Ian's Bits & Bobs: The Blog

Heirloom_PriceOppty

Aim High This Spring!

Recently I stayed at a (moderate!) hotel for three nights each of which was priced separately at $129, $161 and, wait for it, $234! When I asked the front desk why, they immediately reduced the third night back to $161. They just dropped it over 30% without protest. Clearly they were pricing to make some money off those who were unaware or just didn’t care.

That’s not my suggested strategy for garden retail this spring! But the incident once again underscores just how much “padding” other consumer product pricing has built into it: does yours?

Since my last blog post, I have met over 30 independent retail owners and walked many stores to continue the discussion about price raises this year. Most answers were too timid and non-strategic. Yet at the same time, I hear every job-applicant asking for a higher starting wage than last year.

A client told me that unless he raises sales by $200,000 (on a total of $3 million) he will be “going backwards” this year, due to his state’s rise in minimum wage.

One owner circulated my last blog to his team but his managers and buyers came up with NO suggested products to raise prices on, even though they had asked for wage increases. Employees can find it hard to connect those dots, often judging retail pricing in the context of their own household income. Unfortunately many retail employees don’t think they can afford to shop where they work! Pricing is strategic and has to be driven down from the top, sorry.

This is the year to (finally) make some money!

The 2017 reality is that household credit card debt is approaching 2008 levels, car sales are at record highs while planes, restaurants and cruise ships are full again. It may not be equal in all demographics or regions but many American households, especially those who shop at independent retail garden and hardware stores, are spending again.

In many independents, 70% of sales revenue is spent on Inventory and Labor.  Conservative price raises on these major costs are 3-5% on cost-of-goods and 4-8% on labor rates in the first half of this year. So if your sales don’t increase by 5-6% you are indeed, going backwards. The choice is clear: raise your prices 5-8% or sell a lot more units.

But most supplier prices are set in summer, so today’s prices were set last year. Rumors in the green goods side of the industry suggest 10-15% increases for 2017-18, so retailers had better make some money this year!

Be aspirational, not apologetic!

Twenty years ago garden retailers became used to sales increases of 10% per year – aaaaah, those were the days. Today, we have let ourselves become over-cautious, influenced by the last few years of recession and we need to snap out of it, now!

Pricing increases should be big enough to be aspirational for the team, something managers can get behind as a rallying cry for the year’s business.  “Shoot for 15% and settle for 12%” as an associate of mine with years of senior leadership in manufacturing and retailing behind him would say. You won’t hear corporate America politely asking for 3-5%. I’d like to bet that numbers of 10-12% are being baked into binding, job-preserving goals all across the country. What are yours?

Next topic, coming soon:  quick-fix sales increase ideas before it’s too late this spring!

 

Photo credit: taken by Ian

Mar 27, 2017 16 Comments
LowesGreenhouse_2017_cropped LowesGreenhouse_2017

Reading The 2017 Tea Leaves

I took a few months off the blogging trail, so we didn’t distract our massive readership from the 2016 election! Then I waited a few more weeks to see what the election had done to the retail garden business and voilà, here we are now well into 2017.

Happy New Year

I do believe it will be a happy 2017 for the retail garden business and the supply chain that supports it. The business signs are quite positive, always allowing for the usual weather challenges and a (mild) cyclical recession predicted for 2018. The fourth quarter of 2016 ended very well once the consumer’s attention was re-focused after the election. Garden center teams or independent garden retailers I spoke to after Christmas said the last two months had been very strong in sales and the consumer’s attitude to spending. Average sale per customer was well up over the last few years and all operators I spoke to focused on the same observations (albeit anecdotal).

Simply put, the biggest, most expensive end of the range of almost everything, sold out first. It didn’t matter whether it was wreaths for the front door, “everlasting” Christmas trees or swag for the mantle, the most expensive selection sold out first. The $2000 everlasting tree sold before the $800 one, the new clever lighting set sold before the cheaper one designed five years ago and the biggest table-runners went first. Even the sadly “footballed” Poinsettias were elevated for a few weeks with the bigger pots and higher priced specimens selling out early.

