Artikel The Impact of E-Commerce On Agro-Food Marketing
Artikel The Impact of E-Commerce On Agro-Food Marketing
Artikel The Impact of E-Commerce On Agro-Food Marketing
marketing
The case of agricultural cooperatices, firms and consumers in Crete.
Abstract
This paper is concerned with the impact of e-commerce on agro-food marketing. First, a
theoretical framework is specified for the Internet as a marketing tool with emphasis on the agro-
food and organic food sections. Subsequently, the results of a survey that was conducted in
order to investigate how Cretan agricultural cooperatives use or tend to use the business
methodology of e-commerce are presented. Consumers and managers of cooperatives in Crete
reveal their expectations from the new technology. From this survey valuable information is
gained about the practical relations between e-commerce and the agro-food market on the
island, and divergence from the theoretical framework is noticed.
Full text
Headnote
Keywords Internet, Food industry, Organic food, Agriculture, Marketing, Co-operatives
Abstract This paper is concerned with the impact of e-commerce on agro-food marketing. First, a
theoretical framework is specified for the Internet as a marketing tool with emphasis on the agro-
food and organic food sections. Subsequently we present the results of a survey that was
conducted in order to investgate how Cretan agricultural cooperatives use or tend to use the
business methodology of e-commerce. Consumers and managers of cooperatives in Crete
reveal their expectations from the new technology. From this survey valuable information is
gained about the practical relations between e-commerce and the agro-food market on the
island, and divergence from the theoretical framework is noticed,
Headnote
The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0007-070X.htm
Introduction
The revolution in information technology (IT) and communications changed the way people
conduct business today. Managers and academic researchers are predicting the huge potential
of the latest networking technologies in business. They forecast that the size of online trading
revenues in the next few years will vary from a few hundred billion to a few trillion dollars. Today,
the e before words like commerce, business, marketing, etc., indicates a philosophy that must be
followed by companies and organizations that want to keep their competitiveness.
The rate and the extent of adoption of e-commerce practices varies according to country and
sector of application. The Internet approach seems to be a one-way path for the industry of
digital products. On the other hand, for agrofood industry the Internet could be at least a
significant marketing tool which integrates and completes commercial activities. Within an
industry, the rate of adoption also varies. Large firms are usually first to use the new technology
and to acquire an electronic philosophy, but this is not an obstacle for small firms because
barriers to entry on the Internet are negligible. Finally, e-commerce expansion is not the same for
all countries. The USA is the leader, Europe has today the best rate of e-commerce
development, but certainly great differences exist between developed and developing countries.
In this paper, the impact of e-commerce on the agro-food sector is discussed in both theoretical
and practical aspects. First, a theoretical framework is given for the benefits of the Internet as a
marketing tool, with emphasis on the agrofood and organic food sections. Subsequently, we
present the results of a survey that was conducted in order to investigate how agricultural
cooperatives in Crete, Greece, use or tend to use the business methodology of e-commerce.
Cretan consumers and managers of local cooperatives reveal their expectations from the new
technology. Finally, conclusions and implications of this survey follow.
Different definitions of e-commerce are found in the literature. Broadly speaking, e-commerce is
a modern business methodology that addresses the needs of organizations, merchants and
consumers to reduce costs while improving the quality of goods and services, and increasing the
speed of service delivery (Shaw and Strader, 1997). From this definition it is clear that marketing
through the Internet and World Wide Web provides specific efficiencies to all the participants. For
the purpose of this research, e-commerce is defined simply as the trading of goods and
information through the Internet.
Internet marketing is the application of the Internet and related digital technologies in order to
achieve marketing objectives (Chaffey et aL, 2000). Online marketing shares some of the
characteristics of both direct and indirect marketing forms. In general, Internet marketing can give
to agribusiness the following four sources of competitive advantage (Fraser et aL, 2000):
(1) Reduction in intermediation costs associated with wholesale and retail activities.
(2) Ability to decrease costs associated with purchasing by curbing the time and effort involved in
supply and logistics operations.
(3) Improved information selection and processing which result in improved management of the
supply chain.
(4) Prospect of expanding market share and/or developing new markets by decreasing the cost
of selecting and processing information concerning the needs and the wants of existing and
potential customers.
Product
A product is anything that can be offered to a market for attention, acquisition, use, or
consumption, that might satisfy a want or need (Kotler, 2000). The number of products available
online is growing steadily and they can be categorized as services, digital and physical products.
However, in the case of e-commerce marketing, it is also important to consider information itself
as a viable product too.
Although agro-food products do not have the same opportunities as services or digital products
on the Internet, information can provide similar results for all categories of goods. Customers
benefit from lower search costs when they conduct on-line searches for information about either
a special software or a good wine. Especially for organic products, for which a large amount of
information related to characteristics of the products is needed by the consumers, the Internet
provides the best information channel An agro-food company providing such information has
thus an advantage over its competitors.
