The Other ‘R’ Word

The Other 'R' Word

Several signs are pointing to the likelihood that we are now in economic recovery. The gross domestic product (GDP) for the last half of 2009 was positive and most indices are reflecting a turnaround scenario. Even the housing market has been showing signs of stabilization. Not exactly a robust recovery, but certainly an end to the precipitous decline we saw in 2007 and 2008. The recovery phase will be marked by ongoing price declines in many locales, albeit more gradual ones. We will also see a gradual stabilization in sales rates, a gradual decline in the level of inventory for sale and a gradual bottoming out of construction activity.

Again, though, the word to emphasize is “gradual.” The new home industry has done a good job of reducing supply with inventory for sale now in line with the long-term average. But the existing home market is still oversupplied, and we continue to be inundated with an influx of distressed and foreclosed properties (albeit at a slower rate). That means anyone hoping for a robust “V”-shaped recovery is likely to be disappointed. It will be more like an “L” with the bottom part sloping slightly upward. But the good news is we are finally seeing signs of improvement.

Now About Consumers …

The real question is how the decline in the value of housing has affected consumer willingness to spend. It is on that point that most economists are mixed. Two separate studies were referenced in the Wall Street Journal in the same week with one indicating “further de-leveraging of the household sector will likely keep a lid on any rebound in consumption. In other words, the future of consumption and house prices are closely linked.

The other study concluded that “…while consumer spending may be sluggish in the near future for other reasons, it is doubtful recent declines in home values will be a major contributor to this problem.”
So which study is true? I think they both are–it just depends on which sector of the economy you’re discussing.

Obviously, in the green industry, we have historically found a strong correlation between the demand for our goods and services with housing. Consumers are, in general, saving more and spending less. Their investment in big-ticket items (including landscaping) has been preceded with intensive information gathering and, in many cases, customers are purchasing in “incremental phases” and not biting off the entire amount of the investment at once.

In order to analyze how the economic downturn is affecting consumers differently, Nielsen recently created a segmentation that divided households into groups based on their spending behavior in reaction to the decline.

Their recession analysis grouped consumers into eight segments:

Recession Indifferent. Those who do not alter their purchasing habits at all.

Recession Insensitive. Only slightly affected by the downturn and will cut back on spending for luxuries such as entertainment and dining out.

Switch to Private Label. Tend to be younger, larger households known as “young, bustling families” and often represent plain, rural living. They buy generic brands or store labels.

Light Coupons & Sales. Typically represent older and smaller households that take advantage of light coupons and sales.

Stock Up & Save. Generally older couples who live in a comfortable affluent situation and are known as “empty nesters.” This group remains loyal to name brands but depends on coupons and sales to stock up while they can.

Switch Stores For Best Deal. Consumers who typically live in cosmopolitan centers and will switch stores looking for the best deal.

Brand Disloyal/Promo Sensitive. These consumers will switch from name brands to generics or brands on sale looking for the best deal.

Panic Stricken. Those who take drastic action to greatly reduce living expenses and cut back in all departments to do whatever it takes to save money.

Enhancing The Quality Of Lives

Interestingly, income alone does not have a direct correlation with the purchasing behavior segmentation. More than half (57 percent) of the “Stock Up & Save” consumers earn more than $50,000 per year, compared to only 47 percent of the those in the “Recession Insensitive” group.

Likewise, a higher percentage of people with lower incomes are in the “Switch to Private Label” group than in the “Panic Stricken” segment. Other characteristics such as household size, age and location are also factors in a consumer’s ability to tolerate a recession, which is why trying to reach “Recession Indifferent” consumers with marketing efforts that target higher income groups is probably not efficient.

The value proposition for growers in the future must focus on the unique ways in which quality of life is improved for our customer base. Much has been researched and validated about the benefits of flowers, plants and trees. In a nutshell, our green industry products and services improve emotional health, boost seniors’ well being, enhance hospital recovery rates, enhance employee innovation and ideas, strengthen feelings of compassion, decrease worry and anxiety, express feelings of compassion, build stronger communities, mitigate environmental externalities and improve the value of homes–just to name a few of the benefits.

I cannot overemphasize the importance of this quality of life message, particularly in focusing our differentiation strategies in the future. That because of whether you are member of the Boomer, Gen X or Gen Y generation, quality of life is a “higher-order” need that is important to you.

For example, although the economic downturn has increased anxiety on the part of Baby Boomers about retirement, they are nevertheless proactive in seeking innovative solutions to dealing with age. They view their new stage of life as one of activity and fulfillment rather than idleness. Gen X is the most “time-starved” generation, often juggling career and family obligations, but they maintain a strong commitment to work-life balance in their lives. The Gen Y generation is just beginning their adult lives and facing lots of firsts: their first home, first job and most importantly, first independent income. They are trying to find the right balance between spending for necessities and spending for entertainment. This generation is concerned not just with function and utility but also style.

