Caught With Your Plant Prices Down?

Apr 1, 2015 13 Comments

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!

Amanda Clark
Apr 2, 2015 at 1:17 pm
Good reminder for all of us, Ian. In the past I have always done this, but let it fall to the backburner this past year–moving from state to state can do that to ya. I need to plan a trip shortly to the local stores, because our pricing is key and will make it so we can be prepared for the year. Thanks Ian!
1. Ian Baldwin
  Apr 3, 2015 at 8:52 am
  Amanda, nice to hear from you again. Yes we did talk about this quite a lot last year didn’t we so I am glad this was a helpful reminder, now you have to convince others! BTW: best wishes in your new position.
Jack Davis
Apr 2, 2015 at 1:44 pm
Ok Ian. There you go again spreading common sense.

IGC suppliers should be growing and IGCs should be purchasing veggie varieties recommended by their Agricultural Extension Service.

Absolutely no excuse not to. So easy and effective to differentiate and add value. Plus something powerful to advertise and promote.

A successful consumer will bring sales year after year after year……

Cheers
1. Ian Baldwin
  Apr 3, 2015 at 9:00 am
  Jack, thanks for the kind note. I am flattered but not sure if it is common sense, I just have the benefit of being able to relax at this time of year and walk stores rationally – something owners and managers don’t have!
  
  I love the idea of tying into local Extension service recommendations as a differentiator. We always try to do that in our own garden, in fact we have a bunch of CA native plants waiting to go in as we speak. You are correct about adding value. To me the Bonnie Plant price is the baseline for LGC pricing not the ceiling; we are talking about a consumer who buys 20 or more coffees at $3-5 every month and spends $3+ on a bag of salad leaves for one meal!
Michele Slominski
Apr 2, 2015 at 6:12 pm
I find it astonishing that one reason used for not wanting to raise this price to at least what the mass merchants are commanding, is that employees don’t think such a price should be charged for such a low cost item?! Unless they, are really in-tune with their employers overheads, this just doesn’t hold weight. Sounds like these staff members need to be shown that eye-opening $1.00 exercise from GCU! And then be asked to explain where the funds for any raises might come from…… Great point, Ian!
1. Ian Baldwin
  Apr 3, 2015 at 9:08 am
  Michelle, So nice to hear from you again, our best to you and Tony (go GCU!!)?
  
  You would be surprised how many LGC pricing decisions are still made on emotion like the one I quoted. But you can’t blame the employee if the owner/manager has allowed this to continue and not educated the price-setter with the background and overhead cost structure you mention.
  
  Most employees have no idea about the costs of running a business, why would they if they haven’t been involved (or worse, actually dissuaded from knowing)? Managers get the team their leadership deserves!
  
  Have a great spring!
john heaton
Apr 6, 2015 at 2:52 pm
It is so true we leave way to much money on the table. We should all be higher (a little at least) in our retails than the boxes. We are just not collecting enough on what we are selling. We provide a lot of technical advise and many are happy to pay us for our knowledge. Me I want to travel to a lot of nice paces in the winter my price are up. Join me. John
1. Ian Baldwin
  Apr 7, 2015 at 12:40 pm
  John,
  
  Thanks for taking the time as I know in Chicago, you are probably deep into early spring preparation right now. You are correct to get the higher margin where you can, as long as you “give it back” where you have to in order to appear to be competitive. It is interesting to see that Home Depot now has those same veggies on sale at 5 for $10 for a limited time I am sure. But they know that having the kind of margin they are making at $3.86 allows them lots of room to do this! It’s a harder pill to swallow if the regular price is $2.49. Thanks again, happy travels next winter!
Randy Hunter
Apr 7, 2015 at 10:50 am
Great direction and advice.

Thanks Ian
1. Ian Baldwin
  Apr 7, 2015 at 12:43 pm
  Randy, thanks for your kind comments. Many people are quick to vilify the box stores for their “race to the bottom” strategy on prices, but now we should be thanking them for raising the national price perception on such a driver-item!
Ernet Wertheim
Apr 7, 2015 at 2:37 pm
Ian: Thank you for your comments. They are very helpful . If the owner does not have the time to go and visit the competition then he or she should delegatet this job to soeone else in the company.It does not take great brains to check this out.I also like to know what varietires they are carrying. I hope that your area did get some of the heavy rain we received during last night here in San Francisco. It was short,
but every dropi is being appreciated.
1. Ian Baldwin
  Apr 7, 2015 at 5:12 pm
  Thank you Ernest, how very nice to hear from you! Yes you are right, looking at the price of competing stores is a good way to share some of the management load as well as motivating employees to become more involved in the big picture. They will see that these big box stores can be quite varied in their pricing strategies, not everything is low-priced there at all. They know how to do the math! Yes we got a lot of rain today, now we only need another 31 inches before November!!
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