Inversely, using the proper Internet technology, companies can gather information from
consumers. E-marketing research is cheaper than conventional marketing research methods,
and becomes increasingly more valuable as the Internet population becomes more
representative. This kind of research helps companies to improve the quality of products, to
develop new products and adopt an attitude of flexible response to the needs and wants of their
potential customers.
Place
E-commerce must be conceived as a fully qualified channel of distribution. In the special case of
traditional industries, e-commerce is not just another alternative, but rather a complementary
channel of high potential that has to be integrated in their distribution policy (Dussart 2000).
The major characteristic of e-commerce through the Internet is reach (Zott et aL, 2000; Klein and
Quelch, 1996). Firms have the ability to find a greater number of suppliers, to communicate and
interact internationally with a larger number of companies involved in the supply chain, and of
course to acquire potential buyers anywhere a connection to the Internet exists.
For the 13213 level, on the other hand, the savings in transaction costs may be significant.
Internet technology is suitable for big supply chains like those in agro-foods. E-commerce
innovations aim to reduce the cost of procurement before, during and after the transactions
CLucking-Reiley and Spulber, 2000). Extranets can be set up in order to reduce the cost of
dealing with suppliers by decreasing task complexity, paperwork and operating cost.
Development of such a system gives firms flexibility, control of production, and, most importantly,
it allows them to be convenient to their customers, being other firms or consumers.
Price
Through the Internet, price discrimination and special offers can be quickly realized at any time.
A supplier can use the technology to discriminate pricing between customers in different
countries, for example, when he tries to penetrate a new market, or to inform customers online
for various discount offers.
Pricing on the Internet is a difficult task. Bickerton et aL (2000) report that the Internet can force
prices down, and set them close to marginal cost, for three main reasons: it makes easier for
customers to choose between products; it reduces overheads, making price cuts possible; and it
increases competition globally, bringing greater pressure on prices.
Promotion
Promotion is the element of the marketing mix that includes all the ways a firm communicates the
merits of its product and persuades target customers to buy it (Kotler, 2000). Ellsworth and
Ellsworth (1996) argue that promotion has been revolutionized by the Internet. A good Web site
can be used for advertising, for brand name recognition, for public relations, for customer support
and for technical assistance.
The Internet, in contrast to other communication channels, has a powerful advantage that
provides companies with great opportunities to promote products and services - the richness of
information. Richness occurs in a virtual market because the information flows in both directions
are greater, deeper, and faster than they could ever be in a traditional market (Zott et al, 2000).
An example of this symmetric information flow is the interactive information exchange between
buyers and sellers. Evans and Wurster (1999) claim that such rich product information is most
useful when the product has a strong connotative context, and this is the case of agro-food and
organic products. Today, the demand for safe, healthy, and high quality food is higher than ever
before. Consumers are strongly demanding information about what they consume. A short
television message or a printed advertisement cannot, in general, provide the same amount or
depth of information as a Web site.
The effect of branding is also important in Internet marketing of agriproducts. Consumers' loyalty
is expected to be strong for established brand names, especially for new Internet users who
explore familiar brands first (Klein and Quelch, 1996). To create and sustain a brand name is
less difficult through the Internet. Every company with the proper e-strategy can interact
satisfactorily with its customers. Once a relationship is established, because of familiarity and
commitment, the customer needs to have a strong reason not to continue with it (Walsh and
Godfrey, 2000).
A major benefit for the agro-food sector is the low cost of promotion through the Net. Promotion
of food products requires large amount of money, while the relation of advertising and sales is
strong (Oustapassidis and Katsoulakos, 1999). This is a major barrier for small firms that wish to
have a successful presence in business locally or internationally, and a considerable competitive
advantage for big and established firms. The Internet, on the other hand, being a cheap and very
powerful communication medium, eliminates these differences by providing small and medium-
sized enterprises (SMEs) with equal opportunities to build a direct link with consumers.
This research had two main objectives. The first was to investigate how Cretan agro-food firms
and cooperatives use the new technology, and if they do not, their tendency to use it at least as a
new marketing tool. The second objective was to investigate the Cretan consumer's opinion and
perspectives for e-commerce and agro-food.
The selection of the island as the geographic region for the research was not accidental;
agriculture is the most important sector for the economy of the island and Crete is a good rural
area representative of Greece.