All of these generational attitudes come down to one thing: enhancing the quality of their lives through emotional well being, ecosystems benefits and economic dimensions. Our industry research shows there’s no better way to do this than through the daily use and/or enjoyment of flowers, plants and trees. All we have to do now is convince consumers of this in a manner that they view our products and services as necessities instead of luxuries. This will, of course, make us even more recession resistant in the future. It will also sell a lot more outdoor living spaces.

Leave a Reply

More From Finance/Operations...
Pansy ‘Cool Wave Blue Skies’ (Wave)

September 20, 2016

PanAmerican Seed Settles Alleged Trade Sanction Violations

PanAmerican Seed, a division of Ball Horticultural Co., has been charged with violating trade sanctions to Iran over a number of years. According to a release from the U.S. Treasury department, PanAmerican Seed made 48 indirect sales of seeds to two Iranian distributors. The company shipped the seed to consignees based in countries in Europe and the Middle East. PanAmerican Seed’s customers then arranged for the re-exportation of the seeds to Iran. The release states that the Office of Foreign Assets Control (OFAC) determined PanAmerican Seed did not voluntarily self-disclose the alleged violations to OFAC, constituting an egregious case. “We believe that the settlement was extreme; however the alternative was to litigate with the U.S. government, which would take months, if not years,” says Todd Billings, Chief Financial Officer for Ball Horticultural Co. When asked what Ball Horticultural Co. has done to ensure that violations to trade sanctions do not […]

Read More
young-plants

September 20, 2016

The Top Young Plant Growers, And Four Critical Challenges Facing Them

In Greenhouse Grower’s 2016 Top Young Plant Growers Survey, growers discuss the latest challenges and opportunities in fulfillment, shipping, labor, and crop protection.

Read More
Cavicchio Greenhouses

September 6, 2016

Cavicchio Greenhouses Wins Inaugural Sustainability Award

The Sudbury, MA, growing operation sustains more than 250 acres of annuals, perennials, and nursery stock, with a number of practices to mitigate its impact on the environment.

Read More
Latest Stories
Pansy ‘Cool Wave Blue Skies’ (Wave)

September 20, 2016

PanAmerican Seed Settles Alleged Trade Sanction Violati…

PanAmerican Seed, a division of Ball Horticultural Co., has been charged with violating trade sanctions to Iran over a number of years. According to a release from the U.S. Treasury department, PanAmerican Seed made 48 indirect sales of seeds to two Iranian distributors. The company shipped the seed to consignees based in countries in Europe and the Middle East. PanAmerican Seed’s customers then arranged for the re-exportation of the seeds to Iran. The release states that the Office of Foreign Assets Control (OFAC) determined PanAmerican Seed did not voluntarily self-disclose the alleged violations to OFAC, constituting an egregious case. “We believe that the settlement was extreme; however the alternative was to litigate with the U.S. government, which would take months, if not years,” says Todd Billings, Chief Financial Officer for Ball Horticultural Co. When asked what Ball Horticultural Co. has done to ensure that violations to trade sanctions do not […]

Read More
young-plants

September 20, 2016

The Top Young Plant Growers, And Four Critical Challeng…

In Greenhouse Grower’s 2016 Top Young Plant Growers Survey, growers discuss the latest challenges and opportunities in fulfillment, shipping, labor, and crop protection.

Read More
Cavicchio Greenhouses

September 6, 2016

Cavicchio Greenhouses Wins Inaugural Sustainability Awa…

The Sudbury, MA, growing operation sustains more than 250 acres of annuals, perennials, and nursery stock, with a number of practices to mitigate its impact on the environment.

Read More
Charlie Hall Feature Image

September 6, 2016

10 Insights From Charlie Hall’s Green Industry Economic…

With the uncertain current economic climate, Texas A&M economist Charlie Hall says now may be the perfect time to invest — as long as you do it smartly.

Read More
Penn State Plant Bud

August 23, 2016

AmericanHort Is Helping Plant Importers Adjust To New R…

A report from Craig Regelbrugge at AmericanHort says the government is implementing a streamlined system for imports, in which all required data will be submitted electronically through a single window.

Read More
Plug Connection Assortment

August 9, 2016

AmericanHort’s Plug And Cutting Conference Will Feature…

This year’s conference, which takes place Sept. 19-21 in Carlsbad, CA, features discussions on water, pest and disease control, and production inputs, as well as a biocontrols workshop and tour of local cuttings facilities.

Read More
Cannabis In Greenhouse

July 27, 2016

The Top 5 Myths About Cannabis Production Cleared Up

There is a lot of misleading information going around about growing cannabis. Industry insider James Lowe makes sure you know the truth about cannabis production.

