Food Industry Sees Increase in BTB E-Commerce

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The food industry is finally embracing e-commerce, according to FoodTRENDS 2000, a study on purchasing trends among food industry buyers and executives.


All segments of the industry dramatically increased their use of Web sites during the past year, especially restaurants. While just 30 percent of restaurants maintained Web sites in 1999, the study said 56 percent now do.


"We all know the Web is going to be the dominant source for info, but we're surprised the numbers took double-digit growth because they had been lagging behind for so long," said Linda Rigano, publisher at Thomas Food Industry Register, New York.


Research was conducted in March and early April by Magnet Communications, New York, and released this month.


E-commerce in the business-to-business food sector is fueled by the willingness of industry leaders to embrace Internet and software methods for locating and purchasing products. E-mail communication, wider credit card acceptance and use of charge cards for wholesale purchases contributed to e-commerce growth.


"The majority of food industry executives are sourcing via the Internet," said Rigano. "With wider product selection online, the ability to buy direct and the convenience of shopping during non-business hours, more than 80 percent of respondents expect their online purchases to increase over the next two years," she said.


FoodTRENDS 2000, a survey sponsored by Thomas Food Industry Register and American Express Co., New York, found that the percentage of food processors and restaurants that use e-mail to communicate with suppliers more than doubled in the past year. About 61 percent of processors and 20 percent of restaurants in the study this year used e-mail to communicate with suppliers.


Half of all restaurants used the Internet or computer software to locate products this year, compared to 23 percent in 1999. More than 75 percent of all restaurants, wholesalers and distributors noted the ability to locate goods during off hours as a key factor in this increase. Electronic orders are also way up. Nearly 50 percent of restaurants now order electronically, compared to 22 percent in 1999.


The study also focused on the food industry's credit card use because e-commerce growth depends heavily on the wider use and acceptance of credit and charge cards for BTB transactions.


Study results on credit usage included:


• Thirty-one percent of restaurants said they use credit cards and charge cards to purchase food, equipment and supplies.


• Thirty-two percent of respondents expected credit purchases to increase over the next two years.


• Eighty-four percent of wholesalers and distributors and 79 percent of processors surveyed said accepting credit purchases helps to attract new customers and expand business.


• Ninety-two percent of wholesalers and distributors and 82 percent of processors surveyed expected credit purchases to hold at the current level or increase over the next two years.


"We're just now starting to see manufacturers market this way. Buyers are driving manufacturers to market their products on the Internet," Rigano said.


Despite fears that online ordering would create an environment where consumers order directly from manufacturers, 81 percent of wholesalers and distributors believe online sales of products, equipment and supplies will increase over the next two years.


Data for the study was gathered through interviews with 800 food executives responsible for purchasing and management decisions.
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