It is clear to me that consumers are willing to open their wallets only when they feel we bring them good value and continually introduce new and interesting products that increase their chances of success. Whether consumers are shopping at big box stores or a local nursery with just one location, our goal should be to keep them buying more and make them more successful while bringing a new generation into the world of outdoor living.
Some members of the industry like to degrade the big boxes as less-than-legitimate purveyors of green goods. Some have not been able to see the evolution of the industry as a positive and would be happy if we returned to the days of limited distribution and little to no price competition. The big boxes admittedly have brought major changes to the industry that have changed the way we all do business. Let’s not forget they have also brought tremendous growth that would not have been conceivable or possible without them.
The three significant national retailers–Home Depot, Lowe’s and Walmart–have made unbelievable contributions to the growth of the industry through major store expansion that included new selling space for green goods. On the other hand, there has been little expansion among independent garden centers (IGC)–the bulk of which are single-location retailers.
Clearly, there are many opportunities for the IGC segment, some of whom are the greatest retailers in the country (i.e. Armstrong, Pike, Homestead, Lukas, Bordine’s), but the reality is the big boxes overwhelmingly outnumber and outsell the IGC group.
The Good & The Bad
In 2009, Home Depot, Lowe’s and Walmart had a combined 7,378 stores. Let’s say the average green goods selling space in those 7,378 stores averages 10,000 square feet per unit–a very conservative number that would equate to 73,780,000 square feet (1,696 acres) of selling space for this industry’s products. So why would we not love these guys?
The obvious answer is they brought significant change to the industry and created a much higher level of accountability that frankly did not exist prior to their entry. Now, let’s examine the changes that have occurred driven by the national retailers, divided into two categories: 1) changes the industry likes; and 2) changes the industry doesn’t like.
Among the changes the industry likes are that the big boxes increased the demand to unprecedented volumes along with increasing the vendor’s cash flow because they paid faster. Big boxes also made the industry have a better understanding of retail, created a closer consumer connection and caused a revolution in packaging.
Among the changes the industry doesn’t like: Big boxes demanded better prices, made their vendors accountable, made many decisions the grower used to make, demanded a more diverse product portfolio and insisted on accurate labeling, including UPC. Big boxes also instituted non-performance penalties, along with pay by scan, which changed the way greenhouses are managed.
Because of the changing requirements, cost of production became an industry concern. In the 1970s, Aart Van Wingerden understood the need for low-cost production and started selling greenhouses that could lead to lower costs. Many growers bought into his system and endorsed his philosophy. Van Wingerden is, in my mind, the greatest visionary the industry has ever seen. He understood how to satisfy the appetites of these national retailers while doing it profitably.
A Different Perspective
Today, these large retailers continue to provide us with a growth in retail space by adding new stores every year. We can almost be certain without looking at the numbers that 40 or 50 new garden centers will be built every year. So why should some industry members rant and rave about what they consider a negative impact? This industry would be at least 50 percent smaller without the impact of the national retailers, and the consumer would be paying twice as much for green goods.
We hear comments like “the plants at the big boxes are poor quality” or “the prices are too cheap, the grower can’t make money.” It is impossible to imagine a buyer telling a grower: “I don’t care what the plants look like, you just have to meet my price needs.”
The buyers aren’t judged on the buy; they are judged on the sell–gross margins same store sales and GMROI. If there are inferior plants in a big box garden center, it is the result of the vendor–not the retailer–and if the product quality causes a decrease in sales or an increase in discards, then that vendor will, in the long run, not be serving that retailer.
In the 2,000-plus stores I’ve visited, I have seen varying levels of product quality that is the result of vendor performance in production, distribution and merchandising. All retailers want to deliver value, and they don’t mean low prices coupled with bad merchandise. Understanding the role of the vendor is crucial to the success of any company choosing to do business with the large national retailers.
As we are clearly in the era of “retailer in charge,” some companies have figured it out and manage their business to satisfy their customers. And they do it very profitably. Although there are those who chide the national retailers, there is a sizable group that loves them because they are making a lot of money serving them.