The Everywhere Economy
20 Mar 2014
The Everywhere Economy
The growth of e-commerce connects Central Minnesota with revenue from around the world
When Tom Smude registered the internet domain name for the start-up sunflower oil operation he and his wife launched in 2010, the Pierz farmer knew far more about tractor engine tuning than search engine optimization.
“Computers weren’t really my thing,” said Smude, a life-long family farmer, cattle rancher and John Deere dealer. “Facebook, Twitter, Pinterest—I didn’t know much about any of that.”
But with the first batch of his family’s bottled cold-pressed sunflower oil about to go to market, Smude knew they needed an online calling card where potential customers could learn more and see that the company was legitimate. “These days, if you don’t have a website, you’re kind of nobody,” said Smude, who set up a simple site and taught himself how to create pages and product descriptions “every night at 10 o’clock, after the chores were done.”
The strategy soon paid off. Smude’s Sunflower Oil (smudeoil.com) soon found its way onto grocery shelves and into high-end restaurant kitchens in St. Cloud and the Twin Cities, more than doubling sales within the company’s first two years. As preparation for this success, Smude’s received an Initiative Foundation loan along with technical assistance to apply for a United States Department of Agriculture Value-Added Producer Grant.
“When we set up the site, you could see three people visited one day, then 10, and then 50,” Smude said. “Then you’d go to a farmer’s market or a trade show in Minneapolis and all of a sudden you had 400 or 500 people coming to check you out.”
The potential for online sales proved so promising that when Smude’s earned the USDA grant in 2012, a responsive website that could be navigated easily on a computer, tablet or smartphone, was one of the first investments they made. Designed by Little Falls-based Firefly Designs Smude’s revamped website helps keep the Central Minnesota business popping up among the top results for “sunflower oil” on internet search engines, connecting the family farm to customers as far away as California and Hong Kong.
Today, Smude estimates that e-commerce now accounts for 25 to 30 percent of the company’s annual sales. “If you told me four years ago we’d be where we are today, I wouldn’t have believed you,” he said. “But the internet has opened up opportunities we didn’t even know about when we got started.”
Smude’s is just one of a growing number of small businesses in central Minnesota finding new customers through the internet. From local artisans with Etsy sites to traditional retailers with outlets on Amazon, eBay, Shopify and other apps, online shopping is connecting Minnesota-made products and services with an increasingly global audience.
“As access to high-speed internet improves in rural communities, the e-commerce playing field is getting a little more level for small businesses in central Minnesota,” said Dan Bullert, business finance manager at the Initiative Foundation. “Anyone with a tangible product or specialty service with a little bit of a niche is finding that e-commerce can really expand their target market of potential customers.”
That’s how a Google search for vintage tractor collectibles led customers from Ireland, England and Australia to the gravel road in Menahga where metalsmith Steve Peterson crafts custom orders at Kettle River Iron Works (kettleriverironworks.com). “Once I figured out how to get this stuff going on the internet, we had success right away,” he said. “We ship all over now.”
Battery Wholesale, Inc., (http://www.bwioutlet.com) a St. Joseph-based wholesaler and Initiative Foundation loan client with six brick-and-mortar outlets across the state, has been dispatching 10 to 15 packages from its warehouse every day since October, when the company became a certified vendor on Amazon.com.
“There are a lot bigger players out there, and we’ve got a lot of competition,” said Grant Brastad, the company’s vice president and co-owner. “But if you can deliver a quality product in a decent amount of time, we’ve found you don’t have to be the cheapest and you don’t need to be the most expensive—you just need to be in the game.”
More Minnesota businesses are jumping into the game every quarter, as jobs driven by electronic shopping have grown by double digits annually since 2010. Between 2009 and 2012, Minnesota saw an 82.4 percent increase in the number of electronic shopping jobs, which now number nearly 1,100 workers, and account for more than $39 million in annual compensation.
Nationwide, e-commerce transactions make up about 8 percent of total retail sales, but as customers become increasingly comfortable with shopping from their smartphones, tablets and laptops, e-commerce is expected to outpace sales growth at traditional retailers over the next five years, reaching $370 billion in sales by 2017. With a record 66 million Americans making a purchase online on Black Friday 2013, technology and market research firm Forrester is predicting e-commerce to rise by 13 percent in 2014 alone.
Central Minnesota stands to gain from this trend. “The internet is a gateway to doing so much more than people realize, especially in a region like this where the overhead and cost of living are relatively low,” said Frank Bray, owner of Final Frontier Toys (finalfrontiertoys.com). His high-end collectible toy shop got its start in a storefront in Gilroy, Calif., in 1994 and signed on as an eBay seller in 1997.
