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Crash! The 2015 National Gardening Survey Returns Us to Reality

An edited version of this story was originally published August 10, 2015 at Today’s Garden Center, the edited / published version can be downloaded HERE, or you can read this slightly-more-candid / pre-edited version, and share your comments below: 

There Is a New Elephant in the Room!

When I first saw last year’s National Gardening Survey (NGS) results from the 2013 gardening year, I was wary  of the massive jump (18%) in total DIY garden spending or 21% rise in spending per household, as that did not reflect what we were hearing from our clients out in the retail trenches.  So this year’s survey, showing a drop of 23% in total spending and 24% less per household, comes as a leveler. No behavior survey is perfect so we expect ups and downs, but we now have data from the same questions for over 30 years and the overall trend is pretty disheartening.

In reality the previous year’s numbers were an anomaly and this year’s report just shows garden spending returning to the doldrums of 2010 to 2012. (Well below 2008.) Now that’s disheartening.

Any Good News?

Yes.  Despite all the distractions available, householders are still “gardening”, though I suspect fewer consumers now use that word. Participation in gardening has been statistically flat for the last 5 years with around 70 per cent of all homes doing something. That is still eighty four million homes, a market many industries would love to have, but we used to be the nation’s sunny spot. Remember, less than 20 years ago, we were America’s “favorite outdoor pastime” with Martha Stewart hauling in great armloads of perennials and 4-5 gardening magazines at the supermarket checkout?

Well that “good thing” has changed to a so-so thing for many. You can almost hear them saying “If I have time and can figure out what to do – is there a good gardening app?”

The dilemma we face is that, despite all the competition for their time and money, householders continue to do something in the garden, but are spending less and less money doing it.  Even as household spending picks up again after the recession, garden spending has not. Has competition reduced unit prices? Are consumers still buying the same number of products as 6 years ago?  I don’t think so. If anything, with the exception of warehouse clubs, the price-driving “big box stores” have increased prices lately. Similarly the Local Garden Centers (LGCs) we know have steadily increased prices and all our clients show an increased average sale per customer (but maybe not from garden products).

Category High Lights and Low Lights

Fortunately, the shining star of the last 5 years – Food Gardening – has held its own and is clearly here to stay. This is the only activity that has steadily increased its share of garden spending since 2005. Everything else has had highs and lows.

Some individual products have done well despite the spending malaise. Cyclical spending such as machinery, as well as “maintenance” tasks like Insect Control rise and fall with need. Yearly spending to keep the property looking tidy such as Lawn Care and Flower Gardening have just declined at the same rate as everything else, but there has been no growth in any of these categories in the last ten years. The survey does not allow for more modern “color” planting using flowering shrubs, grasses and perennials instead of annuals, so this activity  probably continues to rise, which is great news given the higher ticket and extra tie-in products!

“Age Shall Not Wither Them”

It comes as no surprise that over 55 year olds are the biggest spenders of the age groups. This was not always the case. The 55+ group’s spending share averaged 37% from 2003 to 2008  it rose to 44% in the 2009 recession and has now reached the highest ever recorded – a staggering 51% in 2014. So the Lawn and Garden market is even more dependent on the Baby Boomers, just as they adapt to retirement, fixed incomes and health care issues.

At the other end of the spectrum, the recent surge in gardening by the youngest group in the survey, the 18-34 year olds, seems to have faded. Could it be they were tempted to try it and weren’t thrilled with the process or end result?

On Average, Things Are Not Even “Average”

Gardening is clearly not capturing the consumers’ imagination and dollars like it used to do. But because one year’s data is always suspect, we took a look at two sets of data, averaging results from 2009 to 2014 and comparing them with similar averages from 2001 to 2008.

The average household spending from 2001 to 2008 was $435, but from 2009 to 2014 it was $359. This explains why many LGCs (even the best) are still not seeing their sales top those of 2006 or 2007. It also validates the move by the sharper operators into other categories, departments and services as they see core gardening products stagnate.

Remember the NGS asks householders about garden spending irrespective of where they shopped. So if the whole retail sale is down and the national chains are increasing their share of a shrinking pie, it puts even more pressure on the LGC channel.

