Adoption of Computer and Internet Technologies in Small Firm Agriculture: A Study of Flower Growers in Hawaii

Introduction

Computer and Internet technology use in small-farm businesses is becoming more prevalent with the general growth of the Internet and increasing availability of broadband Internet access. According to Warren (2004), almost one third of agricultural firms surveyed had adopted electronic commerce technology. Muske, Stanforth, and Woods (2004) report the same for agricultural micro-businesses. Despite the increasing amount of research, there is much we don't understand about Internet technology adoption and use among small agricultural firms.

Since farmers' use of technology is of particular interest to Extension professionals, the study reported here sought to improve Extension's understanding by specifically examining Internet technology use among flower growers in Hawaii. By better understanding current usage patterns and intentions, the researchers hopes to inform Extension professionals to assist in their planning of future educational and support services for agriculture businesses. This article describes the results of the study and discusses broader implications.

Procedures

In the fall of 2005, questionnaires were mailed out in pre-addressed, pre-stamped envelopes to 330 clients of USDA Agricultural Extension Services located on the Big Island of Hawaii. Follow-up reminders were mailed out several weeks after the original mailing. Of the 330 questionnaires mailed out, 76 (23%) were returned. Because the survey was mailed to every AES client in the tropical flower industry on the Big Island of Hawaii, the survey sample was not randomly selected. Thus the results could reflect non-response bias. This issue is addressed more specifically in the discussion section.

The survey examined three related issues. The first issue concerned computer use in general. The second regarded use of Internet technologies. Last, the survey inquired about specific aspects of Web site use. The survey also assessed two demographic factors, education and number of employees.

Results and Discussion

Demographics

Flower growers who responded are well educated, with 100% having graduated from high school and 90% having gotten some level of schooling beyond high school (Table 1). A substantial 58% have achieved a college or graduate-level degree. Farmers in this survey run small businesses, with most running micro-sized operations. For example, firms employing fewer than five employees account for 73% of respondents, while 14% employ between six and 10 people. Five firms (7%) reported employing 11-20 people, three firms (4%) reported employing 21-50 people, and only one respondent employs more the 50 people.

Table 1.
Demographics

	# Responses	Percent
What is your highest level of formal education?	69
A. Did not complete high school		0%
B. High school diploma/GED		10%
C. Some college or an associate's degree		25%
D. Vocational or technical school degree		7%
E. College diploma		45%
F. Advanced or professional degree		13%
Including you, how many people work in your business?	70
=< 5 people		73%
6 - 10 people		14%
11 - 20 people		7%
21 - 50 people		4%
> 50 people		1%

Computer Use

A large majority of respondents (82%) use a computer in their businesses, while 18% do not use a computer (Table 2). Of those not using computers, 92% have no expectations of starting to use one in the next year. The leading reasons reported for not using computers are lack of knowledge about how to use a computer (45%) and the perception that computer cost is too great (27%). This suggests that there are opportunities to increase computer usage through elementary computer work shops, though the absolute numbers would be small because these growers represented only 7% of all growers responding.

Table 2.
Computer Use

	# Responses	Percent
Do you use a computer in your business's operation?	74
Yes		82%
No		18%
If you do not use a computer in your business, do you expect to begin using one within the next year?	12
Yes		8%
No		92%
If you don't expect to have a computer in your business within the next year, why not? Is it because you?	11
A. Don't see any benefits		9%
B. Cost is too high		27%
C. Don't know how to use one		45%
D. Haven't really thought about it		18%

Internet Use

About 78% of those surveyed reported using the Internet for business-related activities (Table 3). About half (55%) of those not using the Internet indicate an intent to begin using it within the next year. Reasons people gave for not planning to use the Internet within the year include: not knowing how to do it (40%); perceived high cost of doing business on the Internet (30%); and 20% that they haven't really thought about it. Interestingly, only one of the 10 responding to this question indicates a lack of infrastructure as the reason for not planning on Internet use. Despite the heavily rural dispersion of agriculture in Hawaii, apparently infrastructure is relatively adequate for flower growers' needs.

The primary uses reported for the Internet are email (96%), business-related research (92%), and purchasing of goods or services (90%). About half of the 51 respondents to this question reported using the Internet for online banking or bill-paying. Very few respondents do any online contract-bidding (8%). While a large percentage of growers use the Internet for email, research, and online-buying, it is not clear to what extent growers purchase things like materials and supplies for their business. With only 8% of growers engaged in online contract-bidding, there may be opportunities to foster activities like online exchanges and cooperatives for materials acquisition and as additional channels of distribution.

