Farmers buy fewer inputs online but digital engagement is up – McKinsey

Partner Liz Harrison says a decrease among US producer respondents willing buy inputs online reflects large suppliers’ lack of commitment to digital channels and the growing role of trusted agronomists.

US farmers reported decreased willingness to purchase crop inputs online alongside growing demand for digital interactions at other stages of the buying process, according to a recent McKinsey report.

The consultancy’s follow-up survey of 800 US row and specialty crop farmers, who were first polled in 2018, found that respondents open to online inputs purchases had fallen from 29 to 12 percent by 2020.

“As digital engagement has gone up, the people who have been able to monetize that best are those that are innovating and investing on top of their physical channels versus those that are trying to replace the physical channels,” McKinsey partner David Fiocco told Agri Investor after publication of the report: Farmers value digital engagement, but want suppliers to step up their game.

Fiocco said successful companies have supplemented online purchasing with related services such as return-on-investment calculators and virtual farming simulations that support decision-making. Such additions, he said, meet increased interest in digital engagement at other stages of the buying process also reflected in McKinsey’s 2020 survey.

Liz Harrison, a McKinsey partner who initiated the global research project of which the recent poll is a part, told Agri Investor she was so surprised by the decreased online purchasing preference that she asked for it to be reviewed for confirmation.

“My second reaction was: I get it,” said Harrison. “In the follow-up conversations we had with farmers, they told us they can’t get a good deal online, because buying online does not enable them to negotiate.”

In addition, Harrison said the lack of commitment among larger input suppliers to go direct created an obstacle for potential buyers who would prefer trusted names, especially for online purchases. “They can’t buy from everybody online,” she said. “There’s an availability challenge.”

McKinsey’s survey also revealed varied willingness to buy online among input categories. While 76 percent and 79 percent of respondents could consider buying crop protection and fertilizer products online, just 60 percent reported willingness to buy seeds digitally.

The finding can be explained in part by the fact that seed dealers have traditionally lived locally and been held socially accountable for delivery of reliable products and services, Harrison said. Personal relations and strong cultural connections to planting decisions also play a role, she added.

“There is a big emotional connection: ‘This is my livelihood and it’s based on this decision I make once a year’,”  Harrison said. “People put the seed brand they purchase on their tombstone.”

Fiocco said the complexity of the shift from traditional inputs to biological alternatives strengthens demand for agronomic advice in any form. Especially amid growing online purchases of generic products requiring little counsel, he added, continued demand for personalized inputs advice offers clues about how online markets may evolve.

“You could end up in a polarized world where part of leading-edge biologics looks more like seeds and part of the more generically-pressured crop protection looks more like fertilizer,” Fiocco said, describing how the degree of in-person planning with an expert before making a purchase might change.

Agriculture represents an extreme among industries in the degree to which personal relationships continue to play a key role, according to Harrison, whose ag-focused role with McKinsey also includes a broader business-to-business focus that stretches across industries. As is in other markets, she added, technology is helping bring about change.

“The sales rep has to some extent been replaced by the trusted agronomist and the ability of farmers to do their own research online,” Harrison explained. “I would not say trust matters any less; I think it matters for farmers more so than anyone, but who they trust has shifted.”