Unlike other recoveries after recessions, garden spending is not expanding as the economy improves.
“But My GC Peers Are Doing Well Now”

Yes. The surviving independents who weathered the recession are looking forward to some good years. The operative word is “surviving”. Think how many LGCs and greenhouses are no longer in business in your area or on your contact list. Did all that business go to the big guys?  Obviously not. The NGS tracks spending at all retail outlets, not just LGCs, in 16 activities from Lawn Care to Water Gardening. Results show flat to declining purchases over the last 10 years in everything but “Food Gardening”, irrespective of where they shopped. So most LGCs “growth” is probably from categories outside the NGS scope such as gift/décor, patio/outdoor living, food, apparel, Christmas, installation and so on. A good P.O.S. project might be to compare core garden department sales and customer count, before and since 2009.

What IS Going On?

The NGS data shows:

Total garden spending peaked at $39.6 billion in 2002

Spending per household peaked at $466 also in 2002

Participation peaked at 91 million households in 2005

If ever there were three statistics that called for “Re-Inventing Garden Retail”, these are they, yet we have clung on to the same model hoping for a better economy, more housing starts, improved weather, new politicians or whatever.  The garden retail model has worked so successfully for decades; consumers driving to a store (when they are open) and in their spare time(!) being told what to do and buy, then going home and hoping for success. This is clearly not the way forward.

Now think about how the consumer’s “spare time” has changed. In 2002 there was very little (if any) broadband internet, on-line shopping or streaming video. In 2005 there were NO smart phones(!), while Netflix mailed DVDs, Google was a start-up desktop search engine and Facebook was for Ivy League students!

Think of the burgeoning choices consumer now have to spend their discretionary time and money – most of it involving staring at a phone, tablet, computer or a TV.

The new Elephant in the gardening room might be “screen time”, estimated to be at least 12 hours per day for the average American adult.

So Is the Glass Still Half Full?

Absolutely.  Americans like gardens, they just don’t like “gardening.”

How did that happen?  The world seems to have defined gardening as hot, messy work that involves commitment, knowledge and some mysterious intuition, not to mention the expense and risk of failure?  Hmmm, that sounds like cooking too!   How did they manage to make cooking so exciting and desirable?

We have allowed others to define our image which, as any politician will tell you, is not a good strategy.  But despite this image, eighty four million households are gardening, with probably a few million more wishing for the end result.

We have to change the image. We need to talk about at-home entertaining or home grown veggies, family time with nature, kid’s projects, saving Monarchs, relaxation and escape, or pride in property enhancement and style. We should take nothing for granted and look at everything as an opportunity.

End-Game?

If you are looking to retire in 5-10 years, why care?  You will probably be OK as an owner, though employees might not be thrilled with the strategy.

But if you are building a saleable asset or a business for the next generations, the time to start changing is overdue. No one (least of all a consultant!) truly knows the future, but leveraging your skills and reputation into a garden-success-resource center or “village,” based on a wide range of services seems attractive. These might include conventional retail, with design-build indoors and out, at-home maintenance, garden-coaching plus mobile everything including real-time diagnostic services. There will obviously be great niches in up-scale life and outdoor living centers or gourmet food and cooking/brewing centers. I see a strong niche in all-natural, organic/local, environmental activities or decorating/party planning or a complete do-everything-for-me center. There are opportunities in agro-tourism, apparel, weddings, cafes, community centers and whatever your local market can relate to.

The timing is perfect now that “local” is in vogue as consumers turn back to their communities. Meanwhile most LGCs have under-used land and buildings, empty seasons, talented teams, under leveraged borrowing capacity and a safe, strong balance sheet.

But as the National Gardening Survey has shown for ten years now, there is no time to waste. Ladies and Gentlemen, start your engines….!

What can you DO?  Some Calls to Action from the 2015 NGS:

Food Gardening Solution Centers:  Food gardening is the only garden category with consistent growth since 2008 but the plant portion of that spend is a small part of the total spend. LGC must get into the “Food Gardening” business not just the “Food plant” business and become the go-to retailer for every aspect from irrigation to raised beds (“Raised Bed” soil was a big seller at Home Depot this year) to canning supplies. All backed by how-to classes on You Tube and tasting/cook-off events. Celebrate your local-ness with local food how-to knowledge!