It is at least 8 years since garden retailers told me that they sold out of cut trees by Dec 18th and no consumer seemed to want a plain, decorate-it-yourself wreath. They wanted them fully decorated and ready to shine. So the end of a dominant election, a record-high stock market and finally, rising household income, do seem to have combined to loosen the purse strings.

Spending Can Be Fun!

From the “Do It For Me” side of the aisle we saw a strong and increased ticket demand for “Christmas Porch Pots,” outdoor lighting, tree installation and interior decoration. All signs of a more relaxed consumer.

So, does this mean a fabulous year ahead as consumers spend like fools? I am not sure about that, remember that the media giveth and the media taketh away, but the signs are very good. Garden retailers can bet on a consumer who is much more open to persuasion than even two or three years ago.

“Your wage rise is my price rise”

Another factor in the mix is the national conversation about the increase in minimum wage either by legislation or just through simple market forces. What this means is that most customers know someone in their circle of family or friends who is getting a raise, so they should not be shocked to see prices increase as a consequence. As one garden center owner said, “For the first time in years, my customers are expecting me to raise my prices, so I am not going to disappoint them!”

What’s your price rise strategy?

So in the spirit of “Sharing is Caring”, who among you has added 4%, 8%, 10% or more to some lines (which lines?) you will be carrying? Most of our blog readers are not in competition with each other, so let’s hear what you are looking for in your price increases this year. Who’s going to start the bidding? Do I hear 5% to start please….?

Photo Credit: Ian Baldwin, taken inside the classy new expansion at Lowe’s Greenhouse and Florist (Chagrin Falls OH),

showing the owners’ confidence in the next few years!

Feb 15, 2017 10 Comments
HotandDry

Displays are People Too!

This year I have already worked with or looked at over 20 Local Garden Centers (LGCs) helping teams get ready for what promises to be (weather permitting) a very strong year as the economy slowly picks up.

All garden retail channels will be trying to tempt, engage, inspire and sell to the public within the next few weeks. We have all heard of the new demographics emerging in the Do it Yourself gardening business: younger customers are tempted but terrified, intrigued but intimidated.

Merchandising has a new role!

The fear of failure is high and not easily overcome, despite strong interest in the end result (like a stylish planter of succulents or luscious home-grown tomatoes.) The traditional response from LGCs is to say that they have lots of knowledgeable staff anxious to help the newbies succeed. In fact LGCs argue that this is their unique, distinguishing competitive feature compared to the bigger and usually cheaper big-box retailers whose model is essentially one of self-service.

But in the crazy spring season, everywhere is self-service … or at least self-start. No retailer has enough staff to hand-hold every customer, even if that was what the consumer wanted. Increasingly it is actually not what a lot of customers want, at least until they pluck up enough confidence to engage in a conversation with the “experts” who work there.

This is where merchandising – better called “Silent Selling” – comes in. As consumers change from hobbyist to project shopper, Merchandising’s role becomes one of a salesperson: displays can and should validate needs, show options, recommend solutions and close the sale!

In fact a perfect display can attract, hold attention, inform, inspire, answer fears and doubts, suggest/show end-result and make the sale in a few seconds and eight square feet!  As a very minimum, displays must give a customer a feeling of relevance while boosting their confidence.

Reflecting the changing customer

Of course for 40 years, most garden retailers were selling to consumers who knew what to buy (or at least were willing to learn by trial and error.) More and more consumers today don’t know what they don’t know, as you can see from the “deer in the headlights” look when they enter your store or greenhouse. To those people a stunning display of perfect plants will make them feel even less confident.

Silent Selling can sell the project, not just the product

Merchandising has a new role to sell the complete project without a word being said, but from what I have seen in the last few weeks, we have a long way to go. In fact, the current fixation with building inch-perfect “photo-shoot” displays contradicts that new role. Everywhere I go I see products being used to decorate end-caps, around fountains, in front of doors, around table legs – decoration everywhere — but displays helping customer relate and buy, nowhere! These decorative displays are often very attractive but do not offer solutions or suggest projects making them hard to relate to the typical home space. They also shout “don’t even think about touching me!”

The overwhelming majority of merchandising in LGCs today makes customers look around with that inevitable question, “Excuse me, do you work here?” Displays should boost productivity by, if nothing else, engaging shoppers with an idea that helps focus their questions until a staff member is finally able to get to them.

