Ian's Bits & Bobs: The Blog

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Running it by the Numbers – What a Concept!

Looking at financial information from LGCs (Local Garden Centers) and talking through the mysteries of the past year’s performance is a January pastime for us. Each year has its own “fingerprint” based on weather, economy and customer attitudes, but one thing is becoming quite clear after 5 years of recession:

Making a “decent” profit is harder for some than it is for others selling the same products in the same market. Some operators have had a very good twelve months, others have struggled and some have failed.  Darwinism is at work in the LGC channel of the retail garden business!

What is a “decent” profit?

Great question!  Many large corporate retailers are living on a net profit (aka ‘net margin’ on Wall St) as a percentage of sales in the 2-3% range (liquor and grocery stores) to 7% (apparel). Really, so low?  Yes, what you lose in the percentages as you grow in size, “you’ll make it up in volume,” as they say.

So, a small volume company (compared to Kroger or Abercrombie) that wants to end up with a higher net margin, needs a high gross margin  – correct? Not necessarily: it depends on what your operational costs, labor and occupancy costs are.

The downside of using high mark-ups to get a high gross margin across the board is that the consumer will think you are gouging them and the stuff will just sit there, slowly deteriorating. Nothing improves its quality sitting on the shelf in retail!

Can LGCs thrive on a gross margin below 50%? Absolutely, and most local hardware stores have done so for years. Success is measured by the bottom line more than the top line.

One simple word

So, naturally when I saw a client taking their gross margin (as a percentage of sales) up by over 4 points (43% to 47%) in a single year (in a year and region where spring waited until it was almost too late), I had to ask the reasons. The owner’s answer was one word: “Discipline.”

He said, “We worked by a set of numbers. We lived to a pre-determined spreadsheet of targets showing everything from average ticket to gross margin per labor hour.”

“We knew that to hit this number, we had to do that,” and “if X happened, we were ready for it with Y.”

Specifically, they aimed for a higher gross margin by buying less in at one time (mostly in plant material) and turning it more quickly by better operations, merchandising and marketing. They then had the cash to replace it more frequently with fresher and more impulsive product. They offered volume buys to turn even more product and had very little left for that depressing end-of-season give-away in the fall.

“The data was tracked closely by the POS, and our managers, buyers and team members all knew what was expected of them. We had frequent updates and problem-solving meetings, invested in training/coaching and leadership. Everyone – customers, staff and suppliers – loved it!”

The end result? With a flat customer count, fewer labor hours but the same labor dollars (ie more money for less people), sales were up by 4% over 2013 but the gross margin dollars increased by 14.5%!  Ka-Ching!

Now wouldn’t that make a great New Year’s Resolution! Volunteers anyone?

How did your net profit margin fare in 2014? Let’s hear your numbers, sharing is caring!

Note:  these are actual 2014 business results from a US garden center, anonymized and shared here with the owner’s permission.
  Image credit: Grafixar via morguefile.com
Jan 17, 2015 2 Comments
FarmAtGreenVillageGreenhouseSpring2014

It’s Not Over Until the Fat Albert Sings!

Memorial Day and it’s only the 26th of May? We should thank the Calendar Gods for this unusual turn of events, a week of May left after this holiday. AND getting another Saturday (retail’s best day in our best month) is a real bonus. Thank you, thank you.

For those working in warmer climates who have been chasing their tails since February, it is tempting to breathe out slowly, look up to the skies and say “….ahhh, it’s over for this year.” But after a long and brutal winter, much of the garden industry team is hoping to keep the momentum going.

“Help Me Catch Up”!

On my recent coast to coast travels I have seen more consumer excitement this year than for several years, while the “sales numbers” are close to 2007 levels, even if overheads are now at 2014 levels! The season seems 2-3 weeks behind the recent normal, so in the colder climates many homeowners are just now making their first visit to a garden store. We missed the crabgrass control and the seed starting business there. Ah well. Maybe we help them catch up on the very late season by suggesting a 1 gal tomato or even a nice pre-caged 3 gal complete with green fruit rather than that little 4” pot they were considering. Maybe we should tell customers to jump the smaller perennials and packs of annuals for bigger instant-show sizes. It feels like April-May happened in a week and it could be 92 degrees tomorrow.

