E-Commerce Applications and the Produce Industry
By Dr. Charles R. Hall and Lance D. Pate

E-commerce is poised to reshape the way producers, end consumers, and every intermediary in between will do business in the near future.

Many know of some type of e-commerce, most notably electronic data interchange (EDI), but due to the success of firms on the Internet, new possibilities are being explored in the produce industry. Firms operating in Texas have a tremendous opportunity waiting within our state borders.

The Texas Comptroller of Public Accounts and Matrix Information and Directory Service have recently released some very promising numbers concerning Texas and the use of the Internet. According to a recent publication, the number of computers in Texas that are connected to the Internet has reached over 1 and 1/2 million. This number is almost 10 times what it was in 1995, when a little more than 160,000 computers were connected to the Internet. Also, Texas has the second largest number of Internet users in the United States with 4,600,000. However, Texas ranks 19th in the percent of users. Austin leads the nation in percentage of wired residents. Dallas, Houston, and San Antonio ranked 8th, 24th, and 44th respectively.

A question may arise as to what this information has to do with growers of fresh fruit and vegetables. It has been stated that in the future, there might be immense opportunities for suppliers with unique or high-quality products to use the Internet to market directly to the consumer. Although these opportunities are, no doubt, down the road a bit, there are still vast opportunities today to use e-commerce tools to reach greater numbers of customers within the current procurement system.

Currently, a few retailers have begun to use the Internet as a way to provide extra services for consumers. Albertsons allows consumers to make purchases over the Internet, and Food Lion's site provides 'Web Bucks', which consumers can use to purchase anything they want on their next trip to one of the retail stores. Wholesale companies within the produce industry doing business over the Internet are beginning to surface, including ProduceOnline.com and Buyproduce.com. These companies offer produce companies the opportunity to conduct electronic transactions with other companies, regardless of whether any of the companies involved use EDI. EDI is also being used between wholesalers and retailers as a standard interface for transmitting data – in the case of produce sales, this means purchase orders, shipping orders, and the like – from one computer to another.

EDI has proven to possess three distinct advantages. First, it is a standards-based platform that enforces uniform data flows; second, it makes use of digitized data that eliminates mistakes made when re-keying data; and third, it is accepted in the industry. However, EDI has disadvantages that include: the cost of dealing with proprietary systems for each company, the fact that not a lot of companies are currently using it, and the data mapping of all products between the databases of buyers and sellers.

Recently, information has been published concerning the use of hybrid systems to bring even larger numbers of produce companies into the electronic age. E-commerce is an all-inclusive term that includes both EDI and the newer Internet-based solutions. The possibilities for produce applications for e-commerce are wide open, and one solution may not be appropriate for everyone. Several companies have had success with EDI, but others may find Internet solutions or hybrids more feasible.

There was a panel discussion covering this topic in October at a workshop during the Produce Marketing Association's 'FreshTech'99' conference. It was concluded that a hybridization of EDI and Internet-based solutions might be the best form of electronic commerce for the produce industry.

The Internet is a network, and each connection in the network represents the possibility of a relationship. The Internet provides the opportunity for customers to gain easy access to suppliers and goods simultaneously. With the possibility of hybrid systems waiting to be explored, there will no doubt be significant changes in the way the produce industry's procurement system is structured and utilized. In Texas, there is significant willingness on the part of wholesalers, retailers, and consumers to quickly adapt to the technological changes that are taking place within the fruit and vegetable industry. Texas growers who choose to participate in e-commerce stand to gain substantially by using EDI, Internet-based solutions, or some type of hybrid.

True story: Earlier this year, I asked a tomato marketer in Florida if yellow-leaf-curl virus was threatening yields. The guy said no, but he wished it were. "We could use a little more virus. We could use some bad weather. We need something, because everybody's got too many damn tomatoes."

Of course, he wasn't for unilateral disarmament. He wished the same on Mexican growers. Honest words indeed.

Now it's time for all those growers out there who resist change solely as a matter of principle to get honest with themselves. Are strong f.o.b.s a God-given right? If not, then growers need to ask themselves what they plan to do about boosting demand. It's not the buyer's job alone to create more demand for fresh fruits and vegetables. It's the buyer's job, primarily, to buy cheap and sell for as much as he can get. Growers must understand this rather blunt fact. Promotions are great, but cheap consumer prices only work if they create more demand in the long run.

Growers, meanwhile, can't simply concern themselves with just the supply side of the equation – not in 1999, and certainly not in the 21st century. Unless, that is, they're content to moan about overproduction.