Selling Fertilizers: Work Smarter, Not Harder

Managing your SKUs is important for several reasons: cash flow, space management and eliminating confusion with staff and customers, says Swanson's Brad Siebe.Financial consultant Steve Bailey has gathered inventory and sales data from hundreds of garden stores over the years. He finds that the average turns for hardgoods, which includes fertilizers and controls, are dismal 1.2 turns annually. In contrast, his best clients can turn that department’s inventory five to seven times a year.

Swansons Nursery in Seattle and Gertens in Minneapolis are two garden retailers that enjoy success with fertilizers and controls. Here’s how they do it.

Reduce Floor Space And SKUs

It seems counterintuitive to get more profit by getting smaller. But that is exactly what happened at Swansons Nursery.

“The size of the department shrunk and we carried fewer SKUs. And sales increased,” says former Swansons general manager Brad Siebe.

Siebe believes the reason the approach works is twofold: it makes life easier for shoppers and forces buyers to justify every purchase.

“You don’t want to confront customers with too may choices. We only carry what we can stand behind and can guarantee,” he says.

Siebe thinks editing choices for customers not only helps them out, it makes life easier for the staff. “Garden centers can be so overwhelming. [Before we reduced the products we carry], we’d find ourselves in a scenario where the customer would look around, be overwhelmed and ask, ‘What do you use?’ Then they’d look at the other products we carry and ask, ‘What about this one?’ It’s not a comfortable position to be in,” he says.

An example of how Swansons reduced SKUs can be found in its lineup of organic fertilizer, a key product in eco-minded Seattle. After carrying a wide array, the garden center now has only two primary choices, Siebe says.
When you rely on only a couple options, you must select those brands with care.

“We look at sales per square foot. We have limited retail space. Which sold best? We also sought out feedback from our customers and even from ourselves, since we all garden,” Siebe says. “We also looked at our partnerships with vendors.”

“Our current [2013] rolling 12 inventory turns for total garden supplies (which excludes pottery, furniture, decor and accents and floral and holiday categories) overall is 5.07, with a GMROI [gross margin return on investment] of 5.51. Specifically for the fertilizer and chemicals group, the inventory turn ratio is 3.77 with a GMROI of 4.11. During the earlier periods that we were starting to refine our selections back in 2007, our overall hardgoods inventory turns were only 2.5,” Siebe says.

After seeing a big increase in turns and profit in fertilizers and controls, Swansons has applied the same philosophy to other departments.

Make Sure You Stand Alone

Gertens found a way to compete that works for them: They refuse to compete. Gertens does not carry any of the brands big box stores carry in fertilizers and controls.

“You need products not easily available at the local box store,” says owner Gino Pitera. “I know some people don’t want to believe that. If customers can buy [the same product] conveniently late on a Saturday or a weekday at their local box store, there’s no reason to go to the local garden center.”

Pitera says some products are especially vulnerable to comparison shopping: grass seed, fertilizer, potting soils and chemicals.

“There are solutions you can have, and they don’t have to be private label. There are a lot of things out there that are controlled labels. Grab onto these and build your business off of those.”

Pitera acknowledges many garden center owners feel its a big risk to stop carrying major brands. But he says there’s less risk to switching brands than they think there is.

“Customers don’t go to your store for a national brand. There are way too many other places they can do that. You are not understanding your market if you think that is why they are coming to your store,” he says.

Once you switch brands, Pitera does not recommend going crazy with prices. Even if the brands are different, customers often have an idea of what they think a fair price is.

“You need to be in the neighborhood, but you might not need to be in the same driveway. You can’t be $5 over on a water-soluble product, but you can get $2 more, you can get a dollar more. Unless it’s something really different, then you have a lot more margin freedom.”

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