Ian's Bits & Bobs: The Blog

Nutcrackers

Be Smart at the Mart

As the last of the “50% off” sales straggle to a sad end and intrepid buyers of all-things Christmas head for “Market” (as the Atlanta Gift Mart is euphemistically known), I thought it might be worth sharing some observations from the Holiday business 2015:

It seems to have been a happy Christmas season for most garden retailers, despite a falling stock market and a burgeoning on-line business. The spending patterns of the American consumer for 2015’s Christmas reflected the greater changes seen through the year by the independent garden retailers that we know. Average spend per customer in Nov/Dec was up on the previous year by a range of 2% to 12%, while the favorable weather across much of the country drove customer count up by an even higher range for the majority. While predictions for general retail spending in the Malls were modest, garden retailers seemed to beat the street. Did consumers trade savings at the pump for a bigger wreath? J.P. Morgan Chase says that the average household is saving over $260 per year on cheaper gas and that they will spend up to 80% of it!

What consumers spent their money on is important as buyers head for Atlanta and Dallas, hoping to predict what shoppers will drool over in 10 months’ time – never easy. Christmas merchandise has but one chance per year to wow the consumer.  It takes real talent to repurpose a Nutcracker as a garden gnome five months later!

Fresh Is “In”

Feedback from our networks and clients was of strong and consistent traffic across all regions, demographics and store sizes. Fresh was “in” everywhere. Fresh cut trees, greens, roping and wreaths the bigger the better, the more unique the better in all categories. Customized wreath-making stations were selling them as quickly as they could be made. Where buyers could find them, re-orders sold out on cut greens, wreaths and outdoor “Porch Pots”.

Meanwhile, artificial trees were only strong at the top of the price range and what was once the very essence of a retail Christmas, ornaments and collectibles, especially collectibles, languished inside many stores. This last category, known to some of my English friends as “landfill,” may have seen its best days for a while as the collectors of such things as nutcrackers, carolers, nativities, Victorian nostalgia and so on, fade away themselves. And younger consumer may be turning away from decorative “stuff”  to spend on other, more practical or experiential, things.

A Department That Keeps On Giving

Given the (expensive) buying expeditions underway to the shows it might be helpful to know what those other things are!

Sales of all sorts of personal items, presumably destined for under-the-tree gifts were very strong, but the key change here is from Christmas gifts to all year round gifts. As one owner said “I want something I can sell into March, not just up to Dec 25th!” Despite the warm weather affecting sales of winter-wear in the Malls, sales of scarves, gloves, socks, sweaters and jewelry in garden-stores were extremely good in Nov/Dec. Any retailer with new or unusual styles of existing items such as super-cold drink containers sold out, while local-made apparel, food and drink were hits across the country.

I am not sure if I have a conclusion from all this information as you work the booths at market but caution is advised; change is in the air for Christmas “gift” shopping.  One of the big winners at Christmas was gift cards for future experiences: eating out, concert tickets, classes (glassblowing, cocktail making, etc.) or taking a trip.

Take Care With Those Bears

Sure, consumers are still going to decorate with lights, trees, ornaments or swag and will still buy lots of “stuff”. They will still change color schemes and update their homes each holiday season. But the highlights of their spending now seem to be less on Christmas/Santa/Holiday themed products and more on giving personal all-round gifts or new exciting things not necessarily connected to the specific season. Consumers are going for “fresh,” honest and, where possible, local products if they give products at all.

Sooo, buy carefully in the next few weeks: it’s hard to turn the boat back to China once you have confirmed!

 

photo credit for the lit “future garden gnomes” above: Moonlightway via MorgueFile

Jan 14, 2016 4 Comments
KnockOut_Petitti

Tales from The Trenches: “Price First, Then We’ll Talk About Everything Else” – Consumer 2013

Recently I was walking a garden center, looking at selection, pricing, silent selling, etc. to get a feel for their market position when a price stopped me in my tracks. I had an earlier “uh oh” feeling on seeing a basic 2 gallon ‘Knock Out’ Rose at $29.99 … and then a smallish 1 gallon Juniper ‘Blue Rug’ at $14.99 gave me the “oh dear” reflex. This was NOT a one-off, more I’d say the continuing default setting of most Local Garden Centers (LGCs).

Exposed!

After 5 years of recession, with every national retailer in the country using prices to drive traffic; with mobile smartphones able to access comparison websites on all manner of goods and services, why do so many owners still not get the message about selective mark-ups and pricing? The 1990’s position of “we need to make 50+% on every item” is being painfully exposed by this grinding recession.

Why do buyers persist in thinking that their store is a “special case” to the consumer, who will continue to pay more (often a lot more) for a known product because they are local and offer superior service?

When are owners (this has to be driven down from the top) going to connect the 12 years of declining customer count in the LGC channel with the public’s perceived image of “beautiful, knowledgeable but EXPENSIVE”?

When the economic tide was coming in from 1995 to 2007 and all boats were rising, few noticed the steady decline in customer count. Most companies more than made up for it with a rise in consumer average spend, and some owners were actually relieved that price-driven shoppers stayed away.

