Ian's Bits & Bobs: The Blog

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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
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
BenefitConveyingSignage4_SicklesMkt BenefitConveyingSignage3_SicklesMkt BenefitConveyingSignage2_SicklesMkt BenefitConveyingSignage_SicklesMkt

National Gardening Survey: A Roadmap to Opportunity

For three years now I have been privileged  to be asked to analyze and comment on the huge amount of data contained in the annual “National Gardening Survey” (available for sale from the National Gardening Association).  Now that the report is published I can share a few “ah-ha” data points to get you thinking (though this barely scratches the surface of the 260 page document!)

In the good news category:

• Household participation (now 85 million households) in gardening is up 2% over 2011;

• Participation in all but one category increased (“Pet & Bird” stayed flat);

• Food Gardening increased for the 6th straight year and is now a lot bigger than “Flower Gardening” in spending power;

• The biggest rise in spending by demographic group was in 18-34 year old males (this might even qualify as GREAT news!)

But here’s the (still) bad news:

Average annual spending per Household is down $4 to a miserly $347 (less than they spend on pizza in a year.)

Overall, the three year trend towards decorating, small-project fixing and food gardening continues with little sign yet of capital-intensive full scale DIY landscaping. So while homeowners are increasingly more willing to get out and garden than they were 3-4 years ago, they are still not spending like we all want them to.  Gardening has an image of hard work, time consuming and risky-at-best to many consumers, although they seem to want to give it a cautious “go”.

“Woe is us! Consumers just don’t get it, they’d rather blow their money on clothing and reality TV, what’s wrong with them?”

Is it the Weather? Not on a national scale: there’s always weather somewhere.

The Economy? Yes, a little (…but remember that pizza number!)

Is it Time and Lifestyle? Yes – a lot:  and there’s the rub.

In the battle for consumer’s time/attention/money, the lawn & garden industry is competing against some of the best marketers on the planet — from movies on demand to electronics — most of whom have invested in making a compelling “Value Proposition” to the consumer to buy their stuff even in the midst of tighter financial times. In the meantime, too many L&G decision makers are still telling themselves, “oh, we’ll be fine when housing comes back and the economy picks up”.

(Will we? Or will we have already lost our customers’ attention to other pastimes?)

In reality L&G has so many emotional benefits to offer our customers: from increasing a home’s value to healthier food or outdoor time as a family. We know it — but we have simply not made a compelling case. Decision makers in all stages of the L&G chain simply MUST put more effort into getting this message across to consumers.

If you’re in the business of selling lawn & garden products to the American consumer, the insights in the National Garden Survey can be invaluable in helping you focus on areas of growth and opportunity (like those 18-34 year old males!) If you don’t have time right this moment to read the 250++ page report, here’s one of the critical core messages to get you started this season:

It’s time to build a compelling value proposition to communicate to your customers:

  • Figure out the cost per week of DIY lawn care vs. services who will ‘do it for you’
  • Tell them the cost-benefit of what a spiffy front yard does to home values … in order to sell them a “5 seasons of containers” program, tree installation, or DIY landscape design service.
  • Price-compare the pricey packets of fresh herbs or lettuces in the grocery store vs. a plant that can be harvested all season.
  • Hook their emotions about the taste of their first home-grown tomato, or the joy of seeing a child entranced by a humming bird.
  • Clearly demonstrate that your products can solve their problems:  a soft and safe lawn for kids to play on or a plant that won’t get eaten by deer (as shown in the clever signage in the header captured at Sickles Market in NJ).

It’s important to remember that customers don’t already know everything that we do about the ways that gardening can improve their life, but they do seem increasingly ready to listen:   It’s time for us to clearly communicate that value … and then GO MAKE THE SALE!

 

May 28, 2013 8 Comments
welcomeBackRoundRock

Spring Fling 2013: Maybe Things are Starting to Change?

Oh I know this industry is full of perennial (ha ha) optimists but I just begin to wonder… are things starting to improve? (Though to be fair, if I lived in the part of the USA where the weather was back to a normal March seeing my sales numbers plummet compared to last year’s perfect March, maybe I wouldn’t even be writing this.)

But in California where the prior four springs have been down, flat, flat and down, there are some signs, trends and tea leaves that suggest things might be picking up ever so slightly. And the early spring here in the West is showing indicators the rest of the country might want to watch closely.

First, a business read: the wonderful warm, dry weather for the last few weeks brought April numbers in March for most L&G retailers with sales increases for the comparative stores during the comparative period of +25% to +50%. Some are posting their biggest March ever, even bigger than the last big cash-fest in 2007. (OK so we had 5 Saturdays and perfect weather in March but there’s more to it: Weather drives customer count, attitude drives customer spend – and that’s where we might be seeing some good news, finally.)

The Nitty Gritty Data

Looking at POS data and shopping carts suggests that there has been an increase in the bigger sized items where there was a choice; bigger pottery, statuary, fountains, 5 gal shrubs, 2 gal perennials and so on. Although trees are still stalled, there has been a welcome uptick in shrub sales this year, especially flowering ones that can be used as decorative color or basic landscaping. It’s nothing like 2002 – 2007, but it is a start. We even hear of the basic shrub shortages that the growers were predicting 3 years ago.  Classes or seminars on DIY landscaping, sprucing up the greenery or “curb appeal” that were empty just 2-3 years ago are oversubscribed everywhere, while the landscaper’s phones are starting to ring again. Meanwhile the home-grown food theme is still a traffic driver, as is decorating and self-indulgence.

A smart retailer I know from an earlier-Springing part of the state pointed out that this new-found optimism is very recent – since December actually. He said even the Christmas customer was not this enthusiastic about spending money. In fact, several retailers told me they were caught napping by the big demand increase for plants, pottery, seeds and bag goods. Fall season consumer behavior did not predict such a quick turn-around in attitude. So what’s going on?

It’s the economy

The stock market is on a logic-defying climb to all time new highs, which matters a lot in the California economy where taxes and government budgets depend heavily on capital gains and unemployment is still falling. Since February the news media have begun to talk positively about the housing market, hedge-fund managers are snapping up investment properties creating a demand. That drives up prices, turn rates and homeowners’ interest in spiffing up hundreds of thousands of properties that have been ignored for 4 years.

All this, I think, has resulted in a slight loosening of the purse strings … even though some areas are still struggling and the city of Stockton down the road just went bust. The warm weather drove April traffic in March but the customers’ self-confidence pushed up the average sale in the garden center by anything from $3 to over $6 – a huge jump in a recession.

Can it be sustained?  Is it predictive?

Our first April week lived up to its showery reputation so we will see if this has legs in another few weeks. We optimists are always looking for light at the end of the tunnel. No one is ordering a new Ferrari, but for now the message from warmer climate L&G operators to their cooler climate brothers is:

“Make sure you have big volume ready to go and backup when that sells out. If your weather is even just “normal” this spring, business is going to break BIG for you!”

Enjoy!

 (photo credit: taken at Round Rock Gardens, TX)

Apr 5, 2013 8 Comments