Understanding and Improving E-Commerce Use by Small Farms

Final Report for LNE04-197

Project Type: Research and Education
Funds awarded in 2004: $85,317.00
Projected End Date: 12/31/2008
Region: Northeast
State: West Virginia
Project Leader:
Cheryl Brown
West Virginia University
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Project Information

Summary:

This project used an online and a mail survey to gather and analyze information from farm businesses currently marketing over the Internet in the Northeast. A web page, WVFarm2U.org, that provides a consumer friendly Internet directory of agricultural businesses in West Virginia was created in partnership with the Collaborative for 21st Century Appalachia. West Virginia University (WVU) Extension Service’s Small Farm Conferences included workshops on e-marketing and website development for small farms.

Introduction:

This project used an online and paper survey to gather information from direct marketing farms in the Northeast regarding their use of the internet for marketing. Analysis of data from the survey examined factors that influence adoption of a website by the farm, and the impact of e-marketing and other factors on level of gross farm sales and whether a farm household receives more than 75% of its income from the farm.

A West Virginia online farm directory was developed, WVfarm2U.org, that allows consumers to search for local foods by county and farmers to sell directly to chefs via the web. As of January 2009, 70 farms are listed on this website in the on-the-farm category, 12 as roadside stands, and 3 CSAs, along with 14 restaurants and 33 farmers markets.

Workshops on “Cultivating Customers with E-marketing” and “How to Grow a Website” were part of the 2007 West Virginia University Extension Service Small Farm Conference, and these materials, along with the handout, “E-marketing Resources for Farmers,” are available online at http://www.cafcs.wvu.edu/resm/faculty/Brown/service.htm.

Performance Target:

Of the 160 agricultural businesspeople who attend workshops on e-commerce development, 150 (95%) will sign up for the West Virginia Specialty Products web site. We fell short of this target.

Sixty (40%) of these businesses will have increased sales of 10-15% after 1 year of listing along with improved customer satisfaction. We fell short of this target.

Forty (25%) of the 160 attendees will develop a web page for their business, and 75% of these (30) will increase sales by 5-10% within 1 year of implementation. We fell short of this target.

This project will help advance the goals in the Northeast SARE outcome statement that agriculture in the region will be “profitable” and “conducted by farmers who manage resources wisely and who are satisfied with their lifestyles.” By helping agricultural businesses develop this relatively new advertising medium this project will help them increase sales and improve profitability. Because the research part of this project will discover the best ways for agricultural businesses to use the web for advertising and selling, it will help new Internet users avoid some of the mistakes made by innovators in this arena. This should help farmers manage wisely one of their most valuable resources, their time, and thus help them to be more “satisfied with their lifestyles.”

We hypothesize that most farm businesses that develop web pages will use them as advertising for their operation. These business owners will analyze the value of the web page (and other advertising media) by tracking how customers hear about the business. In addition, operators will record sales to those web-using customers. We will survey these businesses after 1 year of listing on the web in order to determine the percentage increase in sales as well as their overall satisfaction with web-based advertising. We fell short of this target.

We project that only a small number of farm-based businesses will actually begin to sell products over the Internet during this first year of web site listing. We will also contact these businesses to evaluate their experience with Internet sales. We fell short of this target.

Research

Materials and methods:

This project used a survey of farmers direct marketing products throughout the Northeast. Both a paper survey sent through the mail and an internet version of the survey were used. First, a Microsoft Access database containing 5,638 farms from all 13 states in the Northeast was created from over 45 online sources. Letters were mailed to 5,392 farmers from all 13 states in the Northeast asking them to participate in the survey. A bookmark with an agricultural photo was included with the letter as an incentive; 987 farmers agreed to participate; 404 surveys were mailed, of which 300 were completed and returned. An Internet link and access code was emailed to 583 individuals with 346 questionnaires completed online. Data from the internet survey went directly into Microsoft Access. Responses to the paper survey were entered via the internet survey format.

