European farmers are early adopters in many areas—for example, yield improvement, sustainability, and animal welfare. In one area, though, they appear to be late adopters: they rarely go online to buy core inputs, machinery, and agritech.
That was the finding of a 2019 McKinsey survey of more than 1,000 farmers in seven countries—Belgium, Denmark, France, Germany, the Netherlands, Poland, and Spain.1 According to that research, only 13 percent of European farmers had made an online purchase of seeds, fertilizer, crop protection, animal feed or animal-feed additives, farm equipment, or software or other agritech in the previous 12 months.2 Moreover, their general view of online retail was one of skepticism.
However, these attitudes and practices might be changing because of the coronavirus pandemic; a follow-up survey in May 2020 found that a much higher percentage of respondents are now saying they prefer to purchase agricultural products online. The implication is that there is an opportunity for companies in the agriculture industry to accelerate their online presence, work out omnichannel strategies, and maybe even change their business models entirely to meet farmers’ needs better. In this article, we set out the barriers to online retail in the European agricultural sector and then discuss how to address them.
There are two interesting paradoxes in regard to European farmers’ online-buying behavior.
One is that even though they do not purchase much online, they have proved willing to adopt new technologies and practices in many areas. More than half of dairy and livestock farmers, for example, use animal-health-optimization software. In the industry as a whole, more than 40 percent invest in holistic management and back-office and operational-efficiency software.3 Even so, there isn’t a single product category in which online retailers lead other buying channels (such as in-store retailers, company sales representatives, and farmer–dealer or co-ops) in the sector. Online retail does best in farm equipment4 (13 percent) and worst in animal-feed additives (3 percent) (Exhibit 1).
European farmers do not purchase much online, but they have proved willing to adopt new technologies and practices in many areas.
The other paradox is that even though Europe’s farmers don’t currently purchase much online, they appear to have no trouble with the idea of doing so, as they use online resources during the customer decision journey (CDJ) (Exhibit 2).
Of survey respondents, 87 percent say they prefer to conduct initial product research online; 65 percent repurchase online. A third say they prefer to purchase online, but only 13 percent actually do so. The gap between preference and action can be startling. In Belgium, for example, 39 percent of cereal and crop farmers say they would prefer to buy online, yet only 7 percent do (Exhibit 3).
Such gaps represent an opportunity lost—and it isn’t a small one. The European agricultural and agricultural-equipment retail markets have annual revenues of around €138 billion.5 At the moment, we estimate that the European online agriculture market is only €150 million to €200 million. Respondents to the 2020 postpandemic survey reported that they planned to spend 24 percent of their total spending on agricultural input, farm equipment, and agritech, equivalent to a €33 billion market. There are different ways to feasibly capture at least €10 billion, considering the size of countries and agriclusters6 and the potential for increasing online purchases (Exhibit 4).
European farmers are willing to adopt new technologies, and they already use online resources in their work, including when researching products they are thinking about buying. But few actually click through to purchase online. Why? And what can be done about it?
The barriers to online agriculture retail
The slow development of the online agriculture retail market in Europe is, in many ways, a self-inflicted wound. It just isn’t easy enough for farmers to go digital. Indeed, at a number of points along the CDJ, it is almost painful (Exhibit 5).
Specifically, during the initial research process, 33 percent of survey respondents complain that it is difficult or impossible to compare products, and 31 percent say pricing is confusing. Many of the farmers stop their online experience right there. Even among those who move on to purchase, however, the complaints keep racking up. Among them are not being able to reach someone 24/7 (64 percent), difficulty connecting with the right representatives (32 percent), lack of real-time product availability (35 percent), and unclear pricing (21 percent). And after purchase, the pain continues, with common complaints about lack of responsiveness and availability. Those results are broadly consistent among all seven countries and all types of farmers in the survey.
Even among those who did buy online, the lack of enthusiasm for doing so was glaring. Online retail lagged behind farmer dealers and retailers in all the most common reasons for choosing a particular purchase channel—for example, in value for money and in ease of comparison, ordering, and searching (Exhibit 6). And remember, those are the opinions of the minority who made the leap; it is no wonder that others haven’t felt much reason to change.
Proving that farmers aren’t digital averse, they rely on many digital sources (such as online searches, brand and company websites, and social media) to identify new products and conduct initial research. Apparently, however, they don’t trust these sources enough to go any deeper—likely because most of these data sources can’t be validated as accurate and are provided directly by suppliers of products.
Farmers appear to perceive suppliers as profit-driven; they aren’t seen as advisers with farmers’ best interest at heart. Thus, while company sources were heavily used for initial product research, they were used much less often to evaluate products. Instead, farmers went to other sources, such as university research, to play that role (Exhibit 7). Once farmers have left suppliers’ websites to evaluate products elsewhere, they don’t have a habit of coming back to the original sources for purchase.
