Spring 2009 promises to be one of the most interesting and perhaps difficult selling seasons that we have seen in some time. What can we expect from the American consumer this spring? Garden center retailers across the Unites States are cautiously optimistic that folks will be out in numbers and spending a fair share on lawn and garden products.
What impact will there be on the lawn and garden sector from the precipitous fall in economic conditions from the back half of 2008? Will customers spend enough of their remaining discretionary income, or will they forego such products at increasing rates to spend on more “fundamental necessities?” Do you expect top-line sales to increase, stay the same or decrease?
How about the impact on profit margins to go along with sales? Should margins be pushed even higher to make up for potential lower overall sales?
Coping With The Economy
How do you prepare a retail garden center for business in an economy not seen in many years? Should you cut back on inventory in case fewer customers are out shopping? Do you limit assortments along with inventory?
How about retail pricing of goods? Do you raise prices to compensate for what is foreseen as lower sales units and dollars? How will raising prices be perceived by the consumers? Will they even notice higher prices? How about “up selling” consumers from more standard plants to branded, or newer, exclusive types of plants?
The questions just keep coming. What about hiring and staffing? Do you increase, keep the same staff as last year or reduce to keep labor down as a percentage of sales? Do you cut back on much-needed vital training for new hires? Reduce open hours for operations, keep the same or increase?
Will advertising be reduced, kept the same or increased? What can you advertise to more effectively connect with the customers and drive them into your stores instead of a competitor’s?
The answer to many of these questions can be viewed simplistically. My belief is that now more than ever is the time to go back to basics. This is not the year to get fancy. It is the year to most effectively merchandise core products. It is the year to put forth the absolute best values to the customers. You are going to be fighting for the customer’s dollars, not only from your retail competitors, but also with all other manner of discretionary spending more so than ever before. Customers will be more selective with their spending no matter what you do, so it’s incumbent that retailers do everything in their power to “force” the customer to choose plants and related items.
A Changed Retail Landscape
Think for a moment about the mass merchandisers in the lawn and garden business. What is happening right now and has been happening for years is an absolute market share battle that cannot be understated. This is literally a war between Lowe’s, The Home Depot, Walmart, Meijer’s, Menards, independent garden centers, supermarkets, farm stands and others.
In my opinion, America has become somewhat “overstored” in regard to current demand compared to 10 years ago. Retraction is one possibility going forward, as some retailers may shrink. Cannibalization of some retailers by others is another possibility through acquisition.
The size of the “retail pie” does not seem to be expanding. Players in the retail game are fighting each other for each and every customer to maintain or grow market share. Getting the customer to shop in your store versus another’s is going to take convenient locations. It’s going to take good presentation, both inside and outside the garden center. It’s going to take decent staffing levels. It will require that the staff is reasonably trained. It will require having in stock what the customers want, when they want it.
It will require ample parking spaces, inviting store fronts, colorful displays and logical and informative signing. Most of all, it is going to require great values.
Now Is The Time
This is not the economic environment to raise retails in. It is not the time to see how much you can squeeze out of the buying public. It is, however, the time to get out there in front of the customers with retail pricing they may not have seen in several years.
It is the time to put out deals that stop consumers dead in their tracks when they’re reading the Sunday morning ads. It is the time to get the customer to stop what they were planning on doing and have them flock to stores because your deals are irresistible.
I am not saying go backwards on large swaths of your retail mix in gross margin or retail pricing. I am, however, saying you should do something to get the customers thinking. Do something that gets them excited to come to your place. Don’t be satisfied with “retail matching” with your fiercest competitors. Now is the time to take share.
Pricing is not the only tool in your arsenal. In normal times, I would rank it fifth or sixth in importance behind quality plants, in stock, well merchandised and knowledgeable staff. But these times call for a more desperate call to arms. Gross margin budgets can be met by increasing top-line unit sales, even if you have lower gross margins on these so-called “loss leader” items.
Of course you have to sell a lot more units to generate the same or just a little more profit dollars, but your customers will not forget about the great deals in your stores.
They will share tales of great conquests at your stores with family, friends and neighbors. The goodwill established with giving customers great deals will surely encourage the customer to continue to come back again and again to your stores rather than your competitor’s.
A Few Must Do’s
Customer service can be as powerful as any of the other weapons at your disposal. It’s equal to, if not greater than, pricing. Excellent customer service is more difficult to execute than simply pricing products at outrageously low prices. This is definitely going to be the single greatest challenge retailers face in today’s economy.
You absolutely must have products to make sales. Customer service levels will yield increasing or diminishing returns based on the perspective of store operators. This is such a hard concept to grasp in the mass market because plants are not as major a percentage of overall sales as they are in independent garden centers.
Most independent garden centers would not exist without excellent customer service, superior quality live goods and knowledgeable sales help. Big box stores have always struggled with replicating this across wide sections, or all of their companies.
The bottom line is this retail environment today is not one for the faint of heart. What these economic times call for are gut-wrenching decisions in terms of profitability and viability, not to mention how resilient some retailers will need to be just to survive. I believe bold efforts to grab market share will be rewarded and are necessary. I’ll always recall a quote from one of my company’s leaders when discussing a major competitor several years back, and that was, “Peaceful coexistence is not an option.”
Vinny Naab is owner of Naab Horticultural Marketing, LLC, a consultant to the horticulture market. Contact him at firstname.lastname@example.org.