Searching For Value by Gary Mangum
Few growers and retailers will become the norm as we move toward the future.
November 18, 2008
Over the next 25 years, fewer growers will likely serve fewer retailers. The process has started, and will likely continue. Acreage will likely be grown significantly, with distribution and grower service evolving each year. More consumers will decorate with flowers and plants, and the connection to outdoor living space and nature will grow, not decline.
Big Box Stores
With one clear exception, the big box stores (regional and national giants) have worked hard with their growers to improve quality and size options in a way that gives the gardener or decorating consumer a better chance to succeed. As quality has improved, costs and retails have generally risen, but cost and often even breadth of selection remains an advantage enjoyed by this segment as compared to all others.
It's widely acknowledged that this channel, especially Home Depot and Lowe's, has been responsible for introducing many to gardening who might not otherwise be with us today. Advertising at levels that were unimaginable even 10 years ago has helped fuel massive growth, as well as location, location, location.
The inter-industry stigma of supplying this segment has been pushed to the side, and many growers today indirectly fuel big box sales at retail through unique grower-to-grower arrangements. Today, several of the breeders and growers working closely with big box buyers are helping to create trends, not just follow them. With ever improving working relationships, this trend-setting should be good for the industry and the consumer.
Fewer growers supplying major retailers will likely continue as there seems to be clear advantages on both the buy and supply side to this consolidation. Accountability and execution have improved as Home Depot, Lowe's and several regional giants have operated to varying degrees this way for several years. Wal-Mart made a major move in this direction for 2009 with its massive supply base restructuring - creating major upset in some supply circles and opportunities in others.
To survive the next 25 years and remain viable in the garden business, service will need to be re-energized where it's been lost and grown where it's currently in place. There will always be a place and some related demand for cheap, but value will be the key to most repeat customers, and service and quality are the key parts of that proposition.
Grocery & Membership Warehouses
I know the grocery environment has treated many suppliers very well over the years. The convenience offered as we shop for our staples has clear advantages, but space and assortment is always limited. I do feel it will remain viable, though likely served by fewer regional growers, whom we're already seeing with ongoing ownership changes of major chains. Distribution and the ability to adapt to this changing segment will be crucial to long-term success.
As far as the membership warehouses, Costco remains one of my top two choices in retail for spending my own money (Home Depot of course the other). Because the products change all the time, the treasure hunt mentality here is a good hook for members, and creates a great outlet for suppliers. I have always felt products should be packaged differently and grown in different size configurations, so that we don't hurt ourselves (our industry) by having the public make too many direct cost comparisons related to all other channels. Very low margins allow these club buildings to sell large amounts of product in a short period of time - though always a very limited assortment with no service.
The value proposition has always been important to club customers - and I think the buyers need to remain vigilant related to the quality they showcase. Depending on where one is, you generally can find the same price points region to region in this segment, but there can be noticeable differences in the actual product. On a personal note, I always spend at least twice what I intend to, every time I get inside a Costco or a Home Depot building to shop. It's not ever the price point, but the batteries, water, and flashlights organized well and piled high that make me buy more each time I visit.
I expect more retail consolidation could occur in every segment as the space gets more crowded with buildings added that further cannibalize same-store sales or pull from a limited base of customers. If we as growers work with the breeders and marketing experts in our field, we can grow the pie and all benefit. It's all about providing a good experience and helping the consumer be successful, with whatever they choose.