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Management Considerations for Implementing E-Commerce in a Food or Farm Business

This article will cover considerations for implementation of e-commerce in a farm or food business's strategy and operations.

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Updated:

January 17, 2023

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E-commerce continues its growth as a venue for product sales. Retail e-commerce sales as a percentage of total retail sales have steadily increased over time. In the fourth quarter of 1999, e-commerce retail sales were estimated at 0.6% of total retail sales (U.S. Dept. of Commerce, 2000). The revised estimate for the fourth quarter of 2019 placed e-commerce sales at 11.4% of total retail sales, an increase of 2,882% ($5,300,000 to $158,049,000), demonstrating a significant increase in consumer use of the internet for purchasing (U.S. Dept. of Commerce, 2020).

Sales of food and agricultural products direct to the consumer through e-commerce have also been increasing, most recently due to the COVID-19 pandemic and subsequent recommendations for social distancing and stay-at-home orders. During March 2020, thirty-one percent of U.S. households, or roughly 40 million, used online grocery services like home delivery and pick-up according to research from Brick Meets Click and ShopperKit (Thakker). This is more than double the number of monthly users from August 2019, when the firms estimated 16 million Americans had shopped online. Of the online grocery shoppers surveyed, 26% said they used a service for the first time. Thirty-nine percent of users aged 60 and older said they were using online grocery for the first time. Total monthly order volume among users surged 193% and monthly order rates were up 19% compared to August 2019.

According to the 2017 Census of Agriculture, 73% of U.S. farms have access to a computer and 71% have internet access. However, only 47% were using their computers and 39% a mobile device or tablet for farm business (USDA). As e-commerce continues to increase among U.S. consumers, the need for farm businesses to integrate a web presence and e-commerce into their business and marketing activities is crucial. Even for business owners that recognize how e-commerce can benefit their farm business, there are numerous considerations behind the decision to strategically utilize e-commerce beginning with the choice of platform to use.

There is an abundance of e-commerce options available for farm and food businesses to consider. From utilizing an in-store POS platform, such as Squareup, as your online system, to adding plug-ins to your existing website, such Woo-commerce (a WordPress plug-in), to a full Software as a Service (SaaS) platform, such as Shopify or GrazeCart, where all matters of security (such as PCI compliance), hosting, storage, bandwidth and software updates are taken care of for you with your monthly fee.

This article will not review the individual options available; rather it will discuss aspects that you should consider when analyzing the platforms available to you so that you can make the most informed decision regarding which one to implement.

Does an E-Commerce strategy fit your business?

You should first determine whether e-commerce is a strategy that will lead you to meeting your business goals. Where do you see your farm business in the coming years? Future business goals can assist you in choosing the e-commerce platform that will be the best fit. For example, an online ordering system could attract new customers who may prefer to shop online rather than shopping in a crowded store or for personal convenience, thus growing your business.

Not all businesses will necessarily benefit from purchasing an e-commerce platform. It is possible that simpler models of taking orders and payment over the phone or using online forms to place orders with payment by card or cash at time of pick-up or delivery will be a better fit for overall business goals and available resources. You'll also want to consider whether you or someone within the business, has the knowledge and technical skills necessary to manage the e-commerce platform.

Assuming that e-commerce aligns with your long-range business plan, the following issues should be reviewed as you assess platform options.

Online Store Traffic and Anticipated Number of Transactions

Related to whether e-commerce compliments your business goals, you'll want to estimate the amount of traffic and the number of transactions you expect to see through an online store. From a financial standpoint, you should estimate the return on investment from the implementation of an e-commerce platform. If you anticipate low to moderate transaction numbers or revenue from online sales, investing in an expensive e-commerce platform with numerous features may not be a wise investment.

Understanding your customers' preferences and expectations can assist in estimating e-commerce traffic and transactions. For example, consumers who live in urban and suburban environments where other retailers offer online shopping options may be more likely to want, and expect, e-commerce to be an option for shopping with your farm or market.