Drive Traffic: After 10 years of declining customer count, the immediate strategy for most LGCs should be to drive more traffic using a combination of competitively priced, driver-item products and categories that extend the season such as apparel, food, bird, homebrew, indoor gardening and so on.

Go Mobile:  Many younger consumers are interested in gardening but are very dependent on their mobile device. LGCs MUST invest in making their website and marketing methods “mobile friendly”. Generation Y is trending towards smaller independent retailers but only if they can find and use them on a mobile device!

Know Your Numbers: Analyze category trends (unit sales, dollar volume and customer count if possible) since 2006, just where IS the growth? Is it in gardening or all those other categories?

Look in the Mirror: Take a long hard, unemotional, objective look at your company’s image. Does it still look, feel (smell?) and operate like a 1995 GC? Profitable means more than just pretty!

Be the Answer Place (for New Gardeners):  Take a clear strategic look at what it will take to become the local community “One-stop, first-time garden/landscape success center, including “Do It For Me”. (Editor’s note: you probably aren’t as friendly and approachable as you think you are!)

 

*As a reminder the NGS is an on-line survey by Harris Interactive of a statistically representative sample of householders, drawn from a data base of 7 million households. The survey was carried out early in 2015 about a householder’s participation in and spending on gardening in 2014. The data is compiled into a 260+ page report, (available from The National Gardening Association). The NGS’s 30+ year’s history, gives us a huge database of consumer participation and spending.

Aug 17, 2015 16 Comments
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Is It In Our Nature?

Being one of those Nature Nerdy lads (actually more of a football-crazy Nature Nerd), I always paid attention to people who raised awareness before it became mainstream.  Rachel Carson was an early influencer (as was Sir Peter Scott for my English mates) and like many people in the garden business, I grew up in the outdoors.

The garden retail community embraces nature in gardening (after all we are very good at helping consumers succeed). But our industry seems way behind the ball in its sensitivity about the wider garden around us, outside of the manicured lawns and perennial beds.

Sure, we support Arbor Day … but we do so with any tree that grows well locally, looks good and makes a bit of money.  I still don’t think the garden supply chain wholeheartedly supports Earth Day with its assumed political agenda and 1970’s culture. Meanwhile garden retailers dislike fertilizer regulations aimed at cleaning up the very rivers, lakes and coasts they frequent with their families in their spare time.

Head for the Hills!

Most people I know in the garden business love the outdoors in their (limited) free time. They backpack with their kids, fish their rivers, hunt their deer or escape to their cabin. These people not only love plants but they can’t wait to be connected with nature on their first day off. They don’t go to the movies, they go kayaking!  Yet ironically the garden industry has not shown the leadership and influence around “nature” that we could and should. Americans are increasingly disconnected from the natural world. We face an entire generation fearful of stepping outside their own back door.

As a lifelong bird watcher I may be more sensitive but why, 50 years after “Silent Spring”, do we have to wait for non-profits like the National Wildlife Federation to tell us how back yards can help disappearing songbirds?

It should be the garden business, not CNN, raising awareness that plants sustain the bees or offset droughts. Even Dr. Charlie Hall’s excellent review of the economic power of “green” practices, from health care to clean water, failed to shake us up.

Money Is Green Too

So I think it is time to frame this differently – business opportunity!!

Twenty years ago working with Hines Nurseries we used a photograph of a monarch wing to signify “Plants for Butterflies,” not knowing this ubiquitous summer icon would now need our help. Several years ago I saw and promoted the “Save Our Monarchs” website but didn’t get much traction from retailers. Only now, after TV news reports the population crash, do we see Monarch plants and programs in the garden business (kudos to those companies, like the Monarch Cafe’ program, carried by Family Tree, pictured above!)

