Growers Taking Charge
June 12, 2008 The relationship between grower and retailer continues to evolve in significant ways. This month, Greenhouse Grower explores aspects of this evolution. In my experience, I have seen the relationships change rather dramatically, in many cases, from the way buyers and sellers typically interacted in the categories. One thing is for sure – in today’s retail buying environment, there are many more demands being placed on growers and suppliers to help manage the supply chain process, especially in the big boxes.
The traditional way of doing business saw growers offering their products to retailers and agreements forged between the two were pretty simple. The buyer would select products and growers primarily for the quality of goods they produced, their ability to be low-cost provider, and ability to bring products to market. Buyers would make items and mix selections, quantities per order or store, shipping dates or periods, advertise if appropriate and process orders. Growers would, in turn, grow the product, tag the plants and meet required shipping parameters for dates and quantities per store.
Retailers would take possession of the product upon receipt, merchandise and maintain the product, sell at full retail to as high a percentage as possible, and then either take intermediate markdowns on products to force out culls or mark down products completely and discard. In many, if not most cases, there would be multiple growers going into the same stores with different items or, in other cases, shipping some of the same items at the same times or at different parts of the season. Many growers did not offer service if programs weren’t guaranteed sale or pay-by-scan.
Single Sourcing
The bedding plant industry changed fairly dramatically with big box customers and has taken different paths in some cases but has done things in a similar fashion in other ways. One key shift in the way these folks interacted is that many buyers chose to simplify their multiple sources of supply for the category to single sourcing. While they may have, in their minds, sacrificed some flexibility they may have enjoyed with multiple suppliers, they chose to go to single sourcing mainly for accountability purposes. If you have only one supplier in a store, it pretty much narrows down whom to praise or punish for a job well done or otherwise.
The other major positive impact to single sourcing is the logistical advantage of growers taking full product lines to store locations that are closer to their operations. Before this practice, it was pretty typical for a grower to specialize, let’s say in New Guinea Impatiens baskets, and they might ship only that item to 200 to 300 stores for one of the big boxes over a 300-mile radius. Using the single-source method, those same growers may have to broaden their production of items and hypothetically could be shipping 20 items to 50 locations within a 40- or 50-mile radius and do the same dollar volume, if not more. So the efficiency really makes this a positive for growers, provided they can produce the mix that is required.
The Rise Of Retail Service
An offshoot of the single source of supply was service being injected into the retailers, either through the grower’s own personnel or through a third party. This is one area that has become critical to the retailer in many cases and has become such a factor that it has almost equal importance to the retailer as the plant quality. Service includes merchandisers from supplier or third parties that may unload product, pack out product, sign the plants, water and maintain the plants, cull out plants that are no longer saleable, recycling delivery carts or racks, and so on.
Service personnel can also serve as inventory managers, product flow agents, product selection managers and excellent conduits of information, either back to their grower headquarters and/or directly to the retail operators at store level or buying office to run a better business.
Managing Retail
Most large-scale growers today have today retail account managers. This is where I have seen a dramatic change from the past. Expectations for these folks have risen steadily as more has been demanded from retail buyers. Today, these folks typically get involved with planning individual store layouts from year to year. They will be influential in analyzing sell-through data by item and by store or region. They most likely will write all orders per the buyer’s request. They are asked to do retail reconnaissance to help the individual buyer better understand the marketplace and how they compare or compete with their competitors in the market.
Account managers typically will be asked to handle retail shops of competitors and will subsequently give advice to the retailer about how they are priced against the competition. They are also being asked to provide all advertising needs for their products through the season. They most likely will be responsible for inventory levels and also sell through on the products.
Some retailers now expect their growers to help them set up and maintain fixtures for displaying the goods in their stores. The retail account manager or service manager may oversee fixture build outs for individual store sets or at least have field area managers reporting back to them on the process. This has become a very important part of the grower and retailer partnership.
Once a selling season passes, the retail account manager typically receives the sales results for stores they supply and will be asked by the buyers to help form a strategy for the following year based on the results. These folks are quite often asked to participate in things like the annual Pack Trials, store walks with operators, program rollout meetings and old fashioned product road shows. They will very often be relationship builders with district or area managers, merchandise managers, buyers and regional vice presidents of operation and merchandising. These retail account managers can be invaluable aids to new buyers who may not have familiarity with the market or the live goods category.
Big box retailers are able to provide extremely accurate and up-to-date information to their grower partners on a daily or even more frequent basis. This is not really new in the last several years, but all three of the bigs are able to give their suppliers the data they can use in making shipping decisions. Traditionally, this information was analyzed by the buyer and then the buyer would instruct the grower what to ship and to whom. Today, there seems to be a much higher trust factor and accountability so that this function is often done jointly, if not predominantly by the grower and that seems to work well for both parties.
The bottom line is that growers have become increasingly savvy operators when it comes to the big guys. There is much more of a business management in the relationships between seller and buyer. Expectations from the retailers have certainly grown dramatically and growers are responding to this changing environment. They have learned to think much more like retailers as they wear the dual hats of supplier and retail managing partners. The business seems to be better for it.
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