Econometric analysis (probit model) of the data was performed to determine factors that led to adoption of a website for a farm business. Additional analysis using ordinary least squares (OLS) examined the impact of e-marketing and other factors on gross farm sales and a probit model examined the ability of a household to depend on farm income (whether they received more than 75% of their household income from the farm).

The website WVfarm2U was designed by a professional website developer, Seayside Designs. A web software firm, Terradon Communications, installed and customized the site.

Research results and discussion:

First Milestone: Project coordinator will conduct research gathering and analyzing information from farm businesses currently marketing over the Internet.

A survey of farms regarding their use of the Internet for marketing was conducted and results disseminated through presentations and publications.

Second Milestone: CSR and NRAC will make improvements to WV Specialty Products web page.

This plan was changed. Instead, a website, WVFarm2U.org, that provides a consumer friendly Internet directory of agricultural businesses in West Virginia was created in partnership with the Collaborative for 21st Century Appalachia, a consortium of chefs, farmers, extension personnel, educators and others interested in creating a local food system for West Virginia. This website made its début at the 2007 West Virginia State Fair with the Governor and West Virginia Department of Agriculture Commissioner in attendance.

Third Milestone: A total of 160 agricultural businesspeople will attend 1 of 4 workshops on e-commerce development held throughout West Virginia.

The first workshop was held February 28, 2006 in Morgantown, WV as part of a “Marketing for Success Conference” sponsored by the West Virginia University (WVU) Extension Service. A 3-part workshop was part of the 2007 West Virginia University (WVU) Extension Service’s Small Farm Conference. It included a presentation on e-marketing techniques along with methods for evaluating the value of Internet marketing. A presentation was given by the director of the Collaborative for 21st Century Appalachia regarding connecting with and selling to chefs over the Internet using the WVfarm2U website. The third part of the workshop was a presentation by a professional web developer on website development for small farms. Materials developed for that workshop were made available on my website for WVU Extension educators and others to use to educate farmers on e-marketing and web development. Over 125 people were in attendance at this conference in 2007.

This annual small farms conference draws participants from across the state and neighboring states. Much effort goes into making this 3-day conference a worthwhile experience, and scholarships allow attendance by many farmers who otherwise could not make it. After discussion with WVU Extension personnel, it was decided that rather than have poorly attended website workshops across the state, resources would go towards this annual event.

Fourth Milestone: 150 agricultural businesspeople will sign up for the WV Specialty Products web site.

The WVfarm2U website had delays in being developed but went online in August of 2007. It débuted at the 2007 West Virginia State Fair with the Governor and West Virginia Department of Agriculture Commissioner in attendance. The website has been promoted by the Collaborative for 21st Century Appalachia, the West Virginia Department of Agriculture, and at the 2007 and 2008 West Virginia University (WVU) Extension Service’s Small Farm Conferences. In addition, a new WV agricultural website just went online sponsored by the newly formed West Virginia Farmers Market Association which lists a link to the WVfarm2U website. As of January 2009 there were 70 farms, 12 roadside stands, and 3 CSAs listed on the web site, in addition to 14 restaurants and 33 farmers markets. A mailing to encourage farmers, farmers markets and restaurants to sign up on the site took place in early 2008. We hope to eventually reach the 150 farms projected in this milestone but it may take some time, along with continued promotion of the website.

Fifth Milestone: Sixty agricultural businesses will have increased sales of 10-15% after 1 year of listing on the WV Specialty Products web site along with improved customer satisfaction.

Due to the late development of the WVfarm2U website along with slow signup on the site and the approaching end of this project, we will not be able to determine if this milestone will be achieved. Surveying of farmers is currently underway to determine their satisfaction with the website and whether they believe it increased their sales, however, an increase of 10 to 15% was probably overly optimistic. In addition, it is extremely difficult for farmers to determine if an increase in sales was due to listing on this or any other web directory. The groups involved in development of this website will continue to follow up with farmers to determine their satisfaction with and benefits from their use of this WV e-marketing website.

Sixth Milestone: Forty farm businesses will develop a web page for their business.

