Story by Cindy Green
Photo by Rolf Hagberg

Go online or go out of business? Not long ago, it appeared to be small businesses’ only choice. Traditionalist Color ores, e-gurus said, would eventually become obsolete or secondary to buying, selling and trading online. Internet marketing seemed a smart business strategy for rural retailers outside major market areas.

But e-commerce’s promised land may be a mirage after all.

News stories of dot-com entrepreneurs becoming overnight millionaires are being replaced by projections of e-commerce collapse. An April 12th St. Paul Pioneer Press article stated, “most firms that sell only online will expire in a year or so, drowned in red ink, battered by increasing competition and abandoned by disheartened investors,” according to findings of Forrester Research in Cambridge, Mass.

Internet sales can double and triple a retailer’s revenues, but only through expensive advertising and marketing efforts that often exceed sales revenues — “virtually guaranteeing whopping losses,” the article stated. The only survivors will be big-name retailers such as Target or Gap and reliable catalog merchandisers.

So where does that leave value-added ag businesses? Should they or shouldn’t they retail online?

Weighing the options

“People are trying to figure this out, from mainstreet to backstreet to all kinds of businesses,” says Corky Miller, AURI information systems director. “There’s so much excitement and media play. Nobody wants to be left behind.”

“More and more clients are asking for it,” says Lisa Gjersvik, manager of AURI’s Waseca field office. “The perception is, ‘I’ve got to get on the Internet.’ Well, do you?”

Gjersvik says businesses need to look at the e-commerce costs of attracting a customer, conducting a sale and providing customer service. Is the result a profit or loss?

“The beauty of the Internet is it can provide an opportunity for the little guys to be considered alongside the big guys, depending on how well they position themselves,” Gjersvik says.

Too high for the small guy?

With new software packages and servers, almost anyone can design a Web site. But drawing customers to the site can easily ring up thousands of dollars, with Internet marketing alone. For example, banner advertisers are charged for every hit on the host Web site, even if visitors don’t click on the company’s ad banner.

Registering with search engines is free, but companies pay monthly fees to hire services that do multiple registrations and use key words and other positioning strategies. “The way a company registers itself with a search engine is an art — the coveted spots are the first 10 that come up. If you don’t come up on the first or second page, no one’s going to find you,” Gjersvik says.

Businesses that actually want to sell online have more than the usual Web site concerns — design costs, Web host, domain name, establishing links and so on. They must also set up an e-commerce server to act as a virtual shopping cart and conduct transactions, verify and track orders, catalog inventory, etc. Set-up costs are around $15,000 when orders are filled in-house.

“Inventory management and order fulfillment often turn out to be the most costly, complicated and time-consuming components of (online) business operations,” says the May issue of Entrepreneur’s Business Start-Ups magazine.

Outsourcing with a fulfillment house will cost $50,000 to $100,000 for set-up; additional shipment costs are about 10 to 15 percent of sales. E-businesses would need to sell at least 100 items a day to justify the cost, the article says.

Cybermalls and catalog companies may be less expensive options, but entrepreneurs are still likely to spend thousands to get on board. And if a Web address isn’t easily recognized or popping up on search engines, the site might not get much notice.

“Established brand-name bricks and mortars, such as ford.com or sears.com, are doing a great online business. That’s the real worry for local businesses,” Miller says. “If your customers can go online and buy for a few dollars less, obviously you have to consider new market strategies … that may be to open your own dot-com.”

Few selling online so far

Most AURI clients who retail value-added ag products haven’t jumped on the e-commerce bandwagon. Many do have Web sites, including pages on www.auri.org, which receives about 160 visits per day. Of those with an Internet presence, all offer product and contact information, usually including toll free numbers and e-mail, and some contain order forms to mail with payment.

But only a handful actually conduct transactions online. Pet Care Systems’ cat litter, SoySoft lotion, RBJ’s rhubarb spread and Country Candle’s soy wax products can all be purchased by credit card on the Internet, but all four say e-commerce makes up only a small portion of their revenues.

swheatscoop.com

Pet Care Systems, Inc. in Detroit Lakes, Minn. started selling three brands of wheat-based cat litters six years ago, and shortly after set up a Web site that now draws up to 35,000 visitors a month. While customers can buy two 10-pound sample bags of City Litter online, the company doesn’t promote Internet sales, says Mark Hughes, sales and marketing director. “We sell in 7,000 retail stores and don’t want to compete with that.”

The site extols wheat litter’s virtues — it’s scoopable, flushable, biodegradable, and good for cats as well as the environment. It also tells potential customers how to use the product, where to buy it, where it’s made, and how to contact the company. “It’s an educational tool,” Hughes says.

For visitors who want samples, Pet Care links to Authorize.Net, which guarantees a secure credit card transaction. Pet Care averages one or two Internet sales per day, Hughes says.

Online shoppers are more likely to browse through megastores’ or major catalogs’ Web sites, however. Pet Care’s Swheat Scoop is one of 12 litters sold by www.petsmart.com. PetSmart, a major chain, spent $115 million to construct its site, which sells over 400 bags of Swheat Scoop per month.

“For a small company, setting up a Web site is expensive — I think we’ll see more piggybacking,” says AURI’s Corky Miller. “It’s like opening a cart in a busy shopping mall.”

Keep it in your hands

With millions of companies vying for browsers, a successful Web site must be unusual and outstanding. Web experts usually recommend hiring a company to design a site. However, Hughes suggests entrepreneurs stay in charge.