That was then and this is now

Price-driven shopping has become the norm. People at all levels of affluence boast about going to Costco. Social networks buzz with deals and offers. We have consumers of all earnings levels looking for bargains and, critically, judging an entire company’s image on the prices of the relatively few “Known Value” (KV) lines – like a ‘Knock Out’ rose.

The known value (KV) effect has been around for years, yet LGC owners and teams still apply department or category-wide mark ups to achieve the high Gross Margin they think they must get on everything. That makes a few things (the KV lines) way over-priced to the shopper while leaving dollars on the table with other less known or unique lines. Selective, volume-based, seasonally sensitive mark-ups have been the norm for years in grocery stores; when did you ever see all apples the same price, or a year-round price on Coke?

LGC owners’ peers in the family-owned local hardware store business have long since figured out how to compete on price-perception with the big box home centers.  Think about it: everything the hardware stores carry such as paint, electrical and plumbing – not just lawn and garden – is in a home center!

These hardware stores use competitively priced national brands to drive traffic, unlike many LGCs who shun them. Hardware stores might lower Gross Margin to 20% on a few carefully selected KV lines and get 60% on specialty, unique and local lines. Some hardware stores use 72 hour prices to further promote their competitiveness; others choose just one size of a certain product to get down and dirty with. Some use their marketing budget to “subsidize” the lost margin dollars on a deep price offer for a weekend special. And guess what? The hardware channel has (comparatively) had a very good recession – if there is such a thing!

Time for Action

So, as we hear about another large multi-generation LGC closing down, I think it is time for leaders in the LGC industry to wake up and smell the POS reports. Identify 20-40 Known Value SKUs (out of 5,000 to 45,000!) that create a price-perception to the consumer, reduce prices, budget for it and shout about it – loud! After 50 years of being seen as “pricey” this change in strategy might take several years to pay off, but now is the time to start showing your market that you are sensitive to their budget struggles.

My mantra is “get it where you can and give it back where you have to.”

I firmly believe that local garden centers have a great future as a resource for a consumer that is garden-success challenged. However, as the number of LGCs falls monthly, consumers are frightened away by a few KV prices before the company even gets a chance to show their relevance. So it’s time to copy our cousins in the hardware industry: get customers in the door with prices and retain them with service and success!

Americans are very generous to local causes and charities, but pretty unsupportive to the plight of a  local retailer. Unless you can achieve cult status (like Apple), it’s time to embrace and promote a KV strategy – or register as a non-profit!

Photo Credit:  a smart Known Value pricing strategy as seen at Petitti Garden Centers (OH)
Oct 16, 2013 21 Comments
Business Closed

Don’t Bank on These Guys for Help!

You may have heard about someone going out of business lately, shook your head and said “That’s a shame” and continued with your day. After five years of recession, consumer fatigue, stalled housing and increasing competition, we all knew a shake out was inevitable.

Most people assume that failing companies are badly run, saddled with debt and just not up to life in today’s retail fast lane. And there is some of that, no question –  owners unwilling or unable to change their strategies and operations. When the national lawn and garden market shrinks 20+% since 2007 and the sales of trees and shrubs drop by 46% in 4 years (National Gardening Survey), retail decisionmakers had better be nimble … or else!

But sadly, there is more to it:  garden centers that are making money go out of businesses too. We know of two (over 100 successful years between them) who are currently scrambling to stay in business despite positive cash flow, increasing customer count and on-time bill paying.

The reason? National brand banks are turning away from their traditional role of credit-line supporter. Maybe there was a bankers’ convention about the dangers of “exposure” to small family-held garden retailers. Maybe being awash in cash, large banks have decided they can afford to drop these relatively small accounts – they probably never were very profitable with low bonus opportunities for the top cats anyway.

Let’s Blame the Fed

We know an owner who was excitedly taken on-board with an aggressive pitch and very competitive terms by a national bank in 2007. The bank won all his business, loans, merchant fees and credit line effectively tying up all their collateral against long term construction loans. Now he is told that the yearly rubber-stamp for a winter credit line (always paid back on time in spring) has been refused and their application sent to the bank’s own “Graveyard”.

There, bean counters who know nothing about their customer, will declare the business too risky according to their formula. Even more galling is a bank tendency to blame this on the Federal government’s post 2008 lending guidelines. The retailer said to me, “Didn’t I – the taxpayer – just bail them out? This is what I get in return!”

After many years of providing local employment, creating wealth and running many millions of dollars in sales through the bank year after year it’s over; but you can’t fight it. Today’s reality is to learn and move on.

A “DUH!” Moment

This retailer was told that as their company didn’t make a profit last year, they couldn’t have a credit line. Well, DUH! It is a privately held company, of course they didn’t show a Net Profit on their Profit and Loss statement! But if the bank was interested enough (obviously not) to do an EBITDA calculation from the same documents and spend about 15 minutes on the phone with the owner (as I did), they would see that there was plenty of Net Cash Flow (a much more accurate measure) generated last year.

