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.
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.
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?
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!