But in most of the country, Memorial Day kicks off summer entertaining and outdoor living: so consumers should now be decorating for next week, not next month. Those market packs and 4 inch sizes just won’t cut it but shoppers may not know that. Merchandising and one-on-one conversations should help customers with that reality. When temperatures climb in today’s garden world, the best laid plans for the bigger spring projects quickly get put aside in favor of decorating and for that they need volume and an instant show!

The truth is that some colder climate stores may have missed one of the (3-4?) yearly trips a consumer makes to a garden retailer. It might be awkward for the merchant or buyer who still has 5 weeks back-stock of small or earlier material but when consumers are playing catch-up, they need help to make that leap from early spring cheer to full summer in-your-face-decoration. That takes some preparation and training by owners and managers. It also takes some skills in silent selling (i.e. merchandising) and in sales conversations to skip those spring projects to go straight into full-sized, lush, restful summer landscapes, patios and veggies.

Summer Livin’

Meanwhile in the warmer southern areas, garden retail is now well into the summer decoration and outdoor living mode. This means a team focus on entertaining, decorating decks, hiding those ugly areas and having succulent fresh herbs even if there are still lots of unsold April-May material being watered every day. Yard Sale!

In the dry west, it will be harder to raise a cheer from staff who see freeway signs about drought every day and are themselves ready for a few slower weeks. But if consumers can’t get honest, experienced help in successful hot dry gardening, the industry needs to take a long hard look at itself. We should be the go-to resource center for all the concerns that homeowners have. What will the drought do to my mature shrubs and lawn? How do I keep my veggies going just as they are starting to produce crops? What can I replace easily next year or when it rains again?

Just like the farmers faced with less water, homeowners may have to choose between keeping alive short or long term plants. This will need help and support, for instance suggesting investments in long term items like mature trees that by now may be worth hundreds if not thousands of dollars. Employees should ask the homeowner’s priorities, “must-save” plants, how long they plan to stay in that property and so on. Help to reduce drought losses will build loyalty in the future.

Fat Albert Isn’t Singing Yet

So, it’s not over is it?! Now comes the third season of the year: in fact this year’s early Memorial Day might signal a BIG double season; helping catch-up in must-plant Food Gardening products AND a strong confident start to summer living. So plant that 5 gal tomato and fire up the barbeque!

May 27, 2014 12 Comments
AnswerShack

Anticipating Common Questions: A Real Win-Win

In the last posting, I talked about retail being theater and how we are all players on the stage. Garden retailers have a challenge to help their customers succeed the first time. I call it a “challenge” because so many garden shoppers lack knowledge and confidence, they fear failure.  I say “the first time” because with so many alternative uses of their time and money, consumers are in no mood to spend a lifetime mastering what we sometimes take for granted.

Garden retailers have an opportunity to build loyalty and trust in the customer’s mind when they come to your store, buy what you suggest, do what you say, succeed beyond their expectations and love you for it. The newer garden customers want the end result they see on TV or on social media, but without the trial and error they saw absorbing their parents’ lives.

Few homeowners want a concrete lawn and plastic flowers and are increasingly paying others to “Do It For Me,” (or Do Some of It For Me), because they don’t know what to do and don’t see the value in a 5-10 year learning curve.

That’s where garden retail teams come in, even if you are only one small step ahead of that customer approaching you as you look up and smile.

Even though you may not feel confident, you probably know more than you think and a lot more than many customers. It is a matter of confidence. Confidence to greet, engage, listen, validate and then decide if their question is something you can handle – no guessing or making it up – or something you should ask a veteran team member for help on (and give you a chance to learn for the next shopper).

What Do I Need To Know This Week?

But we can spend years in gardening and still not know everything, so how does a newer employee stand a chance? Owners and managers need to focus on the few specific questions that the customer might ask each week (a technique we call “The Year’s Top 50 questions”). The 80:20 principle applies here! Right now you can predict the top 10 questions from customers this week; “Can we plant tomatoes yet?”, “When do I feed my lawn?”, “Should I prune shrubs that have flowered?” and so on. Much of this information has a short window, few ask about crab grass control In June.