Displays should answer questions (not create unnecessary questions) 

Let’s see the suggested products bundled together in volume, easily shoppable displays with themes such as “Hide the neighbors for under $200”, “Plants for busy people”, “Feed your lawn for 3 cents per square foot per week”,  “Home Grown Tomatoes made easy”, “Grow your own Pesto” or “Save the Monarchs”.

So, let’s give this challenge to retail teams this year as they design, build, stock and work on sharing their knowledge and helping customers to buy:

1.       Is this display meant to simulate the end result? If so (and if you don’t want the impact to be lost as people shop it), where do shoppers find the product/kit/bundle to do the job?

2.       Is this meant to be a grab-and-go display that sells itself and consequently does it say, “Shop me, ruin me, that’s OK”?

3.       Does this display answer questions and build customers’ confidence until we can get to them?

Now it’s time to put those displays to work: Happy Silent Selling!

Feb 27, 2015 15 Comments
iphone_morguefile

Malaise and Mobiles and Midterms, Oh My!

Based on recent conversations with local garden center (LGC) owners, I am sensing a selective malaise afoot in the nation, depending on product and demographic.

In terms of product, it’s easy to see where the money is going right now: smart phones and systems. Lisa and I went to the Apple store on Thursday to get a case/cover for her new i6 Plus – $40 for a piece of colored molded plastic, no moving parts, bells or whistles – they probably have less than a couple of dollars into it.   (The store was totally jammed and we probably bought the cheapest thing in there that day.)

Yesterday I went to my mobile phone carrier’s store (by appointment or a 40 minute wait) to get help with my too-smart-for-me phone. Again the place was jammed at 9am.

If you take a look at the options that both these companies offer for “essential” spending as a smart phone owner (i.e., 70% of the adult population and probably 90% of your customers), it is pretty impressive. While talking about lowering your monthly fee and giving free minutes or kilobytes, they try to sign you up for all manner of vital extras (an international navigator even though never leave your own county, ad-free Spotify for those songs you never missed until they were on-line, a redundant set of backup data protection and so on and so on).

I read somewhere that the average cell phone bill is now over $250 a month per household and that’s $3000 a year they are not spending in our industry.

Sadly, I have no a-ha moment ideas to share, but we should certainly talk about the ease with which these companies “sell up” from their basic low-price product/service. Every associate is trained accordingly. There is a learning somewhere for LGCs in this process. Those “phone stores” used to be a place to pay your phone bill and buy a new wall mount, and they have become a totally immersive high-tech service facility in the last 15 years.

What has garden retail done in the same time frame?

In terms of demographics, we have 85 million households participating in some form of gardening (yeah!!) but many of them are living paycheck to paycheck. America hasn’t had a raise for years and along comes a “must-have” $250 a month cell phone industry.
(There goes our lawn food budget.)

On the other hand, some LGC owners are telling me that fall has been strong on color, decorative and small self-indulgences and Christmas has started strongly. Talking in more detail to a few operators suggests that it is the bigger, more permanent ticket items that have stalled, especially woody stock. Even those with landscape divisions and re-wholesale departments concur, consumers are simply not committing at present to as many big ticket perishables as they used to in a plan or project.  Is this because they are influenced by those high energy landscape TV programs full of kitchens, swing sets and pavers? Or have several years of winter damage made householders tree and shrub shy?

I think one of the main reasons we are seeing that malaise is the uncertainty of future paychecks, so they are buying low cost / low risk or fun and immediate gratification. The midterm elections and the political rhetoric swirling around on every media channel certainly aren’t helping with that sense of uncertainty.

The good news is that consumers are not turning their backs on a good looking, value-enhancing, fun outdoor space around their homes – our challenge is to figure out how to maintain a share of that business! Re-inventing Garden Retail remains the name of the game (or at least re-presenting Garden Retail).

I look forward to hearing your thoughts: please leave a comment below (or just Facebook me, since I have an upgraded data plan now and I am ready for this brave new world!)

Image credit: Rickyysanne via morguefile
Nov 2, 2014 3 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