Cost and Fees

Each platform will have its own pricing structure, with most charging a monthly service fee beyond any initial set-up fee. The monthly service fee might be determined in one or more of the following ways:

Flat fee. Many platforms with flat monthly fees, also offer tiered subscription levels with each tier providing a different set of included features.
Based on the number of orders placed. Under this structure, the monthly fee is determined by the number of orders placed or the number of transactions that occur.
Based on the number of products in the catalog/store. With this structure, the monthly fee is based on the number of products you have in your online store or catalog.
Calculated as a percentage of sales. This fee structure charges a payment transaction fee, usually a flat amount plus a percentage. For example, 2.6% + $0.30 per transaction.
Add-on fees. Additional optional features may incur an additional monthly charge.

Ensure that you know whether the platforms you are considering are displaying monthly fees with or without payment transaction fees, if they exist. Unless the e-commerce platform has an exclusive agreement with a payment processor, you may find it beneficial to talk to the bank where you already have your business accounts to see if they can give you better transaction rates and service fees.

For platforms with a flat monthly fee, be mindful of potential additional expenses in the future through optional apps and plug-ins. Add-on fees for additional features can quickly become very expensive, driving up the total cost and possibly resulting in a total monthly expense that is higher than a standard monthly fee with other platform options where the features are included in their standard monthly fee. However, used with care, optional features allow a platform to grow with your business while providing a wide range of excellent features.

Finally, most e-commerce platforms will not charge fees for hosting or hard drive space; however, it's something to keep an eye out for as you compare services.

All costs need to be considered in your decision, to ensure they fit well within your business model and existing cash flow.

Features and Ease of Use

Numerous e-commerce platforms have been designed specifically for agriculture with the purpose to address the unique needs that come with food products and farm and food business models. However, you should base your decision on which platform to use on your individual needs.

All available e-commerce platforms will offer different features and compatibility with an existing website. Some features will be integral to the platform while others will be optional. Prior to reviewing any e-commerce platform, outline the features that are vital to you. Some of the features you'll encounter while comparing platforms include:

Inventory tracking and notifications
Pack lists
Customer history
Email support
Coupon and discount codes
Social media integration
Shipping integration
Reports

Consider a platform's compatibility with your existing point of sale (POS) and/or accounting software. It's somewhat common that e-commerce platforms include integration with popular accounting software such as QuickBooks but confirm this if this aspect is a requirement for you. Further, at what level does it integrate? Will the platform only provide basic reports and accounting information or can it also transact information about your product inventory, etc.

Initial Set-Up Time

E-commerce platforms vary in their complexity and the platforms they are built upon thus impacting the time required for set up. If you are inexperienced with e-commerce, be prepared to spend more time setting up the system initially. Inventory will be the most time-intensive to set up even if your current POS system can be easily linked to your website and online store.

In most POS systems, the inventory descriptions are very brief which is fine for in-store purchasing. However, customers ordering from your website will need and want items to be well described. Details to provide include:

Product name
Item size, quantity, or weight
Producer or manufacturer information (if selling items in addition to your own)
Product form (ex. block vs. slices for cheese, pots vs. flats for flowers)

Particularly for new customers and new product offerings, product photos can be vital in driving customers to place items in their shopping cart. Photos should be high quality to enhance the appeal.

Once you have your online store stocked, make sure to take the additional step of testing. Either you or a trusted friend or family member should submit at least one test order, preferably several, to ensure that your system is functioning properly in these areas:

Navigation
Checkout
Credit card processing
Order confirmation
Scheduling of pick up/delivery times

Inventory Management

Beyond the initial set-up, consider how the inventory for your online store will be kept up to date. Depending on the e-commerce platform you choose and any existing POS that you have, product inventory numbers will either be synchronized for your brick and mortar location and online store, or you will need to regularly update your online store with product availability information. Accurate inventory management is essential for successful e-commerce. Consumers will quickly turn elsewhere if they routinely discover unavailable products or inaccurate availability information.

