Retailers and dealers provide a conduit role in the farm buyer channel, but what is the reality and value of that role in today’s farm buyer journey?
We spoke to agriculture industry intelligence leaders, Maurice Allin and Shane Thomas, to gain deep insights into their views of the current retail dynamic and the challenges and opportunities that lie ahead. Their thoughts, in their own words, are below.
Shane Thomas is an agribusiness professional from western Canada with global experience in a wide range of areas in agriculture including the business of ag retail, technical agronomy, sales, marketing, supply chain management, digital/agtech strategy, product strategy and agribusiness consulting.
Typically, retails and dealers have always brought a boots-on-the-ground understanding and solutions to their farm customers. They provide an extremely important role in enabling and integrating actions and understanding of what works in their customer’s area or geography. However, one of the biggest factors facing and challenging the value of the retail relationship today in my opinion is a dynamic called influence erosion.
What I call “influence erosion” has started to occur in today’s ag retail customer channels. We are starting to see influence erosion in the race to the grower through digital avenues and more open information exchange.
Ten to twenty years ago, farmers retrieved 90% or more of their information from the retail. That’s because crop production companies communicated their value proposition through the retail directly and it was then relayed to the farmer.
These companies now have direct access to build their relationship with and influence the farmer through digital channels such as Twitter, email, or other socials. This allows farmers to have a more direct line to the company or manufacturer who also now offer their own agronomic digital offerings and staffed up direct-to-farm initiatives. Along with digital marketing tools and their own distribution channels, companies have increased farmers’ understanding and access to information of the marketplace.
This is topped off with the vast access to information online and through alternative service providers like independent consultants and precision ag companies. So even the retail providers offering a strong service today are met with more messages, other relationships and increased complexity to navigate when talking with farmers.
The retail channels still provide significant value, but in my opinion their influence at the farm gate has declined which is one of the factors leading to margin erosion and more challenges with customer loyalty. What the retail brings to the relationship is the ability to reach farmers as individuals within their own community of understanding.
The retail is extremely important in enabling and integrating actions and understanding what works specific to their customer’s specific area or geography and integrating that successfully. Digital is augmentative rather than prescriptive – and that can be the difference.
For retails and dealers – the leading concern I hear when it comes to relationships with their farm customers is, “how do you cultivate higher loyalty?” This question becomes even more complicated if a retail relationship is built on price and an undifferentiated service or product offering.
Ultimately, bringing unique solutions supported by an engaging and curious staff are core to securing a connection to the farm buyer and building long-term loyalty. It is important to remember that digital tools, experiences and data are one avenue to achieve this with farmers and that can be the difference in the race to grower loyalty.
Digital augmentation can be a tool to help strengthen the retail relationship and offering to the farm customer, but it is important to remember that it can’t be the stand-alone strand in the relationship.
Maurice Allin is a highly respected agrimarketing, data and business first strategic thinker, who combines both business and agency expertise. He is the VP of Business Intelligence at WS.
As an agrimarketer, every product I have ever worked on has gone through a distribution channel with a retailer as the final step. So historically, every conversation with farmers has been about the retailer that they purchase it from. When it comes to the farm-buyer journey, one thing that has not changed is the reliance on interpersonal relationships.
However, in my opinion, what it comes down to is that we all have relationships and in the farmer community, there seems to be a tricky collective bias – that because we are part of a farm community, there is a collective trust interaction that is common across the population.
Ever since I started doing interviews and focus groups with research and farmers dating back 20 years, without exception, one farmer participant would undoubtedly always lean back and say, “Yeah, but you can’t always trust the retailer, because he needs to make his margin.”
So, we combine this reality with one of the biggest changes that we are seeing, and it is happening all over agriculture, is the huge disintermediation effect. The reality is that the distribution channels and virtually everything and every product category on the planet are being challenged.