“When I set up my site, I never kept control of it. I allowed the people who developed it to register it in their names. You can’t change it or do anything to it unless it’s in your name. That was a pain — it took six months to get it changed to my name.”

Other than its normal marketing channels — company literature, Cats magazine ads, trade shows and word of mouth — Hughes says Pet Care doesn’t invest in Web advertising. While the site is a nice marketing supplement, he says, it’s still a bit player in the company’s overall scheme.

soysoft.com

“Welcome to SoySoft’s online store” announces the home page. Linked to Yahoo Shopping, the Edina, Minn. company offers full and trial sizes and gift sets of its soy-based creams and lotions.

The Web site “is only three percent of our sales, but it is valuable in extending our business,” says Lucy Larson, who owns SoySoft, Inc. with her husband Cliff. “It’s good support for our marketing. People can learn about our product there instead of using our 800 number, which saves me time.” The page also lists retailers who sell SoySoft by location.

Designed by Cliff, the site gives customers plenty of reasons to buy: soy lipids are naturally rich in vitamin E, essential fatty acids and lecithin, which nourishes skin. SoySoft does not contain mineral oil or dyes and has not been tested on animals.

SoySoft’s Internet sales vary month to month, depending on media exposure. “About a year ago, we were featured on KSTP. People could go to the KSTP Web page and link to us — we had a huge response,” Lucy says. Similar responses occurred when SoySoft was featured in the Los Angeles Times and other national publications.

Numerous Web catalogs have sprouted up, offering a collection of products for sale online. SoySoft is offered online by two: a South Dakota Soybean Store and a collection of school fundraiser items.

While both are doing fine, individuals who start catalog companies generally aren’t successful, Lucy has observed. “We get approached by individuals from all over the country. They want to scoop up a bunch of products, start a Web page and make a fast buck — but it doesn’t work,” Lucy says. “I’ve said ‘no’ a lot.”

Fulfillment — properly balancing inventory and demand — is critical to success, she says. After a hurricane a few years ago, “we had a hard time getting some ingredients from the East Coast. We found that people got real grouchy about not having their SoySoft. And we don’t want them to start using something else.”

spreadablefruit.com

RBJ’s Spreadable Fruit dishes up a fun, zippy Web site with product information, online sales and rhubarb recipes to boot. The small company, an offshoot of RBJ’s Restaurant in Crookston, Minn., sells 5- and 14-ounce jars of rhubarb, strawberry, pineapple and peach spreads. Because RBJ’s manufactures in North Dakota, it received a grant from the North Dakota Department of Agriculture to have a marketing firm design the site as part of the “Pride of Dakota” campaign.

RBJ’s owner Kim Samuelson says that although Internet sales are currently less than five percent of her total, she expects to see more. “Our customers tend to be older, 40 to 70, so they’re just starting to get into the Internet. There are people who used to call and place an order or mail it, now they’ll do it online. It’s definitely time-saving for me.”

In April 1999, RBJ’s was featured in Taste of Home magazine and received over 2,000 orders, “which really built up our client base for direct mail.” When the Web site was constructed a few months later, Samuelson sent a direct mail piece to her customers and “a lot of people who first ordered via the magazine now order on the Internet.” Sales soared over the Christmas holidays, but have quieted down since.

Samuelson wouldn’t recommend doing business exclusively on the Internet or contracting with pricey consultants to market a site. “People who tell you they’re going to get you on all kinds of search engines — that’s probably just a waste of money. From the people I’ve visited with, you probably don’t get the bang for the buck. The best method is the literature you put out.”

“I can’t say we are putting a ton into advertising,” Samuelson adds, but RBJ’s does include its Web site on all printed literature, ads and labels. “I’m glad that when we designed our site, we did the full e-commerce route because otherwise customers will just browse, and it might not result in a sale.”

“It’s a new world for us, so I’m excited — it’s just another way of being out there.”

From RBJ’s Web site:

RHUBARB CAKE

1 1/2 cups sugar
1/2 cup shortening
2 eggs
1 cup buttermilk with 1 tsp. soda
1 tsp. vanilla
2 cups all-purpose flour
2 cups diced rhubarb
2 T. sugar mixed with cinnamon

Preheat oven to 350 degrees. Grease and flour bottom of cake pan. Mix first 6 ingredients; add rhubarb. Pour in pan and sprinkle sugar-cinnamon mix on top. Bake 35 to 40 minutes.

countrycandlecompany.com

Jill Anderson has only been selling her homemade soybean wax candles on the Web since April, but she’s already reached customers from California, Washington and Massachusetts as well as the Twin Cities.

And for a start-up entreprenuer selling soy wax candles out of her basement, it was nice to get 6,000 visits her first month.

Anderson operates Country Candles, LLC, in Redwood Falls, Minn. She pours 12 to 15 tons of soybean oil into her soot-free candles, with luscious scents such as mango-papaya and orange dreamsicle. She also sells soy lotion bars and creams.

She credits her impressive Internet debut to self-taught Web site designer Lynn Muenchow from Wabasso, Minn.

“She is so creative — she does everything,” Anderson says. Muenchow not only designed an elegant online brochure for Country Candles but set up a guest book, shopping cart and link for securing credit card transactions. When a buyer enters a credit card number, a company encodes it before sending to Anderson, who has a special decoding formula. The credit card number never enters cyberspace.

After Anderson and her husband had their credit card number stolen by a waitress in Canada, she was wary of Internet transactions. “Now that I see how it comes across, I am not worried. ... This is much safer.”