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!
john heatonJan 14, 2014 at 6:17 pm
The real answer to success is not gross sales but net profit. Even margin dollars are much better to look at that just sales. Margin dollars per sq ft will give a good indication how any department is doing. John Heaton, Knupper’s
Ian BaldwinJan 17, 2014 at 8:26 pm
John, thank you for your response. You are right of course, the more precise we can drill down those numbers the better, more accurate the decisions should be to improve. Do you calculate GM$ per department and if so how do you use that information?
john heatonJan 28, 2014 at 10:33 am
I look at Margin dollars per sq ft on about 20 categories. Water garden is gone as no profit. Annuals and perennials are expanded. Trees, shrubs and evergreens have decreased space all due Margin dollars per sq ft.
Ian BaldwinJan 29, 2014 at 3:57 pm
John, good stuff! Now the next dimension is GM $ per sq ft per week/month, which circles me back to Manchester England where I was calculating that for greenhouse crops in the 1970s – a funny old world eh!
Ron VanderhoffJan 18, 2014 at 3:22 pm
Oh humble master . . . I suspect there isn’t likely a single measurement for business success. I think sales ARE important, so too of course is net profit. What about cash flow – companies can see sales and profit growth, have a terrible balance sheet and still go out of business. Then there’s GAP, Sales per square foot, GMROI, market share, etc.
Don’t they ALL say something about the health of a company?
Ian BaldwinJan 18, 2014 at 7:37 pm
Thank you Ron, you are right about being a basket of “metrics” and it depends what owners, managers and lenders are looking for. I just want to move things forward from the conversation ending at sales volume being up or down.
Which measurements do watch closely at Rogers?
Jeff WarschauerJan 19, 2014 at 2:39 pm
Polar Winds: Long as you are keeping those lights burning, we should not forget those sales opportunities that can occur after 5:00 PM many of them from non traditional GC sales.
Ian BaldwinJan 19, 2014 at 4:23 pm
Jeff, well said, would that include food by any chance? 🙂 Some of our clients have a healthy “after 5pm” trade especially near to Christmas and in those exciting spring days. With the rise in home brew and local wines I can see that opportunity for many too.
Bob FriedlJan 20, 2014 at 4:11 am
Hello and Happy New Year Ian. Very nice article. It’s spot on. I’m glad this crossed my desk and be looking for more.
Jeff WarschauerJan 20, 2014 at 8:05 am
Food & Events, typically both as they do well together. As you stated we have so many clients that have empty warm space in the winter think of all the possibilities, we have a client that empties out the benches and brings in an awesome full scale “Putt – Putt” with a children’s science theme. Of course having hot chocolate, hot dogs and such is a great opportunity to cash in during these high traffic events.
Who knows, maybe someone will figure out how to use a growers flood floor as an ice skating rink!
Ian BaldwinJan 20, 2014 at 9:25 am
Jeff you will be pleased to know that a garden retailer in England has had an outdoor skating rink (in the seasonal Outside Sales Area) for several years – http://www.beckworthemporium.com – where you can sit in the restaurant, if you can get a table, and watch your kids zip around. They also have a strong local produce, bakery and butchers offer together with beer/wine. What’s not to like?!
Boyd Douglas-DaviesJan 29, 2014 at 1:50 am
Greetings from UK! Just to add to the Ice Rink thread… We had one for a 2nd year at Hilltop and decided to put it under the seasonal plant canopy. No problems from the English weather this season and skater numbers up 46% on previous year.
Kellee O'ReillyJan 20, 2014 at 8:25 am
As usual, Jeff is right on — (and I love the flood floor ice rink idea!!). I just facilitated an ideation session for garden center innovation (working with Kip Creel at the Northern Green Expo) and one of the ideas that bubbled up was using the garden center as a setting for drive-in movie events, or a possible dog park / people park in winter months. Edwards’ Greenhouse (ID) seems to be on the cutting edge of this concept with their winter “pop-up-park” idea: https://www.facebook.com/media/set/?set=a.10151821395161470.1073741840.132509866469&type=1. Others are doing Beer & Brushes (horticulturally-inspired painting and craft brew tasting), wine & (container) design nights. Becoming a community activity center of sorts during slower seasons can create additional visits and additional revenue, and differentiate local garden centers from Amazon.com or the boxes.
Ian BaldwinJan 20, 2014 at 9:16 am
Kellee and Jeff,
Thanks for your good input, keep it coming! Although there is no national strategic agenda, or state of the industry “Think Tank”, the USA’s Local Garden Center industry is in effect re-defining its future path. Creative destruction is underway!!
Julie BridenbaughJan 20, 2014 at 8:33 am
Ian, I appreciated the thought provoking article! We all need to keep our eyes on the numbers and ears on our customers as we navigate the future!
Ian BaldwinJan 20, 2014 at 9:26 am
Well said Julie, our best to you and Gary, go GCU!
Lou SussanMar 12, 2014 at 6:56 pm
Enjoyed your thoughts and couldn’t agree more. Looking forward to meeting you next week when you share your experiences with all the associates at Hicks Nurseries. I’m sure it will be rewarding for all and help us improve upon the customer experience while identifying ways to enhance our market position.
Ian BaldwinMar 28, 2014 at 6:35 pm
Lou, thanks for your kind comments. I was thrilled to work once again with the Hicks team – a great group to work with and I hope there were some good takeaways from our time together. You may recognize some phrases in my latest blog posted today….
Looking forward to the next visit in summer. Meanwhile let’s hope the weather is finally kind to you and April breaks all kind of (positive) records!
PS Your spring flower show is the most spectacular of its kind I have seen, great job to all at Hicks