Predicting this week’s main questions, addressing the problems and projects that drive customers to your store, encourages team members to engage customers, rather than putting all the load on the shoulders of a few “experts.” It also shows employees that they are not expected to carry a whole year’s information at any moment, making them more self-confident, while passing off the deeper or oddball requests to the veterans. The customers get the impression (it IS theater after all) that ALL the team knows its stuff and trusts their words more – probably increasing the average ticket in the process.

Implementation

Weekly meetings should outline the expected questions, “retiring” some and introducing others as the season progresses. Daily huddles or one-on-one coaching will prepare even the most nervous “newby” (assuming they were a correct hire in the first place) to help a customer succeed. Each week employees are encouraged to add new sure-bets to the list such as “Don’t you have Impatiens anymore?”.

Some managers add the top 5 questions of the week to the daily calendar or scheduling log-on, some use PK or Product Knowledge training to emphasize customers’ top projects or requests. Others make it the core of their morning huddle; “We have frost forecast all week, let’s talk about our crop covers”.

Help me “Like” Shopping Your Store

However they are conveyed, sharing a few focused questions with the team can be a major win-win, giving much needed self-confidence to employees, trustworthy answers to the shopper and a higher rate of success for the homeowner. What’s not to like?

Coming up next time: Listening!

Apr 17, 2014 6 Comments
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It’s OK Not to Know the Answers

Ah spring; the daffodils, the greening lawns, the plum blossom. And of course there is also the Bobcat that now won’t start, new truck drivers who don’t know your “before 10am” policy, the phones that didn’t re-charge overnight and the customers: oh yes, “them”!

Every year (like an ice-storm in Atlanta), spring seems to arrive as if it was a surprise to many. Garden retailers take in more on the first busy Friday than in the previous 4 weeks. By 11am on Saturday, you have already beaten the sales for the entire month of January. Yet employees are unprepared for the stress, hired and thrown in the deep-end (or allowed to continue set-up “task” jobs even as the parking lot is bulging).  The next ten weeks should pay a year’s bills; this is intense stuff and not for the fainthearted! Nor for the shy or the task-obsessed; the next few weeks are about people, specifically, customers.

After many years of walking retail garden businesses I am still amazed how easy it is to be ignored by the people on payroll that day. I don’t mean to suggest these people are lazy or disinterested; they are often busy, even overwhelmed, with a task list from their leaders, but somewhere in the training, orientation and mentoring, a crucial behavior becomes lost.

Mantra

So even with all the caveats about hiring earlier, selecting for character and training for knowledge and so on, here’s the Baldwin spring mantra for the next few weeks:

                It’s OK not to know

but it’s not OK to avoid customers because you may not know…

So, look up, catch eye contact, smile, welcome your wages coming your way. Engage with a non-invasive “Good morning! Sunshine (or warmth/cloud/rain) at last(!)”, and then pause to ‘read’ the customer’s  response. That’s all it takes, literally!

Been there, done that

I have been there. At 18 I remember lifting, carrying and digging my way through spring, keeping my head down and my eyes on the job, praying that customers would not approach me and ask me a question I was sure I would not be able to answer. “The boss knows everything, ask him,” I thought. “This is my first spring, how would I know when to plant sweet peas? I am just filling the tables with them; please, oh please don’t walk over here…”

Obviously, the more product knowledge and experience they have, the more confident the retail employee will be and the greater chance the customer has of being engaged by a smiling face, instead of looking at busy people with their heads-down. But retail is theater and is all about self-confidence. If you don’t like that moment on “thin ice,” don’t volunteer to go on-stage.

Fair Game

No one knows everything and never will. This industry and its products are evolving so quickly even the veterans have a hard time keeping up to date with PK (Product Knowledge). But employees in garden retail cannot let their own lack of knowledge govern their behavior towards paying customers, who don’t know or care if the employee has been there two days or twenty years. Anyone in uniform is fair game.

If this frightens you, retailing may not be a good fit for you.  If it encourages you, congratulations and welcome to a great industry! The day will be much more fun and the customers much happier if you look “open for business.” Spending your time avoiding customers’ eyes can add up to a long long day!

So for now, I wish you a “heads up and happy spring!”

Stay tuned here at Ian’s Bits & Bobs for the next installment: Anticipating the Customer’s Questions.