“We saw right away that the internet was going to change our business completely,” Bray said. “A storefront is incredibly labor intensive, and the overhead in California is outrageous.” By 2005, as the real estate market began reaching “ridiculous heights,” Bray and his wife decided to cash out their California house, close the storefront and concentrate on e-commerce exclusively. “As long as you have a good internet connection and reliable pick up from FedEx or UPS, you can do what we do anywhere, and anywhere ended up being Menahga,” where Bray’s wife has family.
In the seven years since his business moved to a building on the property of his home in Minnesota’s north woods, Bray admits he’s still not accustomed to winter, and he’s had some challenges finding local hires with the “geek-nerd” skill set needed to answer customer questions about “Return of the Jedi” Chewbacca figurines (asking price: $350), or vintage G.I. Joe “Cobra Terror Drome” playsets ($7,995). Even so, he’s been happy with the excellent high-speed internet service he receives from West Central Telephone in Sebeka, and delighted by Final Frontier’s steady growth, which started in 2009 and has grown every year since.
“We have customers all over the blessed globe, in 67 countries, so for us globalization has been helpful—not a curse.”
An increasingly global economy has also been a boon to Little Falls’ Atomic Learning (atomiclearning.com), which provides on-demand technology training and support for educators around the world.
Launched in 2000 by a team of tech-minded teaching professionals, Atomic Learning soon found a major client in Australia—a development their marketing plan hadn’t anticipated. “But once you launch something on the Internet, it knows no boundaries,” said Dan Meyer, an Atomic Learning co-founder and a member of the Initiative Foundation’s board of trustees. “You can’t put up walls and say we’re not ready to do business with you yet.”
Today, the company’s 60,000 how-to videos and tech curriculum tutorials are accessed every day by an audience of more than 7 million users in Australia, the United Kingdom, Singapore, Qatar and 25 other countries.
Having a mailing address in Central Minnesota is no limitation to the markets Atomic Learning can reach, according to director of marketing Kathy Sell, who says social media helps the company’s 70 employees keep close tabs on cutting edge topics in education. Before Twitter took off “a teacher who might be really passionate about technology would have no one else in the building to bounce ideas off of, and now they’re able to connect with people all over the world who are running at their same speed,” said Sell. “We use Twitter within the education spaces to watch what they’re talking about, understand what their challenges are, and even to solve customer service issues quickly.”
But social media savvy is not a requirement for succeeding in the world of e-commerce. In fact, Mann Lake Ltd. CEO Jack Thomas, who started his beekeeping supply company (mannlakeltd.com) from his front porch in 1983, is proud to report that he’s never sent a text message, logged on to Twitter or ordered anything from the internet.
Even so, the Hackensack-based company has grown to become the world’s largest supplier of beekeeping products, a global reach that Thomas credits in large part to Mann Lake’s move to the internet in the 1990s.
Starting with a simple site of pages numbered exactly to correspond to Mann Lake’s popular catalog, the company’s products can now be shipped through Amazon and from their own virtual storefront, where customers can “live chat” with a knowledgeable staff person. Thomas, who now employs 235 people in Minnesota, California and Pennsylvania, believes that responsiveness is a key to their success.
“We’ve never had a slump year and I would say the number one reason is that we answer the telephone,” he said. “Every call to Mann Lake is answered on or before the third ring by a live person 24/7.” Combined with this embrace of old-school customer service, the new world of e-commerce has extended Mann Lake’s audience far beyond his expectations. “Without the internet, I’d guess we’d be about 75 percent smaller than we are.”
Tom Smude says he would love for his sunflower oil business to find the kind of loyal customer base Mann Lake has created over three decades, and he’s already changed his marketing plan to make it happen. Though he and his wife began their business with the assumption that young, hipster foodies would be the target audience for their sustainably farmed and heart-healthy oils, Smude soon discovered that market doesn’t have the disposable income for such a high-end product.
But when Smude’s Sunflower Oil was introduced to local supermarkets, it was quickly embraced by customers who’d struggled to find sunflower oil in the midwest, where vegetable oils are more popular. “Turns out that in Russia, sunflower oil is what everyone cooks with, and we heard from a co-op in St. Cloud that Russian immigrants were driving up from Minneapolis and filling up their jugs,” said Smude, who has adjusted his social media and advertising to connect with Russian-born customers on the coasts and in Missouri.
Smude is confident that growing word of mouth for his product, not to mention a big headline about heart health, could be just what his sunflower oil business needs to become a major player in the market. “With our website and e-commerce, I know we’ve got the groundwork laid to handle it when it comes.”