Farmer interest in e-marketing has been slow to develop in West Virginia. Many farms still have dial-up Internet connections and the main high speed alternative, satellite, is expensive. In addition, many specialty product and direct-marketing farmers in WV believe that they cannot meet their current demand and so are reluctant to expand their market through use of the Internet. Farmers are also listing on the variety of farmers market and farm directory websites that are currently available in order to have a presence on the Internet. For many farms, this is sufficient exposure and the costs of developing and maintaining a website for their farm are not offset by the benefits.

From the survey of direct-marketing farmers, we learned that there are many factors (mainly time, money, and interest) that determine whether a farmer will develop a website for his/her business. Attendance at a workshop that promotes and explains website development may be the first step on this path but is not sufficient to lead to website development unless the farmer had already made significant progress towards website development on his/her own. Thus, the workshops that were part of this project were useful in that they probably initiated some websites for farmers who were almost convinced anyway and may have started some farmers to investigate the benefits of a website more intensively.

Seventh Milestone: Thirty agricultural businesses which created web pages will increase sales by 5-10% within 1 year of implementation.

See discussion under sixth milestone regarding the number of agricultural businesses creating websites. Also, increasing sales through use of a website requires heavy promotion of the website along with much time and effort maintaining and updating the site. It is also difficult for a farmer to determine if website advertising is behind any increase in sales, especially given the recent overall increase in demand for local foods. To follow up on website development among WV farmers a survey will be administered during early 2009 regarding current levels of website use and development for their businesses.

Participation Summary

Education

Educational approach:

Outreach to farmers occurred through West Virginia University Cooperative Extension personnel and conferences/workshops, as well as through events and individuals connected with the Collaborative for 21st Century Appalachia and the West Virginia Department of Agriculture. The governor and his wife launched the website at the 2007 WV State Fair to gain publicity and alert farmers to its presence. In addition, this SARE grant paid for a promotional mailing to encourage farmers to register for the WVfarm2U.org website.

Materials are available online:
A Regional Survey of How Farmers Use the Internet
http://www.cafcs.wvu.edu/resm/faculty/Brown/EcommerceSurveyReport.htm

E-marketing Resources for Farmers http://www.cafcs.wvu.edu/resm/faculty/Brown/EmarketingResourcesforFarmers.pdf

Cultivating Customers with E-marketing
http://www.cafcs.wvu.edu/resm/faculty/Brown/E-MarketingPresentation2007a.pdf

How to Grow your Website http://www.cafcs.wvu.edu/resm/faculty/Brown/how2growWebsite.pdf

Publications
One West Virginia University graduate student, Alexander Baer, wrote his thesis based on this research, To E or Not to E: Adoption of E-Marketing by Direct Marketing Farms in the Northeastern U.S. It is available online at http://www.libraries.wvu.edu/etds/.

“Adoption of E-Marketing by Direct Market Farms in the Northeastern United States” by Alexander G. Baer and Cheryl Brown in the Journal of Food Distribution Research July 2007, 38(2): 1-11.

“Impact of E-Marketing on Direct Market Farms in the Northeastern United States,” by Cheryl Brown and Alexander G. Baer is currently under revision for resubmission to the Journal of Food Distribution Research.

Additional Project Outcomes

Project outcomes:

Impacts of Results/Outcomes

As shown in the discussion under Milestones, over 150 farmers received information on the value of and how to develop a website for their farm via workshops in West Virginia. In addition, this information was presented to 160 attendees (farmers, Extension agents, government officials and agency representatives) at a conference in Virginia. The materials used in these workshops are available online for anyone to access, especially extension personnel.

Through development of the WVfarm2U website, all direct-marketing West Virginia farmers have the opportunity to list on this searchable web directory. To date 70 farms are listed in the “on the farm” category, 12 roadside stands are listed, and 3 CSA farms are on the site. Farmers have also gained a way to sell directly to chefs via this website, although that was not part of this study. Consumer looking for local foods also benefit through the ability to search by WV location for a source of farm fresh products.