The kicker is that with the national bank holding the retailer’s collateral, no other bank will give them a credit line either. So, like others we know, this retailer is now schlepping his business around town to see how community-minded these local banks really are. The owners are cheered by the attitudes of managers they are now “interviewing” for the privilege of being their customer, so they feel safe, at least until that local bank gets amalgamated into another national “brand” with lush ads and silly mileage cards.

No names mentioned here (to protect our own Net Cash Flow!) but that same national brand name comes up a lot these days in this discussion. Clearly as they grew from regional retail and community bank to international investment and commercial banking giant, they forgot to read their own “Visions and Values” (I am being kind), or are simply dumping the small businesses that once were their life blood.

The Moral of the Story

The moral, if that word fits in a banking story, is to find a bank who knows that your business matters to them financially. Remember, your weekend cash flow is their source of loan money next week! Now is the time to be a bigger fish in a much smaller pond. Be prepared with true Net Cash Flow documents, not just your own P&L or tax docs. Find a bank (still one that is insured and tested by the Feds preferably!) with a few branches in town, where the decision maker might even know your store. Most cities do still have a few banks living by their original values without visions of grandeur. (Who knows, the manager might just show up for that seminar on herbs!)

If you’re not ready to hang out that “Closed” sign for good, your banker needs to be an ally for you, not an adversary. It’s time for you to practice what you preach to your own customers: SHOP LOCAL. 

photo credit:  Michael S. Richter via Morguefile
Sep 4, 2013 8 Comments
canned

Fall is for … Preserving?

I am delighted to report that there has been a welcome upturn in the conventional garden business. In other words consumers are buying flowers, veggies and lawn food again – hooray for that. There was a moment in July when it looked like the American householder had forgotten that their yard, garden or patio traditionally involved buying, replacing or maintaining some type of plant! Most retailers I know had “horrible” Summer numbers, not just in sales figures but, more worryingly, in transactions or register rings (some people call it “Customer Count”). This was not just a local thing in one area with bad weather, it seemed national in scope with comments like “No one showed up” or “Business dropped off the cliff from mid June”.  So to hear that September was up substantially in sales figures, on an admittedly poor 2011,  pretty much across the country in all retail channels is nothing but good news.

What would be even better news would be knowing what is driving it.

To some extent there is no choice for many homeowners.  After 4 years when spending on the garden and patio was pushed down the priority list in many households, they can see that their biggest asset, their house, is starting to look tired and less attractive to a buyer. So at least that will drive people to a store to buy flowers, a few containers and some lawn food, maybe even some pruners to attack those tryphid-like shrubs. Consumers realize that the least they have to do is to protect and preserve what they already had or owned.                                                                   

Is the home-grown, fresh veggies boom driving some traffic?  

I think so, especially in areas of the country where (if you know how) you can get a late crop of all sorts of fresh greens, winter squash or root veggies and a great start on next spring before Jack Frost arrives.  Also, now that many feel competent about growing a juicy tomato, the intrigue of preserving some of that summer bounty might be catching on in younger generations who didn’t learn it from their parents like I did. When I was a kid in England I was cheap labo(u)r for everything from painfully picking gooseberries to cleaning countless jam jars. From June to October the house always seemed to smell of jam or chutney!

Riding the Trend Wave

Some retailers I am glad to say have encouraged this food-preservation trend with tasting events, classes and supplies, others have not. One garden center owner complained that he couldn’t make money on canning supplies but his store just had a shelf or two of jars and lids sitting there for those consumers who knew what to look for (and probably knew their prices as they bought them somewhere every year). There was no promotion, tastings, eye-catching merchandising, cute signage, themes, events, classes, experts on-hand or items bundled into E-Z success-kits like “Make your own Pesto sauce” or “Preserve your luscious tomato flavor all through the winter” and so on.

It takes some imagination and a bit of work, but if we have managed to win the consumers’  trust to grow their own, we can surely be the credible “How-to” center that helps them keep those wax beans, onions or hot peppers on-hand until next summer. Why not use their own tomatoes for those winter pasta or pizza evenings instead of buying a can?

The fact is that consumers have spent on what made them feel good all through the worst recession in recent times. One of those feel-good themes is eating out. (Have you tried to get in to a decent restaurant on a Friday night lately?) Meanwhile the press coverage of better food for kids and the number of cooking programs on TV continue consumer awareness of eating local and better. What could be more local than their own backyard or better than their own basil?

Here comes a softball…

Retailers should be constantly watching the market looking for new opportunities, doors opening. The door labeled “Food Gardening” just offered yet another chance to re-connect with the consumers who are jazzed by their tomato success but are mystified by tales of preservation, canning or even worse “Putting Up.” It is on-trend, not executed well by the supermarkets or boxes, and a natural extension of the core of gardening. In the constant game of looking for one-more-visit-per-household-per-year, the Lawn and Garden industry just got a nice soft delivery thrown its way.

photo credit: Lisa Baldwin (from our harvest!)

Oct 12, 2012 11 Comments

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