Read More
Joe Bischoff

July 26, 2016

SAF Partners With Cornerstone Government Affairs To Adv…

A new partnership between the Society of American Florists (SAF) and Cornerstone Government Affairs ensures that SAF will continue its highly effective work advocating for issues that affect the floriculture industry. “SAF and Cornerstone together provide experienced voices on Capitol Hill to protect our growers’ interests,” says SAF CEO Peter Moran. “We’ll continue to move major policy priorities forward on behalf of small business and agriculture.” Cornerstone is a public affairs firm specializing in government relations, strategic consulting, and advocacy. Its team of more than 50 senior professionals includes former senior professional staff from both authorization and appropriations committees and the U.S. Department of Agriculture (USDA), as well as veterans of the horticulture industry. Agricultural and horticultural issues of primary concern to SAF members include access to labor, immigration, crop protection, international trade and other matters related to the day-to-day operations of growers. Before she retired this year, SAF lobbyist Lin […]

Read More

July 26, 2016

AFE Releases New Videos Highlighting Industry Successes

The American Floral Endowment (AFE) recently released five new videos, created to highlight floriculture successes through industry collaboration, support, and participation. “Each video shares real stories from industry members on career development through scholarships and internships, and true examples of research solutions that have shaped how the industry operates today,” says Laura Shinall, President of Syndicate Sales, Inc., and AFE Public Relations and Development Chair. “We’re excited to be able to share some great success stories in an effort to increase industry participation.” The introductory video “Heard of the American Floral Endowment?” helps educate those who aren’t currently aware of AFE’s programs, while other segmented videos (retail, wholesale, grower) share how Endowment programs complement each group and why it’s so important that everyone in the industry participates: Retail Florists Share Why They Turn to AFE New Resources for Floral Wholesalers and Suppliers AFE Helping Growers Profit Ready for a Career in Floriculture or Horticulture? […]

Read More
Briscoe White, Growers Exchange

July 6, 2016

The Grower’s Exchange Unlocks The Secret to E-Commerce

In the Internet era, Briscoe and Kenan White knew they had to adapt or die and specialize to survive. Here’s how they took The Grower’s Exchange online.

Read More
Brie Arthur

July 6, 2016

5 Can’t-Miss Events To Watch For At Farwest 2016

Whether it’s classes on biocontrols and gardening trends, or networking opportunities in and around the trade show floor, there’s plenty happening at Farwest 2016 in Portland, OR, in August.

Read More
Cannabis states 2016

July 1, 2016

Adult Use Of Cannabis On The Ballot In 2016

25 states have legalized cannabis and public opinion is increasingly positive. Here’s where things may be headed as we move toward the fall elections.

Read More
Practical Software Grower Vertical

June 18, 2016

Practical Software Solutions Increases Accessibility, E…

Practical Software will demonstrate Grower Vertical, its customizable and scalable enterprise management system for the horticulture industry, at Cultivate’16 in July.

Read More
Battlefield Farms Company shot

June 14, 2016

Battlefield Farms Is A Finalist For 2016 Operation Of T…

Battlefield Farms in Rapidan, VA, is one of three finalists for Greenhouse Grower’s 2016 Operation Of The Year award and winner of the Excellence In Innovation award for 2016.

Read More

June 7, 2016

Ball Seed Offers Full Mobile Ordering Capabilities With…

The latest update for Ball Seed’s WebTrack To Go mobile app now includes full ordering capabilities for the industry’s largest assortment of seeds and plants. App users can also complete order fulfillment via seed count or package size, find product substitutions, get personalized “contact us” information, request plant tags, and more. “Upgrading WebTrack To Go to the full suite of ordering and management tools is where we’ve always wanted to be,” says Mark Morris, Director of IT for Ball Seed. “With this new roll-out, we’re keeping up with our customers on-the-go and providing them the information and access they need –- even while away from their desks.” The Ball Seed WebTrack To Go app lets customers: Check order status and shipment tracking 24-7 Access up-to-the-minute product inventory from hundreds of suppliers Place orders by seed count, packet size, and more Find product info, culture and photos when and where they […]

Read More
Gotham Greens Atrium Style Greenhouse Chicago

May 23, 2016

What’s Good For The Environment Is Good For Business [O…

Investing in technology to become more sustainable “always goes hand in hand,” says Abe VanWingerden, co-CEO of Metrolina Greenhouses. “If it is good for the environment, it normally is good for business over the long term.” That connection was abundantly clear in the responses we received to this year’s Top 100 Growers Survey. VanWingerden points to three investments Metrolina has made as good examples of how technology can reduce an operation’s carbon footprint and pay dividends financially. Its biomass system burns locally sourced waste wood — a renewable resource; its ozone water treatment system cleans irrigation water, reducing the need for fertilizers and pesticides, and improving plant quality and precision growing; and electrostatic sprayers reduce water and chemical use, and provide more targeted chemical applications. Other Top 100 Growers have found VanWingerden’s theory to be true, as well. Costa Farms’ investment in solar energy panels on three buildings at its […]

Read More
Petunia 'Supertunia Violet Star Charm' (2015 University of Georgia Field Trials)

May 10, 2016

New Southern-Centric Ornamental Production Conference T…

The 2016 Academy of Crop Production is dedicated exclusively to sharing information on advanced ornamental crop production and business management techniques for ornamental producers.

Read More
University of Florida Online Greenhouse Training Courses

April 25, 2016

University of Florida Offering Online Training Courses …

There will be five courses offered, with the first starting on May 30. Courses are available in both English and Spanish and range from beginner level to advanced education.

Read More
[gravityform id="35" title="false" description="false"]