How Bad Plant Pricing Can Hurt A Good Retailer

Key pad with a plant and cart buttonWhen Greenhouse Grower RETAILING sent a pricing survey to the industry, we put the most important question at the top of our survey: How do you calculate plant prices?

One of the experts we recruited to help make sense of the responses, Dr. Charlie Hall (Texas A&M), looked at all the ways plant retailers say they calculate plant prices. At first glance, the methods were all over the board, but Dr. Hall sifted through the replies and was able to sort them into four main groups.

46%: Markup. The cost of a plant multiplied to reach a sales price. So a 2x markup multiplies the plant cost by two.

18%: Margin (or gross margin). Percentage between the sales price and the plant’s cost.

10% Competition. Plant prices at competitors’ sets your own price benchmarks.

8%: Market value. Whatever price the plant can realistically bring in, regardless of its wholesale cost.

Another 17% skipped this question.

How We Rank the Pricing Methods (from least to most effective)

So long as your prices cover your expenses and give you a bit of profit, does it really matter how you arrive at the price?

Absolutely.

Not all pricing is created equal. Here’s how three of our advisors (consultants Steve Bailey, Ian Baldwin, and Sid Raisch) ranked the most common pricing methods:

1. Market Value. The supreme model for pricing? Market value. This model forces the retailer to focus on quality. Is the plant branded and supported by an advertising campaign? Is it better quality or larger than other similar plants? Then customers will pay more.

If the margin percentage falls below what you need to support the perceived value, Baldwin says, then you know the plant is not worth carrying.

2. Margin Percentage. Margin, which is sales minus the cost of goods sold, works better than markups because it gives a clearer picture of the finances involved.

3. Markup. Our advisory group feels the markup method has inherent weaknesses. It’s a format that doesn’t easily fit in with profit and loss statements (P&L), Bailey says, so owners often have to convert their pricing to margin percentages in order to compare expenses and revenue.

Another weakness is that markup percentages look higher than margin percentages. Technically, that’s not a problem. But psychologically, it can be. Markup percentages can give retailers the false impression they bring in more money than they do.

Here’s a chart to illustrate that:

Markup vs Margin chart

4. Competition. Basing your prices on your competitor’s gives them control over your store. What if they price plants in a way that ultimately loses money? You will be following them off that cliff.

Another problem is there are too many unknowns. The competitors may have gotten a deal from their suppliers, or their cost structures are different from yours.

And it doesn’t take quality into account. If either the plant or the plant store itself is of a different quality, then why should the prices be the same?

Editor’s note: Greenhouse Grower RETAILING asked growers and retailers to share their pricing methods in a survey sent out in mid June 2016. Of the 363 responses, 202 are from those whose primary business is plant retail.   

Topics:

Leave a Reply

3 comments on “How Bad Plant Pricing Can Hurt A Good Retailer

  1. Taught Value Pricing for years at meetings. Talk was called “We’re Not Walmart” and was based on a true story of a company that wanted us to deliver poinsettias and maintain then throughout the holiday season for 25 cents more than they would pay at a big box store. When we said no they were surprised nut it taught our people the lesson to value our services and products.

More From Retailing...
Cordyline Candy Cane (Excelsa Gardens, Inc.)

November 14, 2017

Garden-Retailers Pick Their Favorite Products From The Landscape Show

Grower-retailers have once again named their favorite new products, this time as part of the Cool Product Awards at The Landscape Show 2017 in Orlando, FL. Awards were presented to 12 companies, representing 14 products.

Read More
Ian Baldwin

September 26, 2017

Gardening Industry Not Recovering as Much From Recent Recession as in Past

In his latest blog posting, garden retail industry consultant Ian Baldwin says changing consumer demographics mean that, unlike past indicators, the garden business hasn’t surged after a recession — and it’s not going to under the current model.

Read More
Hydrangea mac. Fire Island (Monrovia Nursery)

September 19, 2017

Grower-Retailers Pick Their Favorites From Farwest 2017

Members of The Garden Center Group once again named their top selections in both live and hard goods for the Retailers’ Choice Awards at Farwest 2017.

Read More
Latest Stories
Cordyline Candy Cane (Excelsa Gardens, Inc.)

November 14, 2017

Garden-Retailers Pick Their Favorite Products From The …

Grower-retailers have once again named their favorite new products, this time as part of the Cool Product Awards at The Landscape Show 2017 in Orlando, FL. Awards were presented to 12 companies, representing 14 products.