Mobile Compatibility

Mobile commerce has taken off as ownership and use of tablets and smartphones has increased. In 2018, mobile commerce accounted for almost 40% of retail commerce and is estimated to account for over 53% of retail commerce by 2021 as forecasted by eMarketer (99Firms). With this in mind, any e-commerce platform that you consider should be mobile friendly. When researching your e-commerce options, use free trials or demos to ensure mobile compatibility and ease of use.

Maintenance and Support

A self-hosted e-commerce solution can become complex and take more time to manage but may give you a certain level of control over your online store that 3^rd party platform may not match. However, with a self-hosted system, you won't have any centralized support you can contact. A 3^rd-party hosted solution removes most of the technical maintenance and support concerns and can have you up and running more quickly than a self-hosted system. If you are considering a self- built and hosted solution, ensure that the technical knowledge and resources are available in-house for both the initial build and set-up, but also for long-term support and maintenance.

Payment Methods, Online Payment and Security

Accepting orders online requires the ability to accept credit cards or other payment alternatives such as PayPal or Venmo. Security and privacy are crucial when accepting online payment. Customers need to know that their information will be confidential and safe while ordering from your business. You will need a payment gateway (ex. Authorize.net, Stripe, etc.) that provides security protection for you and your customers in addition to integrating with the e-commerce platform you choose. Most e-commerce platforms will provide you with a list of payment gateways they integrate with. Payment Card Industry Data Security Standard (PCI DSS) compliance, typically referred to as PCI compliance, will let you know that the e-commerce platform has integrated measures to ensure customer data security.

At the moment, SNAP (Supplemental Nutrition Assistance Program) benefits cannot be redeemed online. However, all retailers that offer online ordering must make this option available for SNAP participants as well. Payment can then be made by processing the EBT (Electronic Benefits Transfer) card either at the time of pickup from the store, or when the groceries are delivered to the SNAP participant with a mobile payment device.

Finally, for businesses that may have visitors and customers from Europe, an additional issue to be aware of is GDPR compliance. GDPR guarantees consumers their right to know what information a company has for them and the right to modify, delete, or have a copy of that information. To illustrate, if you collect email addresses from customers, your business is subject to GDPR if those customers are European Union (EU) residents, even though your business is in the U.S. Best practice with all customers is to allow people to opt-in to communications and let them know how they can manage their information or remove themselves from lists.

Customer Service

Customer service will be even more crucial with an e-commerce facet to your business since in-person interaction which builds consumer trust is reduced, or non-existent. It will be important for you to understand your customers' communication and service expectations.

From a technical perspective, the platform you use should make it easy for your customers to create an account, find what they want, and pay. The platform should also make it simple to communicate with your customers and they with you. For example, can your customers choose to receive notifications from your business such as special sales or new product offerings? Is email or a contact form integrated with the platform so customers can easily submit questions?

Internally, you need to be prepared from a human resources standpoint for providing online customer service and for resulting orders. Is there someone who will be routinely available to answer phone calls, email, and online communications? Who will be responsible for fulfilling orders and either managing the pick-up and/or delivery processes?

Internet Connection

Accessing your e-commerce website is usually no more bandwidth-intensive than accessing and managing your existing website. A typical broadband Internet service should be capable of providing the access you'll need. The two tasks that require adequate bandwidth are managing the images in your online store catalog and downloading the transaction/accounting data.

When adopting e-commerce, you should assume that it will remain an important component of your business. It is often very difficult, or perhaps detrimental, to disable business features such as e-commerce if it is valued and utilized by customers. Take the time to do your research on each of the platforms you're considering. Take advantage of free trials, demos, and conversations with sales representatives asking as many questions as you need. Committing to and implementing an e-commerce platform is not inconsequential. Make sure you fully understand what you're purchasing and ensure that the functionality that you require for your business to operate successfully is included.