The Greenhouse Effect

Gene Gage wanted a quiet life in the country where he could indulge his hobby of growing herbs. That was before he hitched his wagon to an Internet star.

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THE REAL WORLD

Gene Gage had in mind leading a quiet life in the country while indulging his hobby of growing herbs. That was before he hitched his wagon to an Internet star

When Gene Gage left an executive job in New York City, in the late 1970s, he returned to his rural Nebraska roots. He planned to slow down and take more control of his life by being self-employed. After a couple of false starts, he began Papa Geno's Herb Farm in 1993 to indulge his hobby. He thought he'd run an herb nursery and garden center, do some mail-order business, and sell plants to local nurseries.

But a technological wrinkle called the Internet has since rejiggered -- massively so -- that idyll. Gage, a closet techie despite the dirt under his fingernails, decided three and a half years ago to move his agrarian, low-growth business onto the electronic grid of the World Wide Web. Today Gage, at age 55, finds himself working 80-hour weeks and forecasting that his sales will quadruple between 2000 and 2003, to more than $2 million. "There are a million decisions to make every day," says the suddenly unretiring Gage with enthusiasm. "This is my Viagra."

Gage's company offers a telling example of how the Web can take a simple business based in a place that no one's ever heard of -- Roca, Nebr. -- and put it on the map. Gage predicts that what was to be his hobby in semiretirement will be, by 2004, the largest direct-to-the-customer supplier of fresh herb plants in the United States.

Going for market share
The shift in Gage's customer base has been tectonic. The plantsman has moved totally out of retail and even away from his traditional wholesale customers. "In 1998 I turned down at least $100,000 in business from magazine and catalog coverage," he says. The reason was simple: Gage was busy building capacity in sync with a new and potent horticultural player in E-commerce, Garden.com.

Their relationship is really more of a strategic alliance -- on a grand scale. Garden.com has invested $1 million in Gage's business. The results can be seen behind Gage's barn door, where state-of-the-art workstations link up to Garden.com's extranet through a satellite dish. The multimillion-dollar E-tailer shares its proprietary forecasting model with Papa Geno's so that Gage may hone his numbers in real time and ensure smooth deliveries. "We have to keep raising our estimates monthly," Gage says. And Garden.com backs up its projections with long-term guarantees in the form of minimum purchase orders. "They are sharing the risk and helping us obtain half our working capital each year," says Gage. For the fiscal year ending next month, Garden.com will account for 70% of Gage's sales. Gage sees that figure approaching 90% by 2004.

He acknowledges the risk in dancing with this gorilla, but he believes a muscle-bound alliance like this one is the wave of the future. "The Internet is a much more efficient channel for ordering and distribution," he says. In the past year Gage has been able to cut in half the amount of time required to process and ship an order. The cost of processing that same order has declined by 80% in five years. "Once you learn how to do business online, the other stuff is more poky, and there is more room for mistakes," he says. But to be a serious player on the Internet you have to jump in with both feet and seize market share. Gage adds that the results -- his sales soared 185% last year, while the gardening industry saw low, single-digit growth -- speak for themselves. "It's a rechanneling of the industry," he says. "With growth like this, we're obviously taking market share."

Keeping up with growth
Gage has insisted upon a similarly wired relationship with his suppliers. "If they can't handle me electronically, forget it," he says.

Gage replaced his supplier of cardboard boxes. "He couldn't cut the mustard in terms of keeping up with our online demand," he says. That's because not only has Gage's need for cardboard boxes increased by 400% in two years but the pace of meeting that demand has also increased.

He used to grow all his own "plugs" (herb seedlings or cuttings in a clump of dirt) but now farms out the greater part of that chore to 10 different suppliers in order to focus on cultivation and rapid delivery. That has created a new issue -- a lack of control over supply. In one case, speaking of a supplier of rare specialty herbs who's located in Canada, Gage says, "I could take 100 times as much stuff from him."

In the summer of 1998, Gage figured the Roca operation -- five greenhouses on four acres -- would suffice for five years. It is now at capacity. So he bought a second farm, in nearby Martell, Nebr., on which he'll build at least six new greenhouses each year for five years. That timetable was too much for a regional contractor, so Gage has put the bid out nationally to about a dozen greenhouse builders. Rather than contracting for one greenhouse at a time, he's stockpiling the building material on-site and will erect the greenhouses as needed.

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