In the past, we saw the retailers holding a lot of cards in terms of the way they interact with customers around a product proposition. It is not that the retailers had an absolute monopoly, but they certainly had a strong oligopoly (a market characterised by a small number of firms who are independent in their pricing,) as a group, around how information gets to the farmer around the value of the product in its actual use. Historically, as advertisers, we could put out a two-page four colour spread, but for the farmer who had questions, they went straight to their retailer.
Fast forward to today and what we are seeing because of the digital disintermediation, growers and farmers have multiple lines of inquiry that they didn’t have before. Information is much more freely available now and because of that, we are also seeing a situation where farmers have far more market power in and of themselves. I remember even just seven to eight years ago that a 10,000-to-12,000-acre farm was an immense farm. Now, that is the normal of farmers that are left. This has extreme significance on the retailer.
The retailer needs the farmer more now in many ways than the farmer needs the retailer. But more importantly than that is the fact that those farmers have information at their disposal about the product and performance of that product on their farm, way more than almost anyone else does.
This is especially true particularly in the availability of independent leading-edge people and from a technical standpoint in relation to their farm operation – we are seeing both of these offerings being brought right onto the farm independent of the retail.
Segmentation is extremely useful in any market and the farm buyer is no exception. Generally speaking, there are three segments of farmers out there as defined by their relationship with their retailer.
The community-minded farm customer is one that we think of as being mainstream. This is the farm customer that seeks a personal relationship and community connection to where they do business. This farm customer sees the retail as a valuable part of their community. Although their retailer may not have the best deal or offer, this is secondary to the fact that they are a part of the community, and they want to give back. This retail/farm customer relationship includes a high level of trust.
The next if you slide down that scale of trust, is one of equals. “I am a big important farmer – I have a lot of money to spend – I need you to do right.” This segment of the farm buyer are the ones that are starting to veer into the territory of tender pricing. A relationship that is just a bit more at arm’s length and a relationship on the premise of; “well you are an important part of the community – but business is business.”
One of the most important segments of the farm customer that I believe we need to be conscious of is the growing and distinct group of farmers that are the smallest of the large farm operations.
This group often has a distrustful and/or antagonistic relationship with their retailers. They don’t like dealing directly with retailers and their desire is to go direct. Their feeling is that the retailers hold an asymmetric info advantage over them. They feel that the retailer knows more about the mechanics of selling the product than these folks are allowed to know, and they are deeply disturbed by this.
These farm customers prefer to go direct to the manufacturer. We often see this segment of farmer starting Co-ops to access wholesale pricing for themselves and neighbours. The key thing here is that there is an actual antagonistic relationship is a reality in the retail farm customer relationship. It exists and we tend to gloss that over.
When it comes to understanding the role of the retail relationship it is important to look at the retail personas as well. From a product development and marketing and communications standpoint –personas are an incredibly useful tool to best understand the farm buyer journey and how our brands brand or offers manifest themselves in utility to the farm customer.
Sometimes that utility is not purely financial. Sometimes it is egotistical, or it’s in the value of use and ease-of-use. I think that by doing personas, we are always able to enlighten our retail client in areas where their product was winning, or where they thought it was and it didn’t matter to customers.
In my opinion, these personas generally summarize the retail persona;
I believe that it is becoming more and more of a challenge for retailers as an individual retail shed to prove their value beyond a logistics function. If we go back in time, distribution was strictly a logistics function.
Agricultural retail has become very different in the reality that few distribution relationships in the world have had as much impact on product choice as retailers in agriculture. If you go to any other product commodity, be it pharma or construction, for example, they have very little influence on what products are chosen. Their main job is to stock everything and be distribution at the back end.
One of the most curious things to me is just how much market power distributors and retailers have in the ag market when they have very little anywhere else in the world. So how do they hang onto that? Well, in my opinion, they hang onto that by having a high service model, maintaining integrity wherever they can, and by truly understanding what’s of value to their individual farm customer and adding that value.
Laura has over 25 years of leading teams and clients in business development and advancement. Specialized in Public Relations and fueled by a grass-roots passion for agriculture, Laura’s pulse on the industry and respected advisement spread across multiple industry channels— from animal health to crop production, ag financial, industry and government organizations - to name only a few.