Agricultural cooperatives possess a significant part of the agricultural movement in Greece. The
majority of agro-food production, processing and promotion, either organic or conventional, in
Greece is through the cooperatives. However, although they have facilities and knowledge for
the production and processing of qualitative products, they suffer from inefficient administration
and, consequently, economic problems MAICh, 2000). The adoption of e-commerce practices
could help them to re-organize their structure and become more competitive and efficient
In all, 30 cooperatives and private firms were included in the sample. The selection criterion was
their position as leaders and/or their well-established businesses in Crete. Of them, 23
responded to this survey, constituting a 77 per cent response rate. All the surveyed firms and
cooperatives are producers of agro-food (wine, olive oil, fresh juices, etc.), including organic
food; all are exporters to the EU and USA; and all of them are characterized as SMEs (less than
500 employees). The method used was personal interview with the marketing managers.
In order to examine consumers' perspective, 118 Cretans were interviewed. The sample included
people of different ages, both users and non-users of the Internet. The survey was conducted in
all four prefectures of the island (Chania, Rethimno, Herakleion and Lasithi).
The perspective of firms and cooperatives. Beginning with the technological infrastructure of
Cretan firms, Figure 1 shows that almost all of them had a computerized accounting system but
only a few were equipped with information systems proper for e-commerce.
A total of 96 per cent of the firms had access to the Internet, which was mainly used in
communications through e-mail. One in four firms had at least one transaction over the Internet.
However, none of the firms had used the Internet for other important activities, like online
banking, bill-paying, B2B trading, supply chain management, etc. Almost 75 per cent had a Web
site, and from this percentage only 16 per cent had a system for electronic orders and payments.
A total of 44 per cent of these sites had been functioning for more than two years. Many
managers complained about the low number of visitors to the firm's Web page, while others
reported that their sites had already been visited by many foreign agro-food firms which had
asked for further information and/or even collaboration.
Managers strongly believe that the Internet will improve significantly the firm's relations to its
customers and to other companies. However, they expressed considerable doubts over whether
there will be similar improvements in their contacts with governmental institutions. Their
motivations for the adoption of e-commerce are presented in Figure 2. Next to the reduction of
the information costs, the stronger motivation seems to be the ability for easier and cheaper
penetration to new markets. Better response to customers and the opportunity for e-marketing
research are also considered important factors.
The lack of security, the lack of a legal framework for electronic transactions, and the small
number of online agro-food businesses are the obstacles to the adoption of e-commerce.
Interestingly enough, they do not consider the nature of agro-products or the cost of investing in
the new technology as obstacles (Figure 3).
Their future plans for e-commerce show that the adoption of the idea of e-commerce will be
expanded; however, they give different meanings to the realization of such e-practices. More
than half of them are planning to start by the end of 2002 some kind of e-commerce or improve
their current Internet presence, by developing anything from a simple Web page to a fully
functional electronic shop, while 38 per cent are planning to do so by the year 2003 and 18 per
cent beyond 2004. Based on today's market situation, 61 per cent are positive to a completed e-
shop with electronic orders and payments. From these, 7 per cent would prefer B2C
transactions, 36 per cent B2B transactions and 57 per cent both types of transactions.
Overall, the managers believe that online promotion can enhance their image and brand name.
However, not all of them agree on the effectiveness of advertising agro-food products through
the Internet, nor in the improvement of the one-to-one marketing situation. The interaction with
the consumers can fail not because consumers are indifferent to the sales of agro-products
through the Internet, but because consumers do not express interest in every single product
available online.
As regards online distribution and sales, 61 per cent of the respondents state that intermediaries
can be reduced in the long run, but only 10 per cent are certain that the agro-food sector will be
ready for such transactions in the next five years. The motivation for such a delay is the absence
of suitable infrastructure in agro-food firms, and also the lack of a framework for conducting
business between firms electronically. A point here is that 35 per cent of the firms had already
been asked for electronic transactions by other firms trading with them. Figure 4 presents firm-
supplier activities that the surveyed firms would like to achieve electronically.
The perspective of consumers. Concerning consumers, 63 per cent of the interviewed Cretans
are willing to search information about agro-food products on the Internet. The survey shows that
consumers demand information about price, quality and safety of a product with the same
intensity. Major reasons for online search for an agroproduct are the demand for different
varieties, price comparisons, and the low availability of the product (Figure 5). One out of three
consumers claims that information from the Web can lead to purchasing of an agro-food product
from an off-line store. In contrast to what firms believe, the reason consumers will not seek
information for an agricultural product on the Net is not their general indifference to products
available online, but rather their preference for the traditional way of conducting their shopping.
Advertisement of agro-food products does not seem to play a major role in Crete as only 16 per
cent of respondents will pay attention to it. Of the consumers, 41 per cent are willing to respond
to questions concerning products, and 38 per cent are willing to be informed by e-mail about a
firm's offers during or after a visit to the firm's Web site.
Only 11 per cent of the respondents are positive about online buying of agrofood products. The
main reason for this is their strong belief that physical contact is needed for such kinds of
products. Figure 6 shows that the excess supply of agro-food in the market and the lack of
security in Internet transactions are also important obstacles for consumers.
