should complete personal, market, project feasibility, and financial evaluations. • A business plan • A marketing plan • Internet marketing plan • Farm direct marketing on the Internet provides many opportunities for producers to expand their existing business • Internet technologies • Various ways to use Internet technology • Website • Online directories • E-mail

14. Internet Market Planning & Aspects of E-Commerce Internet Marketing Without a Website Internet Directories • Topical directories • localharvest.org • agriculturehealth.com • State Department of Agriculture Internet directories • Local community directories E-mail • E-mail newsletters • E-mail address everywhere • E-mail lists and updates • Never, ever SPAM

15. Internet Market Planning & Aspects of E-Commerce Developing Your Own Website for E-Commerce The things that are easy about creating a website for e-commerce: • Creating the website • Taking the orders • Accepting payment The things that are hard about e-commerce include: • Getting traffic to your website • Getting traffic to return to your website • Differentiating yourself from the competition • Getting people to buy something from your website • Integrating an e-commerce website with existing business data

16. Planning, Designing & Developing Your Website There are several different ways to direct market on the web. Producers must, therefore, ensure that the solution fits in with their overall marketing plan, with their objectives for using the Internet, and with their resource constraints. There three are primary types of websites that an individual producer can choose to develop: • Website to transact sales • Website to distribute information • Website to transact sales and distribute information Fundamentals – Objectives, Target Markets, Products & Services • Objectives of the organization • Needs, wants, and expectations of target markets • Products and services that are being offered.

17. Planning, Designing & Developing Your Website Common Objectives What is the purpose of your site? • Advertising products & services • Selling products & services • Providing customer service and product support • Providing product or corporate information • Creating and establishing corporate identity or brand awareness Target Markets It is important to define every one of your target markets. For each one you will need to determine: • Their needs • Their wants • Their expectations • Appropriate WOW factor

18. Planning, Designing & Developing Your Website Products & Services It is important to define the products and services you want to promote online. Sometimes the products and services you offer in your physical store are the same, but quite often there are differences: • You may have fewer items if you are test marketing, or if some items are not appropriate for online sales because of competitive pricing or shipping logistics. • You may have more products or services online – for example: shipping items out of state, mail lists, etc.

19. Planning, Designing & Developing Your Website Other Considerations: The site should be designed to be search-engine friendly • Keywords in keyword and description META tags (Keywords inserted in the coding), page text, domain names, page titles, alt tags • Different META tags on each page • Keyword density and location • Header tags • Search localization • Hypertext links, anchors • File names • Referring websites • Flash and text in graphics • Website accessibility issues

20. Planning, Designing & Developing Your Website Other Considerations The site should be designed to encourage repeat traffic: • The more your brand is reinforced, • The more your target markets feel a part of your community, • The more likely they are to tell others about you, • The more likely they are to give you permission to stay in touch, • The more likely you will be the first in mind when they go buy your types of products/services. • Web elements to keep them coming back: • Contests and competitions • Cartoons, jokes, trivia, games • Advice columns, tip of the day • What’s New page • Bookmark this page • Calendar of events • Blogs • Online community • Coupons, discounts, giveaways • Specials and promotions

21. Planning, Designing & Developing Your Website Other Considerations The site should have viral marketing elements that encourage visitors to recommend your products or services to others • Word of mouth (tell a friend, send this to a friend) • Pass it on (customers forwarding e-mails to a friend) • Product or service based The site should include elements to leverage its sales force • Affiliate or associate programs The site should incorporate permission marketing, in which visitors are encouraged to give you permission to send them an e-mail on a regular basis • Newsletters • Contests • Notification of new giveaways

22. Planning, Designing & Developing Your Website Other Considerations The site should be designed to encourage customer loyalty • Members-only area • E-club with offers/discounts/freebies • Appreciate their business The site should incorporate “stickiness,” encouraging visitors to stay a while and visit many areas of the site • Advice columns • Description of products • Discussion forums • News sections • Weekly contests

23. Planning, Designing & Developing Your Website Using Competitor Sites to Your Advantage There are a number of ways to find your online competitors • Conduct searches with the appropriate keywords • Visit industry-specific Web portals and directories Analyze the competition • Visual appeal • Content • Ease of navigation • Search engine friendliness • Interactivity • Website stickiness Review the elements that address the criteria above and categorize them as: • Need to have, essential • Nice to have it if it doesn’t cost too much • Don’t need or want at any price

24. Planning, Designing & Developing Your Website Storyboard Your Website A website storyboard can be thought of much like a hierarchical organizational chart in a business: • Begin with your main page or home page at the top • Under the main page, you have your central navigation bar • Sub pages below that

25. Planning, Designing & Developing Your Website Detailed Website Planning At this point, you are ready to think about construction. For each page of the site, you will need to develop content and specific graphics. Your designer will need to work on the site look and feel and ease of navigation. • You will need to write your text. • It may behoove you to have the copy reviewed and edited by an online copywriter with experience in grabbing readers’ attention and getting them to do what you want them to do. • You will need to review and approve, making sure that only the form, not the substance, has changed. • Content should then be reviewed and edited by an Internet marketer (unless the online copywriter is writing for that as well). • The Internet Marketer will also develop content for page titles, META tags, ALT tags, headers, etc. • The Internet Marketer will check for repeat traffic generators, permission marketing, viral marketing.