Almost 50% of American households watch birds (a lot more than watched Breaking Bad!) and Facebook is full of cute ducklings and baby owls. But apart from bird food manufacturers, very few suppliers (and no major plant breeders that I know of) have taken leadership on a “bringing nature to your yard” theme.

We are losing this fight: take a look at those landscape-in-24-minutes shows on TV where homeowners are talked into spending big money on outdoor living, almost none of it nature focused. Some of it is almost anti-nature! Who wants to be a Robin in that yard? Homeowners just fall for what they see and the way it is told. They are wide open to persuasion. Don’t we call that selling?

As Go the Birds…

This is an opportunity. U.S home gardens constitute a huge area of land. One in three USA homes grow food; 48 million households watch birds. Garden retail and landscape is worth around $70 billion dollars a year, employing millions. We are not small fish.

Just as the small breweries leveraged the consumer’s boredom with “corporate” beer and the food industry has exploded with innovation, the garden business should be strutting around as the savior of suburban nature. We should be selling ourselves as the go-to place to save the Monarchs, or the bees, pollinators or maybe even the modern human.

Most of us are in this industry because somewhere in our upbringing we just connected with a plant, fish, insect or bird and never let go. Why leave it to others to set the agenda with our product? That’s never a good idea as any politician will tell you. Let’s get out there and lead the homeowner back into the woods, starting with their own little patch of nature outside the back door.

Jun 10, 2015 19 Comments
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Caught With Your Plant Prices Down?  

Knowing that most people have more important things to do than to read blogs at this time of year, I will keep this brief (who cheered at the back?!).

PLEASE, PLEASE take the time to visit* your big box competitors to look at the pricing of their key items. Some owners and managers do this as a routine strategy but if, like many Local Garden Centers (LGCs) that I see on my travels, you are underpricing the competition – read on!

Two years ago I raised a flag for those clients who were unaware that the Bonnie Plants brand of 4 inch veggies at both Home Depot and Lowe’s had broken the $3 barrier – a barrier many LGC owners and buyers were afraid to cross. In 2013 Bonnie prices were around $3.48, last year they went to $3.68 which also looks like the national price this year too.

Yet I still see many LGCs asking under $3, often well under $3. When I ask why they would underprice Home Depot with such a hot item the usual reply is a lack of awareness of big box prices. Others say that the landed cost to them is just over a $1 so they were getting plenty of margin or the staff didn’t like to charge such a high price on such a low-cost item. (Hmmm, do they know the cost of the actual coffee in that $4.50 morning cuppa?)

Reality Check:

The Bonnie Plants brand is probably in over 6000 home improvement stores nationwide and has done an outstanding job to raise the price expectation on a product many viewed as an incidental. (One retailer told me a few years ago that his entire veggy department was less in sales than his Geraniums.) Then along comes the Grow Your Own boom and the TV Food Channels and suddenly that “incidental” is in demand. And big companies know a thing or two about demand curves. They have actually increased a product’s “Known Value”! How rare is that in this trade? Thank you!

So, thanks to these retail giants the American consumer is now conditioned to pay not less than $3.50 for a small veggie or herb plant. Why would any garden retailer miss out on meeting that customer expectation?

No part of this discussion takes into consideration the assumed better plant quality in LGCs (sadly not always the case) or the LGC superior service, often quoted to justify a higher price in other plant material. This is “Opportunity Cost” thinking.

When the market leaders, with more than 30% of the business, put up their prices, improve their fixtures/merchandising and use national ad campaigns to support that brand, why wouldn’t everyone else in that line of business ride along? How many Gross Margin dollars are LGCs leaving on the table?

That’s the Opportunity Cost and any shortfalls should be mentioned by owners at “review time”….

Few LGCs would try to undercut a big box store price in garden supplies, grills or Christmas trees so to do it in the hottest green goods makes no sense to me. Ride the wave and bank the Gross Margin dollars, there are plenty of other products to lose money on!

Have a great spring!

*Editorial Note: I used the word “visit” (vs. looking online) because at time of writing the online price for those 4” veggies on the Home Depot website (for three zip codes across U.S.) is $4.98  – go figure!

Apr 1, 2015 13 Comments
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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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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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