Table 3.
Internet Use

	# Responses	Percent
Are you and/or your employees using the Internet for business-related activities?	68
Yes		78%
No		22%
Do you expect that you and/or your employees will use the Internet for business-related activities within the next year? (If answered 'No' to #4)	11
Yes		45%
No		55%
What activities does your business conduct on the Internet?	51
A. Use e-mail to communicate with customers or suppliers		96%
B. Purchase goods and/or services		90%
C. Conduct financial affairs, such as online banking		55%
D. Bid on contracts		8%
E. Gather business-related information, such as prices, new products and so forth		92%
Why don't you expect to have your business use the internet within the next year? Is it because you?	10
A. Don't see any benefit		0%
B. Cost of service is too high		30%
C. Don't know how to do it		40%
D. Haven't really thought about it		20%
E. Infrastructure not yet available		10%

Web Site Use

Of those using the Internet, 54% reported having a Web site (Table 4), leaving a substantial percentage of growers who do not own a Web site. Of those who have a Web site, the average time of Web site ownership is almost 4 years. Almost a third (31%) have owned their site for less than 1 year, while 35% have had their site for more than 5 years. Term of site ownership is evenly distributed across 2 to 4 years among the remaining growers. Thus, generally, Web site ownership among responding farmers has increased steadily over the past 5 years.

Table 4.
Web Site Use

	# Responses	Percent
Does your business have a website?	54
Yes		54%
No		46%
How many months has your website been operating?	26
< 1 year		31%
1 - 2 years		8%
2 - 3 years		12%
3 - 4 years		8%
4 - 5 years		8%
> 5 years		35%

Almost half of all respondents reported not having a Web site (Table 5). The most frequently cited reason was a lack of knowledge about how to do one (62%), followed by not having gotten around to it (51%). Multiple responses to this question were allowed. Results indicate that many of those who lack knowledge about Web site management also lack time, opportunity, or motivation to learn what is required for Web site ownership. For example, 19% reported that it would take too much time to manage a Web site. Only 5% indicated seeing no benefit as a reason for not having a Web site. Similarly, only 5% cited too much online competition as a reason for not having a Web site.

These results suggest that even those who do not currently have a Web site perceive potential business benefits in having one. For several significant reasons, however, adequate training being foremost among them, these people have yet to avail themselves of the opportunities presented by Web site ownership.

Table 5.
No Web Site

	# Responses	Percent
Why doesn't your business have a website? Is it because? Circle the letter for all that apply.	37
A. The initial cost is too high		22%
B. Your products or services don't lend themselves to sale on the internet		27%
C. Of too much online competition		5%
D. You haven't gotten around to it yet		51%
E. Of the amount of time it would take		19%
F. The infrastructure is not available yet		11%
G. You don't know how to do it		62%
H. You don't see any benefit from one		5%
Do you expect to have a website within the next year?	35
Yes		37%
No		26%
Don't Know		37%

Web Site Sales, Income, and Perceived Benefits

Out of 29 growers who report having a Web site, 83% said they sell directly via their site (Table 6). Most of these sales appear to be to individual customers (business-to-consumer, i.e., B-to-C) rather than to other businesses (B-to-B). For example 52% of respondents report that sales to other businesses account for less than 10% of total Internet sales The other side of that coin is that two businesses (10%) report more than 75% of their Internet sales are B-to-B, and one firm reports 51-75% of sales being B-to-B. Thus, while a few businesses conduct primarily B-to-B sales, the vast majority of responding growers engage mostly in B-to-C e-commerce.

Table 6.
Web Site Sales

	# Responses	Percent
Do you sell goods or services directly over the website?	29
Yes		83%
No		17%
Approximately what percentage of your internet sales are to other businesses?	21
< 10%		52%
10 - 25%		29%
26 - 50%		5%
51 - 75%		5%
> 75%		10%

Web site sales constitute a small percentage of total firm sales for most responding businesses (Table 7). About 41% report that Web site sales comprise less than 10% of total sales, and 32% report site sales as 10-25% of total sales. Interestingly, 18% (4 firms) indicate that their Internet sales generate more than 75% of total sales. Three of these four firms employ only two people. The fourth employs eight people. Additionally, two of these four firms report the majority of Internet sales are to other businesses (80% and 95%, respectively).

In other words, in the study reported here, firms that do almost all of their business online tend to be quite small and tend to do business with other businesses rather than directly to consumers. For most growers, however, the Internet is a secondary channel for their product. Growers also indicate Internet sales will likely become a slightly larger percentage of total sales in the future.

Table 7.
Web Site Sales to Total Sales

	# Responses	Percent
Approximately what percent of your CURRENT total sales do you make, directly or indirectly, as a result of your website?	22
< 10%		41%
10 - 25%		32%
26 - 50%		9%
51 - 75%		0%
> 75%		18%
What do you think that percentage will be twelve months from now?	19
< 10%		32%
10 - 25%		37%
26 - 50%		11%
51 - 75%		0%
> 75%		21%
Why doesn't your business sell directly from your website? Is it because?	5
A. The initial cost is too high		0%
B. Your products or services don't lend themselves to sale on the internet		60%
C. Of too much online competition		0%
D. You haven't gotten around to it yet		20%
E. Of the amount of time it would take		0%
F. The infrastructure is not yet available		0%
G. You don't know how to do it		20%
H. You don't see any benefit from one		0%

Web sites can generate revenues in ways other than direct sales (Table 8). Most firms in this survey indicated that the Web site stimulated sales that were ultimately transacted via phone, fax, or email (86%). Another 34% reported that the site stimulated sales that were later conducted in person. Several also generated income from advertisers on their site.