26. Planning, Designing & Developing Your Website Detailed Website Planning The Graphic Designer develops the look and feel in parallel with this effort. When all of this comes together, site development can begin. The development process should include adherence to guidelines for: • Content • Consider contact information on every page • Avoid “Under Construction” • Include security information • Include privacy policy • Minimize use of background sounds • Text Formatting • 80% of web users scan text as opposed to actually reading it • Write for scan-ability – bulleted lists, headers, and horizontal rules to create visual breaks • Colors • Keep online and offline images consistent • Logos, corporate colors, other marketing collateral • Choose background and font colors carefully for readability

27. Planning, Designing & Developing Your Website Navigation • Consistent location • Navigation bar that links to all the major pages on every page • Get anywhere on the site in three or fewer clicks • Site map if you have more than eight major sections • Internal search tool if the site is very large Graphics • Combined size of text and graphics should not exceed 50kb • Use descriptive ALT images • Use thumbnails when appropriate • Avoid image maps • Avoid flash intros Visual • Test site in multiple browsers • Test on a Mac and a PC • Test with varying screen widths • Avoid scrolling text Other • Test download time. Users rarely wait beyond 15 seconds to download a site • Ensure there are no dead links

28. Planning, Designing & Developing Your Website Being “Search Engine Friendly” Organic searches • 85% of people using the Internet use search engines as their way to find information. • Most important web elements on a web page for organic search engine optimization: • Page text • Title tags • Keyword META tags • Descriptions META tags • Alt tags • Hypertext links • Domain names • File names • Headers Paid inclusion • With pay-per-click campaigns, you are guaranteed to be indexed by the searchengines, up to the number of pages you have paid for, within a short, defined period.

29. Planning, Designing & Developing Your Website Deciding between optimization and pay-per-click • Limited advertising budget • Website that can’t be modified • Need immediate results • Guaranteed top placement • A need to change ad content or training • Ad-averse audience

30. Planning, Designing & Developing Your Website Options for taking payments • Storefronts • Shopping carts • Out-of-the-box software • Software provided by the hosting company • Build your own system • Refer to your shopping cart considerations handout to help you select a solution

31. Planning, Designing & Developing Your Website Payment Gateways/Merchant Accounts Let’s briefly run through the nuts and bolts or the process of online sales using credit cards: • The customer visits your site. • Customer clicks on a “buy me” button after reviewing sales copy. • The selection is added to the shopping cart. • At “Checkout,” the customer’s personal and financial details are recorded via a secure form. • Details on the form are transmitted to a payment gateway service, which is separate from the cart. The gateway service securely routes the information through the relevant financial networks. • If the transaction is successful, the customer’s credit card account is debited and your merchant account is credited. • Once all funds have cleared, you are able to transfer money to your ordinary business checking account.

32. Planning, Designing & Developing Your Website Payment Gateways • A payment gateway is a separate service and acts as an intermediary between the merchant’s shopping cart and all the financial networks involved with the transaction, including the customer’s credit card issuer and your merchant account. Payment Gateway Issues • Gateway compatibility • AVS protection Gateway Compatibility AVS (Address Verification) Protection

33. Planning, Designing & Developing Your Website Merchant Accounts & Third-party Credit Card Processors When selecting an Internet merchant account provider or third-party processor, you should address these fees: • Statement fee • Application fee • Setup fee • Discount rate • Mid-qualified and nonqualified rate • Transaction fee • Monthly minimum • Reserve • Charge-back

34. Planning, Designing & Developing Your Website Alternatives to Merchant Accounts (P2P) P2P or person-to-person payment services keep track of funds available to both the buyer and the seller. The buyer and seller (or service provider) both need to have accounts with the P2P service. The most popular P2P service is PayPal, though there others are attempting to work up market acceptance. Public acceptance of P2P payment services is the main drawback of using this type of service as your sole payment method. Primary Benefits of P2P: • P2P accounts are usually very easy to get. • Purchase transaction approvals are typically straightforward (either the funds are available or they are not). • Funding accounts and moving funds out of an account are usually fairly simple. Primary Drawbacks of P2P: • Do not have universal public acceptance. • May give the purchaser less confidence in the seller (ease in obtaining a P2P account compared to a merchant account).

35. Planning, Designing & Developing Your Website Domain Registration What is a domain name? • A domain name uniquely identifies a website. Typing a domain name (also called a URL) into your browser allows you to visit that site. Anatomy of a Domain Name: You most often see a domain name listed as www.webixi.com • The center part, “webixi” • This is the unique part of the name. It represents your company or brand name. It is how you will be branded and known on the web. • The last part is called the extension What do the different extensions represent? • .COM – Abbreviation for commerce – currently available to all • .NET – Abbreviation for network – currently available to all • .ORG – Abbreviation for organization – currently available to all • .GOV – Abbreviation for government – reserved for government agencies • .EDU – Abbreviation for education – reserved for educational institutions

36. Planning, Designing & Developing Your Website Domain Registration and Hosting Website Hosting • A web hosting service generally provides server space for your files or website • In addition, website hosts can provide a range of services that can be tailored to your needs and your price range. One example is e-mail. Web Hosting Selection Criteria • Dependability and backup • Bandwidth • Statistics provided • Price • Reputation • Management and maintenance • Security • Software • Support

37. Planning, Designing & Developing Your Website Types of Web Hosting Services • Shared server (virtual server) • Dedicated servers (rented server) • Collocation (owned server in a remote location)

38. Conclusions An E-commerce website can be the next step for your business strategy to increase your sales presence in your specific marketplace. Implementing an e-commerce site represents a new strategy for business growth. You have an opportunity to expand your marketplace and reach new goals with your company. Questions?