Is there a ‘COVID-19 effect’?
In late May 2020, McKinsey surveyed 100 European farmers in the same countries and segments to get a sense of how their digital preferences and usage might be changing. Although the sample size was small, half of the farmers surveyed had participated in the original survey. The results were compelling, with a much higher percentage of farmers buying online and a more positive attitude toward digital retail. That is consistent with what we have seen in other sectors.
The COVID-19 crisis is of major concern; all farms surveyed report worse economic performance since the start of the pandemic, and 75 percent were pessimistic about the prospects of the postcrisis economy. In addition, 95 percent say they are considering adjusting purchasing behavior to minimize physical interactions.
Compared with the precrisis survey, there is a 36-percentage-point increase in farmers’ desire to use digital channels to make product-purchase decisions and a 36-percentage-point increase in their desire to use digital channels to make actual purchases. The bottom line: in 2019, only a third of European farmers surveyed reported wanting to use digital channels to purchase; in the more recent, smaller survey, 69 percent say they do (Exhibit 8). Across Europe, that adds up to almost four million more farmers who say they are ready to use online channels as their main sources of ordering.
Capturing the online opportunity
Even if the COVID-19 pandemic is making more European farmers willing to do more of their business purchasing online, it is still the case that, so far, they have found the process unappealing. Companies therefore need to offer a better experience. The problems associated with online retail for agriculture aren’t impossible to solve, as other sectors have demonstrated. With that in mind, here are some ways to do better:
Improve the online experience. Creating a positive experience will likely increase farmers’ desire to purchase online. Companies need to focus on solving the biggest pain points, such as enabling 24-hour availability; quickly responding to online requests and queries; ensuring that all information is accurate, up to date, and accessible; and improving the data that representatives have when starting an interaction (50 percent of farmers mention representatives not having access to the histories of their conversations as a reason not to buy online).
Achieving 24/7 availability may not be feasible for all players in the near term. However, focusing on improving response time during core daytime hours, seven days a week, could go a long way to meeting farmers’ expectations. As consumer companies trend more and more toward 24/7 customer service, farmers too are likely to shift toward a more “instant” mentality. That is why it is important for players in the market to start thinking and working toward 24/7 service, or as close to it as possible.
Enabling the use of mobile phones is also important to engaging farmers throughout their CDJs, as that is their clear preference: 92 percent use a mobile device to research or purchase products. If not everything can be done via the phone, laptops are the next preferred option (82 percent use them to research or purchase products). Finally, while it is important to improve the online experience, that shouldn’t be done at the expense of other strategies. All survey respondents who bought online say they also used offline channels. The goal, then, should be to create solid and integrated omnichannel capabilities. For example, a website should make it easy to direct farmers to the nearest store or to a salesperson.
- Focus first on the highest-potential markets. Such markets are those that are large, with big gaps between a stated preference for and actual online buying. For example, fruits and vegetables in Spain make up a €17 billion market in which 38 percent of respondents say they are willing to buy online—but only 12 percent do so. Cereal and crop farmers in France are in a similar position: in that €12 billion market, 36 percent are willing to buy online but only 21 percent do.
Target consumers based on their stated propensity to use digital. For example, farmers who use agritech are almost five times more likely than those who don’t to purchase online. It makes sense, then, to make that cohort a priority. Similarly, those who reorder online are twice as likely as those who don’t to complete first-time purchases online; they are another priority target segment.
To segment and target different farmer groups, companies could start by developing a customer-attractiveness matrix that sets out the most promising segments against order size (frequency and amount spent) and mix (type of orders and profitability). On that basis, they could develop specific digital services, such as first-time-purchase discounts, bulk discounts, services, education, and security.
- Build trust. Trust is an important element in building a strong relationship with farmers—and thus encouraging them to use company websites all along their CDJs. At the moment, however, many farmers appear not to trust company websites to provide complete information: they break away from them to evaluate products (and often don’t come back). While 68 percent of survey respondents use a company website to identify new products, only 9 percent use them to compare or evaluate products. For that, 81 percent turn to university research. However, the research shows that trust can be built. If farmers have already used a product and trust that it is of high quality, 72 percent are comfortable reordering the product online. Possible actions to build online trust include ensuring transparent pricing, embedding third-party product comparisons, and integrating university research—perhaps even partnering with universities to provide that information.
As any number of retailers can attest, building a successful online strategy is complicated, requiring new practices, the development of more sophisticated data analysis, and the implementation of seamless operations from the warehouse to the buyer. But complexity is no excuse for delay. Indeed, given the possibility that European farmer behavior could change considerably because of concerns related to the COVID-19 crisis, the case for acceleration is getting stronger.