Table 8.
Web Site Sales Channels

	# Responses	Percent
Does the website produce income for your business through?	29
A. Sales stimulated by the site, but made over the telephone, fax or e-mail		86%
B. Sales stimulated by the site, but made in your place of business		34%
C. Ads on your site		10%
D. Paid subscriptions to the material on your site		0%
E. Commissions for directing business to another site		0%
F. Any other way?		24%

Fully 90% of Web site owners said the Web site has brought them additional customers (Table 9); 76% report the Web site bringing in new types of customers; 76% say their site has increased total sales; and 41% report increased business profits. Many firms (24%) indicate that the site has helped reduce costs. For 14% of firms, the Web site has generated additional foreign business. Significantly, 38% feel their Web site has increased their competitive position.

Table 9.
Web Site Benefits

	# Responses	Percent
To date, what benefits has your business experienced from your website? Has it?	29
A. Increased your total sales		76%
B. Brought you additional customers		90%
C. Brought you new types of customers		76%
D. Reduced your costs per unit sold		24%
E. Increased business profits		41%
F. Increased sales outside the United States		14%
G. Improved your competitive position		38%

Limitations

One issue regards the fact that the survey targeted flower growers in particular, rather than farmers in general. A second concern is the 23% response rate. The cover sheet of the survey explained that results would be used for developing e-commerce-related workshops. Framing the solicitation in this manner may have generated a biased response profile, piquing greater interest among those who are using or planning on using Internet technologies than among those not sharing such intentions.

Taken together, these issues suggest that generalizing the observations obtained here to farmers in other agricultural sectors must be considered with caution. Generalizing these results would probably best be done when looking at agricultural markets that exhibit similar characteristics across several dimensions, including product type, customer type, and market structure. For example, it might be possible to compare Web site usage here to usage among farmers who grow products that, like flowers, require rigid quality control, are perishable, can be shipped, can be sold directly to consumers, but can also be consolidated through grower-shippers. With appropriate consideration, the results presented in this paper can be useful to Extension in assessing technology issues in other agricultural sectors as well.

Conclusions

Respondents were educated and tended own or manage very small micro-businesses, with most employing fewer than 10 people. Firm size is a factor in determining whether to have a Web site: larger firms are more likely to have one than smaller firms (Burke, 2005). In the study reported here the average number of employees in firms not using computers is 2.1, but 8.7 in firms that do use computers. Similarly, firms with Web sites average 7.7 employees, while those without Web sites average 4.1 employees. Interestingly, in the study, the only firm with more than 50 employees (150) did not have a Web site, citing lack of infrastructure as the reason. This suggests that, while larger businesses may generally be more motivated to go online, firm-specific factors may skew analysis and should be considered when assessing clients' needs.

Most growers use computers, and a large majority use the Internet in their business. Growers here report using the Internet for email, business research, and purchasing of goods and services, but few use it for online contracting. Farmers who don't use computers or the Internet report being hindered primarily by lack of knowledge. Internet users and Web site owners in the study reported here claim considerable benefits from use of these technologies, including increased sales, new customers, and enhanced competitiveness. Yet a number of growers are still not using the Internet, and almost half do not own Web sites.

Rather than a lack of willingness or of perceived potential though, once again the main reason cited is a deficiency in training. There are also a number of productivity-enhancing aspects of ecommerce that are not well understood or used by farmers, including online contracting and bidding for services. These results suggest significant opportunities for Extension to teach small farming businesses more about computer use, Internet use, and Web site use.

Extension can benefit from the information and even the questions arising from this survey. For instance, although many farmers are successfully selling products from Web sites, 10 of the growers without Web sites and three who do have Web sites feel their product is not well suited for Internet sales.

This attitude might be more widespread than recognized. Indeed, there may be other types of farmers who feel similarly about their products, when in fact the product they grow might be being successfully marketed by their competitors on the Internet. To resolve this sort of disparity, Extension services should expand efforts in organizing and sponsoring Internet and other technology workshops for their clients. Several Internet technology workshops offered by the University of Hawaii Cooperative Extension Service in Hilo have been met with enthusiastic and grateful participation and requests for more specific and extended topical offerings.

References

Burke, K. (2005). The impact of firm size on Internet use in small businesses. Electronic Markets, Vol. 15 (2), pp. 5-19.

Muske, G., Stanforth, N. & Woods, M. D. (2004). Micro business use of technology and Extension's role. Journal of Extension [Online], 42(1). Available at http://www.joe.org/joe/2004february/a4.shtml

Warren, M. (2004) Farmers online: Drivers and impediments in adoption of Internet in UK agricultural businesses. Journal of Small Business and Enterprise Development, 11 (3), 371-381.