Read More
Ian Baldwin

September 26, 2017

Gardening Industry Not Recovering as Much From Recent R…

In his latest blog posting, garden retail industry consultant Ian Baldwin says changing consumer demographics mean that, unlike past indicators, the garden business hasn’t surged after a recession — and it’s not going to under the current model.

Read More
Hydrangea mac. Fire Island (Monrovia Nursery)

September 19, 2017

Grower-Retailers Pick Their Favorites From Farwest 2017

Members of The Garden Center Group once again named their top selections in both live and hard goods for the Retailers’ Choice Awards at Farwest 2017.

Read More
Trends Slide - No Logo

September 12, 2017

Garden Media Group’s 2018 Trends Report Highlights Natu…

This year’s Garden Trends report offers seven trends that you can use to inspire mental wellness. Take a look to see how many trends you’re already using to connect with your customers.

Read More
GCA Bathroom Winner Wingards Market 1

September 8, 2017

Garden Centers of America Announces Best Bathroom Award…

If you’re a grower-retailer, your restroom may end up being the most important part of your customers’ experience. Find out the big winners of this year’s Garden Centers of America’s Best Bathroom Awards.

Read More

August 29, 2017

7 Popular Retail Trends from the 2017 IGC Show

Almost every type of retail garden product imaginable filled the booths on the tradeshow floor at the 2017 IGC Show held in August in Chicago, from pots and containers to garden tools, patio furniture, and decorative items. Here are seven gardening and product trends that stood out at the show.

Read More

August 21, 2017

50 Cool Products on Display at the 2017 IGC Show

Check out these cool products vendors showed off at the 2017 IGC Show on the Navy Pier in Chicago, August 15-17.

Read More
griffin-expo

August 15, 2017

Griffin Becomes Newest Distributor for Master Nursery G…

The agreement allows Griffin to join Master Nursery’s network of more than 150 supplier partners, while giving Master Nursery access to new product and service options for member businesses in the Midwest, Rocky Mountain, and Pacific Northwest regions.

Read More
Decorative Premium Hanging Baskets (Ainong USA)

July 25, 2017

16 Products That Garden Retailers Loved at Cultivate’17

In what has become an annual tradition at Cultivate, a team of garden retailers presented awards for their picks as the best new products (both live goods and hard goods) from Cultivate’17.

Read More

July 11, 2017

Grower-Retailers Invited to Help Pick Their Favorite Pr…

The Garden Center Group is inviting grower-retailers to join them on their quest to highlight the best new retail products on display at Cultivate’17.

Read More
Hort Couture Farm to Table Display

July 7, 2017

New Marketing and Retail Display Ideas to Boost Your P…

Innovative marketing displays and retail concepts at California Spring Trials 2017, inspired by popular consumer trends and the need to encourage consumer success, overflowed with exciting new ways to promote plants.

Read More

June 19, 2017

IGC Show Features Talks on How to Cash in on the Buy Lo…

This year’s event, which takes place Aug. 15-17 in Chicago, also includes a free workshop on what you might do when starting your business over from scratch.

Read More
Robert O'Neill

May 11, 2017

Former SEAL Team Six Leader to Address Attendees at IGC…

Robert O’Neill is a highly decorated combat veterans and the author of the just-published memoir, “The Operator: Firing the Shots That Killed Osama bin Laden and My Years as a SEAL Team Warrior.”

Read More

April 24, 2017

Ian Baldwin Offers Examples From Grower-Retailers on Pr…

In March, Baldwin wrote a blog advising grower-retailers to consider raising their prices this spring. The post inspired a number of creative suggestions.

Read More
Ian Baldwin

March 31, 2017

Ian Baldwin: Aim High With Your Pricing This Spring

In his latest blog posting, the garden retail consultant says consumers are spending more today, which means it’s a good time to consider raising your prices.

Read More
GCA Summer Tour 2017 Andersons Newport Beach

March 23, 2017

Garden Centers of America Unveils Stops on Its Summer T…

Registration for the event, which includes visits to several garden centers each with their own unique highlights, is now open.

Read More
MSU Guide To Attracting Pollinators

March 9, 2017

New Guide on Bee-Friendly Plants Available From Horticu…

The guide is designed to help grower-retailers educate and motivate their customers to purchase and plant pollinator-friendly materials.

Read More
Grapevine Balls, Glass House, and Galvanized Dish Gardens (Flori-Design, Inc.)

March 6, 2017

Cool Product Awards from Garden Retailers Announced at …

This year’s Tropical Plant Industry Exhibition (TPIE) once again served as a great spot for the Cool Product Awards, an annual collaboration between TPIE, Florida Nursery Growers and Landscape Association, and The Garden Center Group.

Read More