Nursery Service Program Review
Third-party nursery service is booming with mass merchandisers.
June 18, 2008
Over the last six to eight years, third-party nursery service has developed extensively in the mass market arena, particularly at The Home Depot and Lowe’s. More recently, as in this year, Wal-Mart also has begun to test the concept in select markets and will be studying the results to see if the program bears expanding, maintaining or is deemed unnecessary.
The great debate begins as to why programs such as these would be necessary. After all, doesn’t it seem logical that mega-retailers are much more capable logistically of efficiently hiring and training staff to order, maintain and merchandise live goods? Apparently, the answer is they are more than capable of doing this, but it’s obviously more easily said than done.
Massive store growth amongst Wal-Mart, The Home Depot and Lowe’s has contributed to a talent shortage of live goods experts in their stores at this time. This is not to imply that many of their stores do not have high-performing, expert individuals that can drive business, but I know from my own experience in 15 years at The Home Depot that this was much less the case in 2005 than it was in 1995. Early in the ‘90s, almost every store Home Depot opened had experienced garden experts from the nursery industry to run these departments. This was easy when there were 50 to 100 stores, not 300 to 400 stores.
These high-performing individuals could make a huge, quantifiable difference in same-store sales versus similar volume stores in the same market without such individuals. When I say huge, I mean in the hundreds of thousands of dollars in live goods sales. This is not to mention all the related high-margin goods that will accompany these sales. These folks made the retail shopping experience exciting for the consumer. They created a sense of urgency in the shopper that would keep them guessing about what would be on display on their next trip into the stores.
Folks like these would be or are horrified with the current service formats. They feel they have lost control of the ability to be entrepreneurs in driving their store’s business and in most cases they have, particularly with pay-by-scan programs. The problem seems to be that there were less of these talented and specialized folks populating these retail outlets and mega-retailers were forced to be pro-active about maximizing the ability to merchandise this perishable live goods category properly.
Service Program Selection
Service programs come in several formats. In the first format, the live goods suppliers provide their own service for their own products. This method is the current standard for most bedding plant suppliers who are selling to mass market retailers. It is by no means new and was initially developed in the Sunbelt markets right along with guaranteed sale programs on mainly color products. Service became necessary for the suppliers to protect their profits.
This method of service program really mushroomed with the onset of single-source suppliers of annuals into big box stores. Going back some years, most retailers would buy selective products from different growers in an effort to "cherry-pick" the best product mix and quality at any given time. If multiple vendors had service programs, this would create territorial battles at the retail stores with survival of the fittest (or craftiest) winning the retail square footage battle.
This is the preferred method of service program in today’s retail pay-by-scan environment. It seems to make a lot of sense that if you, as a supplier, own the inventory and are responsible for its maintenance, that you would have your own folks on staff to make sure product is merchandised and maintained properly.
Suppliers who provide this type of service basically have either built it into the cost of the plants to the retailer or they are able to bill out separately for services provided while maintaining more competitive costing on the live plants they are providing at retail.
Now that these types of programs are well entrenched across retail, many of the suppliers who provide the services (particularly pay-by-scan suppliers) are looking to expand or extend product mix to more effectively leverage the costs of these programs across their enterprise. Some bedding plant suppliers now are considering supplying and servicing woody ornamentals in some big boxes.
The next main service format is third-party service providers. These would include such entities as Stinchcomb Associates, ICS, RPS and Quick Turn to name several. This type of program is either funded centrally by the retailer or jointly by live goods suppliers contributing to a revenue pool, or even some combination of both. Typically these service providers will service woody ornamentals including trees and shrubs. They may be involved with perennials and tropicals in some cases around the country or with certain retailers. They also will provide the service for the bedding plant categories.
This program, while not intending to displace what passes for nursery help in the stores today, by and large has become just that from my viewpoint based on in-store visits mainly in the Northeast part of the country this spring. One of the inherent problems with any service provider in mass retail today is the threat of store personnel assuming that these providers are the sole source of service provided for these categories. Instead of having a synergistic effect that could possibly take the retailer to new heights, service providers are sorely tested to perform at high levels with limited resources.
The problem here is one of simple mathematics. The revenue pool available currently without building too much into the cost of these plants may allow 20 to 40 hours per store per week only in the busiest of seasons such as April and May. Effectively merchandising these departments would take a minimum of 200 hours per week, in my opinion. This includes merchandising, signing, unloading and packing out and watering. There is a huge variance in what is provided and what is needed to be performing at high levels. Retailers who aren’t aware of this gap are suffering from poor customer perception. Store operations can either work as partners and greatly enhance these relationships or can be narrow-minded about the category and limit their current and future potential, and worst of all, lose market share for their retail site.
From my history, a retail buyer or manager will never be completely satisfied with the performance of third-party service providers, no matter how hard they may try. Suppliers who may be funding either fully or partially are also typically very hard to please and seem to always have some type of contentious relationship with these providers. It has to do with feeling like "you’re getting your moneys worth." Quite often they do and there are many times when they don’t.
Store service programs look like they are here to stay. Retail presentation has radically improved, in most cases as a result of these programs. Big box retailers can have their cake and eat it, too, if they convince their operators at store level to partner with these providers and not defer everything about the program to them. My vision as a Home Depot merchant was to have the service provider execute many (not all) of the tasks at hand in unpacking plants off of racks and on to tables, signing the product and perhaps watering the plants. At the same time, my belief was that all of the displaced hours injected into the system would lead to the most unbelievable customer service ever provided with apron-wearing associates literally swarming over the customers. Unfortunately, this was not the case in the majority of situations. If this tide can be changed, then and only then will the independent garden centers have anything to worry about.
Vinny Naab is owner of Naab Horticultural Marketing, LLC, a consultant to the horticulture market. Contact him at firstname.lastname@example.org.