Mar 28, 2014 14 Comments
PensivePolarBear_Cropped Pensive Polar Bear

The Polarization Continues

In the week of a “Polar Vortex” it’s appropriate to report that the polarization of the USA retail Lawn and Garden business continued in 2013; a better year for some and one to forget for many others.

Ups and Downs

In garden retail it was an early, strong spring in the west, average in the south, a late to no-spring elsewhere, a decent to good summer, a stronger fall than 2012 (which didn’t mean much) and a lackluster Nov-Dec for most.

One easy to spot trend from 2013 was a national culture of looking for a discount on everything – a legacy of 5 years recession and not going away any time soon.

General bricks and mortar retailers had a big Christmas set-back according to Shoppertrack which reported a sales gain of 2.7% but a stunning drop in traffic (i.e customer count decline of 14.6% compared with Nov/Dec 2012.) That number takes some processing: one in seven shoppers from 2012 didn’t show up a year later?  Wow. Was 2013 the year that on-line shopping noticeably hurt traditional retailers?

Talking of market changes, 2013 was also a year with a big uptick in the number of garden retailers getting serious with Social Media marketing presence, though few as yet have started mobile commerce.

In the garden center channel, two large, long established local icons closed their doors, Waterloo in PA and Linders in MN, (at least one of which confirmed another 2013 reality; big banks no longer want this business … hmmm!)

In the lawn and garden industry before the recession, we would have rationalized 2013 by talking of a “good year to catch our breath”, but now we have to rationalize five years of flat L&G sales set against ever-rising costs.

So, the first question should be; did fewer people show up or did they just spend less per visit? With 115 million households generalizing is tricky, but our local garden center (LGC) reports show flat to small (1-3%) decline in customer or transaction count (again) with a good increase (3-5%) in average spend that in some cases compensated (but in some it didn’t.)

Many LGCs we know had decent overall sales increases of 2% to 8%. A couple of stand-outs reported increases in the high teens, while others’ sales finally climbed back to 2007 levels, through a combination of selective price increases, selective price-slashing to drive traffic and a better offer in personal, gift, accents, décor and food. As in previous years, the more dependent a garden retailer was on foundation and woody plants the more difficult it was to find sales growth. Decorating and food gardening continue to be the trends that drive retail lawn and garden.

Consumables

It’s been clear for a while that bird, pet, personal and food categories can ensure regular traffic from loyal customers but in 2013 these non-garden categories really helped business as conventional gardening stalled (again) and other bigger retailers (including Amazon) got more competitive in both price AND quality with core L&G items. I also know more than one male owner who discovered to his delight that jewelry is a consumable to many of his customers; “Amazing, they just keep buying more of that stuff?” (Absolutely!)

In 2013 success was by department (and mostly those that were non-garden) rather than store-wide.

Polar Winds

Polarization is being driven by operators who recognize that gardening is still stalled but bills keep mounting up. Why have so many garden centers not invested in other product and activities to help keep the lights burning? Many of them have thousands of cars passing every day, a heated, dry indoor space, bathrooms, paved parking, year round retail teams and a great local “name”, so why not?  Maybe they never needed to before 2009, but the stakes are just too high now to risk everything on a few perfect weekends. So the more innovative LGCs are finding ways to win more business out of their community and spread the risk.  At least two cold climate LGCs I know adapted their greenhouses for weekly Farmers Markets  –  why not?

Poles Apart

Can we finally stop judging a year’s results by trends in sales volume? What about margin dollar trends, “Gap” dollar trends, bottom line trends? Because that’s what the “good-getting-better” operators talk about more and more – another 2013 trend.

Which leads to my final observation from 2013: another polarization continues quietly, and this might be the most significant. I think 2013 was the year that the range of profitability (from negative cashflow to stellar performers) widened even further. The good are getting better quicker than the less good, who are still wondering what’s going on. Some independents have excellent bottom lines while others hang on waiting for things to turn around. Survival of the smartest is at work in the independent channel!

But the watering can is still half full. Millions of households have a life outside of their own work. The DOW is in record territory, planes, concerts and theme parks are full. People are spending where they see the benefits. No one wants a concrete lawn and plastic flowers: business is there, 2014 is the year to figure out how to get more of it!

(photo credit: SDR and Co. via Morguefile)
Jan 14, 2014 18 Comments

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