Cultivating Customers with E-marketing and How to Grow your Website, two PowerPoint presentations developed for the WV workshops are also used in a West Virginia University course, Marketing Agricultural Products (ARE 431). Hopefully this encourages future farmers to consider using a website for their farm business and provides them with enough background information to get started.

Results of analysis of survey data
Responses to the survey show that time, money, and an interest in and aptitude for computer use determine whether a farmer advertises on the internet or develops a farm website. 32% of respondents reported lack of skills or money kept them from developing a website for their farm, with an additional 31% saying they do not have the time.

Analyzing the survey data we found that, selling produce or baked goods reduced the probability of website adoption. Farms selling produce were 14.8% less likely to have a website compared to farmers who do not sell produce. Perhaps the seasonality and perishability of produce is behind this result. Selling via a roadside stand/tailgate or an on-farm stand/store lowered the probability of having a website by 19.2% and 13.6%, respectively. This result along with the small size of the farms selling at these locations suggests that less organized locations are less likely to perceive a need for a website. Farmers selling at flea markets were more likely to have a website than farmers who do not use these markets. Farmers who advertise in a variety of ways were found to be more likely to have a website as part of their array of advertising methods (the average number of methods used was 5). Farmers who own some of the land they farm and also rent some of the land they farm are less likely to adopt a website compared to farmers who own all of the land they farm. The data does not suggest that a farmer’s education level or age is important in determining whether a farmer has a farm website.

Not surprisingly, having high speed internet access increased the probability of website adoption, by 14.5%. .” Although farmers may be able to outsource their website development and hosting to organizations with high speed access, this will increase the cost of development and maintenance. Our results indicate that farmers may consider the cost of outsourcing too high, may prefer to do this work in house, or may be unaware of the option to outsource their website. This result points out the problem of the “digital divide” and need for high speed Internet access in rural areas.

We also found that farmers with higher levels of gross farm sales were more likely to have a website. This result is similar to that found by studies examining computer adoption by farmers. This is likely due to the cost of paying a professional web developer. The median cost reported in the survey was $775 with a mean of $2152 (N=67). The fact that higher sales increase the probability of website adoption indicates that websites are likely more feasible for larger operations. Thus, programs that are encouraging small farms to use a website as part of their marketing strategy may need to consider subsidizing the cost of web development, including subsidizing payments to professional web developers.

Additional analysis of the survey data found that selling products over the Internet decreased gross farm income, compared to increases in gross farm sales from selling via mail order, or to grocery stores or wholesalers. In addition, having a website did not increase gross farm sales, although having a professionally developed website did. Gross farm sales also increased with an increase in advertising spending, more farm acreage, and being in a metropolitan area.

An examination of factors influencing whether a farm household obtained more than 75% of its income from the farm found that older individuals and those with higher levels of education were less likely to fall into this category as were those in a metropolitan location. Farm households that obtained more than 75% of their income from the farm were those operating a CSA, who had obtained organic certification, where farming was considered to be the primary occupation, who had higher gross farm sales, and who had a website for the farm business.

Economic Analysis

This project may have improved farm viability by providing an additional, searchable farm web directory, WVfarm2U.org, that allows consumers to more easily find sources of local foods. More sales would likely mean an increase in farm income. Because this website also has the capability for chefs to purchase directly from WV farmers, additional sales could occur, again increasing farm income.

The results presented in number 6 in this report show that farms with a website are more likely to fall into the category of receiving more than 75% of their household income from the farm. Whether farmers who depend heavily on their farm income are instituting websites or whether the website is allowing them to be in this higher category of dependence on farm income has yet to be determined.

Farmer Adoption

This study did not develop a practice for farmers to adopt.

Assessment of Project Approach and Areas of Further Study:

Areas needing additional study

As high-speed internet access becomes more widespread in rural areas, a follow-up on whether farmers have expanded the use of this medium would be warranted.

A study that focuses on the many farm web directories and their impact on farm income as well as an examination of the role they play in the development of local food systems would be useful. The number of these directories continues to increase, as does the cost to participate in some of them (e.g., MarketMaker vs. LocalHarvest).

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.