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
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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
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Gazing into the Green Crystal Ball

Some of the most interesting conversations I’ve had this summer (while making the rounds at Cultivate ’14 and in client visits) have to do with the ‘biggest increase in garden spending this century’ as observed through the National Gardening Survey.

Today’s Garden Center published my article with an overview of these observations, which you can download formatted for printing / sharing by clicking here: http://ianbaldwin.com/wordpress/wp-content/uploads/2014/07/TGC-July-2014_NGS-Survey.pdf –

After the article was published, Gavin Herbert of Roger’s Gardens sent over the following note:

“Hi Ian, I sure enjoyed your article today. It paints a very clear picture of the future business model of a Garden Center. I have sent your article to all of my managers (and my father) as required reading. Well said!  Thanks again, Gavin”

I’d love to use Gavin’s prompt to open up a group conversation here in the comments section: what do you think of my suggestions about reinventing garden retail and the ‘crystal ball’? – don’t be shy, let’s hear it!

 

photo credit: Fiona Adam via Morguefile
Jul 18, 2014 9 Comments
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Mom’s The Word!

With due respect to those in earlier climates (who might see Mother’s Day as the start of things slowing down), for most of Northern America the fun in garden retail is just starting with Mother’s Day.

Not only is this the busiest weekend of the year for many retailers, it is also the first big weekend, so it is a baptism by fire for many (INCLUDING the customer who may not have been there since last Memorial Day and won’t have a clue where “the annual greenhouse” or even the bathroom is.)

Here are a few winning tips from veterans which might help those newer people who have not been through the crazy season yet:

 Managers

–          This may be the first time some customers have even been to a retail gardening store; deer-in-the-headlights time, so they don’t need equally stressed employees!

–          No matter how pressured you feel, you MUST run short meetings focused purely on immediate business, ad specials, rules, reminders, positive cultural re-enforcement. Repeat policies about breaks, cell phones, etc. that staff last heard 5 weeks ago on orientation day.

–          Remind staff that although this is the week to be great hosts, they still have to make the sale: no one is going to return next week having had a chance to think about it!

–          As there will be little time to think, the “Top Five Common Questions to Expect This Week” reminders need to go out early and be posted everywhere (see my previous post for more details)

–          Ensure in advance that each department knows what is looking gorgeous or is the ‘hot product’ in the other departments; Saturday morning is too late.

–          Make sure every employee is assigned to their core task. (I once watched a nursery’s main “Plant Expert” spend all Mom’s day on a bobcat as he was the only loader scheduled on-site that day.)

–          Practice MBWA (Management By Walking Around) – don’t get stuck selling trees or directing traffic.

–          Be ready with the rah-rah, cold drinks, bathroom breaks, checkout-helpers, more rah-rah and lead the team with a smile yourself. (It’s your job to absorb the stress of a poor April, sorry!)

Team Members

–          Don’t expect early lunch! (Remember that this one weekend might bring in more business than the whole month of January!)

–          This week will bring a lot of non-gardening customers so be aware of your use of jargon and technical phrases (“Do you want six inch or one gallon?”)

–          Identify 4-5 Mom-type gifts in your area for that question “What do you have that’s a bit different for my Mom?”

–          Identify the most gorgeous flower, the most fragrant houseplant, the biggest-impact hanging basket and know where they are, their price and the extras or tie-in sales (greetings card, nicer pot, easy basket watering device and so on).

–          Don’t expect the department expert or other managers to “come in” when you call them on the radio with a question. They may have 5 customers in front of them or be deep in the warehouse looking for that extra case of product.

–          Expect everything and anything! It could be a $50 gift certificate or a complete landscape design. Welcome people, share their excitement and give them what time you can, but also give them a way to ask for it later, online, or by phone. Most customers will recognize how busy you are.

–          Compared to bland malls or impersonal on-line shopping, this is THE time to make the annual task of shopping for Mom a delightful, fun experience.

Have fun and the week will fly by: who knows, you may win a customer for a lifetime.

Happy selling, happy Mother’s Day!

 

May 5, 2014 11 Comments
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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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