Costco floral buyer Ken Hackman shares insights into his wholesale club’s approach to live goods and why he thinks Costco has been so successful selling them.
GG: The wholesale club retail channel is a unique one compared to, say, mass merchandisers (Walmart), home improvement chains (Lowe’s, Home Depot), supermarket chains and independently owned garden centers. There are several differentiating factors I can identify, including numbers of SKUs, volume and the high number of product turns.
In what other ways does Costco strive to be different in regard to live goods? Can you also tell us about the philsophy behind the number of SKUs, volume and the high number of product turns, and why Costco has adopted its specific approach to lawn and garden?
KH: Costco’s business model is based on larger rings, faster turns and low markups on the highest quality merchandise in order to keep our price points sharp. We adopt those guidelines in the live goods program because it is proven to work for the overall model.
In our program, we limit the choices and SKUs so we can properly manage the extremely high volume that each item does. Our vendors deliver daily – many times more often than that – in order to turn the product, especially annuals, more quickly. That ensures we have best quality merchandise on the floor at all times.
We also don’t want to be everything to everybody. Costco isn’t trying to replace garden centers.
GG: Can you explain the importance of 1) high quality and 2) uniqueness in terms of the live good products Costco carries? What specific messages is Costco trying to deliver to its customers via its live goods products?
KH: Costco members have come to expect everything in the building to be of high quality at a great price. We strive to exceed our members’ expectations on quality and feel that is the best way to build upon that reputation we have and increase sales in the live goods category, as those members share with others their positive experiences with our product. We strive for the "wow factor" on all of the items we offer. When the product looks that good, members just cannot help but buy it and are happy to have done so.
GG: Is the Costco model to live goods still evolving? Is there opportunity for Costco to do more? Carry more plants? Do things differently?
KH: We always review the programs we offer to be sure they are meeting the needs of the member, while staying within the overall Costco model. Costco’s model is not static, but ever evolving, and live goods continues to reflect that approach. Our plant sales have grown significantly over the last five years, and we continue to take an aggressive approach to growing our business without adding SKUs. Opportunities are only limited by the vision you have for the program. We try very hard not to get stuck in the rut of saying, "That’s the way we have always done it.”
GG: What role do growers have in product selection and programs?
KH: We work with the best growers in the industry and partner with them to offer the items that fit what they do best together with what we want to offer. We are not set up to be a cookie cutter retailer. Every market we do business in is slightly different from the next, and some are very different from the others. We use local annual growers for each market so they can focus on that group of buildings in terms of proper deliveries (which is critical) and fresh product. We don’t buy programs; we buy items.
GG: In your opinion, what are the primary reasons your customers choose to purchase plants at Costco versus another retail location? What sets Costco apart from other retailers?
KH: I think the live goods program has become a destination category for our members during peak parts of the year, especially spring. They know when the weather breaks that we will be ready to go with high quality, high-end items like large combination planters, large combination hanging baskets and core landscaping items at really great price points.
Members are not overwhelmed by too many choices, but see large blocks or racks of good-looking product. The value proposition on the items we carry is generally irresistible to our members.