Finally, consumers were asked about the sale of organic products over the Internet. Almost all
(99 per cent) claimed that the Internet is more suitable for the sale of organic than conventional
agro-products. The reason is that the absence of physical contact, excess supply of agro-
products, lack of security, and consumers acquire more information (about the ingredients, the
production process, health attributes, etc.) on organic products. Additionally, there is an excess
demand for these products in the marketplace.
Conclusions
The impact of e-commerce on the agro-food sector is important and crucial for the future.
Although agricultural products do not have the same opportunities as digital products online,
agro-food firms should adopt e-commerce practices in order to benefit from the advantages that
the new technology offers. The Internet can provide significant benefits both to B2C and B2B
commerce, such as lower transaction costs and easier penetration of international markets.
Internet marketing, based on the interactive nature of the medium, is also important to agro-food
business.
This paper examined and identified the slow rate of and the small extent to which the adoption of
e-commerce in the agro-food sector in Crete is taking place. Although the majority of Cretan
firms have already started making their presence known on the Internet by developing Web sites,
the administration of these firms has not yet realized the full potential of e-commerce. The
frequent confusion in the answers by the managerial staff shows incomplete knowledge about
the full benefits that they can acquire. This is especially true for the cooperatives, which are still
subsidized by the state.
The fact that 96 per cent of the surveyed cooperatives prefer a centralized e-shop for all Greek
cooperatives as the best way for online distribution and sales is characteristic.
Cretan agro-food firms, however, have started to develop a tendency towards the use of
information technology, especially the Internet, in order to achieve initial capabilities for 13213
and international transactions. Considering the results from the consumers' survey, this seems to
be the right first step. Consumers in Crete show a weak tendency towards online searching for
and buying of agro-food products. For them, the nature of agro-food products is the main
obstacle. Of course, in order to have a complete perception of this consumer behavior, it should
be realized that the penetration of the Internet in Greece is still small compared to other EU
countries. Moreover, in Crete, many consumers are also producers of agricultural products.
In contrast to familiar studies in developed countries (Papandrea and Margo, 2000; Sparkes and
Thomas, 2001; Berneft and Stricker, 2000), this work reveals the weak relation between e-
commerce and the agro-food sector in Crete, as well as the need to provide the firms, either by
the government or the academic institutions in Greece, with more accurate knowledge about and
motivations for the adoption of Internet technology.
References
References
References
Bernet, A and Stricker, S. (2000), "German wineries on the Web: a survey of sites of Mosel-
SaarRuwer and Pfalz wineries", available at www.wine-economics.de/Research/wineries.pdf
Chaffey, D., Mayer, R., Johnston, K and Chadwick, F., (2000), "Internet marketing", Financial
Times, Prentice-Hall, London.
Ellsworth, J.H. and Ellsworth, IV. (1996), Marketing on the Internet. Multimedia Strategies for the
WWW, John Wiley, New York, NY.
Evans, P. and Wurster, T.S. (1999), "Getting real about virtual commerce", Harvard Business
Review, November, pp. 84-94.
Fraser, J., Fraser, N. and McDonald, F. (2000), "The strategic challenge of electronic
commerce", Supply Chain Management. An International Journal, Vol. 5 No. 1, pp. 7-14.
Ghosh, S. (1998), "Making business sense of the Internet, Harvard Business Review, March-
April, pp. 127-35.
Klein,L. and Quelch, J.A (1996), "The Internet and international marketing", Sloan Management
Review, Vol. 37 No. 3, pp. 60-75.
References
Kotler, P. (2000), Marketing Management, millennium ed., Prentice-Hall, London.
MAICh (2000), Marketing - Management Strategies for the Agribusiness Co-operatives of Crete,
MAICh, Chania.
Oustapassidis, K. and Katsoulakos, Y. (1999), Applied Industrial Economics and Policy, Zigos,
Thessaloniki.
Papandrea, F. and Margo, W. (2000), "E-commerce in rural sector - case studies", available at:
www.dcita.gov.au/crf/paper2000/papandrea.pdf
Shaw, MJ. and Strader, MJ. (1997), "Characteristics of electronics markets", Decision Support
Systems, Vol. 21, pp. 185-98.
Sparkes, A. and Thomas, B. (2001), "The use of the Internet as a critical success factor for the
marketing of Welsh agri-food SMEs in twenty-first century", British Food journal, Vol. 103 No. 5,
pp. 331-47.
Walsh, J. and Godfrey, S. (2000), '`The Internet: a new era in customer service", European
Management journal, Vol. 18 No. 1, pp. 85-92.
Zott, C., Amit, R. and Donlevy, J. (2000), "Strategies for value creation in e-commerce: best
practice in Europe", European Management journal, VoL 18 No. 5, pp. 463-75.
AuthorAffiliation
G. Baourakis and M. Kourgiantakis
A. Migdalas