Do you have a financial-related question about your garden center? Send it to financial expert Steve Bailey at [email protected].
Question: What are the first steps you would recommend a garden center take to increase revenues (sales) in a specific department, such as annuals?
— Tom Hilgeman, White Oak Gardens, Ohio
Answer: The first step to take when attempting to increase revenues in any category is to assess your current sales mix. A categories percentage of total revenues will reveal several things, mainly your intentional or unintentional product mix and how your site is set up to sell certain categories.
Run a sales report from your last annual profit and loss or income statement with the percentage of total revenues on the side. If your accounting software won’t produce this report, do it yourself by exporting the report to Excel or manually calculating those percentages.
Review your categories and how they stack up. Which categories are the higher percentage of the total? While you probably know the categories that are dominant in your garden center, did you realize the secondary categories were such a big part of the total? And are you aligned toward realizing the highest total store GMROII (gross margin return on inventory investment)?
The fact that you sell more or less of a product may not be a conscious decision. The amount of staff expertise dedicated to the category will play a huge role in how much you sell in a particular category. If it’s a product area that will yield gains in GMROII, enlist the staff in product and sales training to increase those revenues.
An even bigger piece of the puzzle may lie in the square footage you allocate to a department or category. Less space can mean less revenues, more space more revenues. This is especially true in annuals, one of the garden center industry’s highest return on investment. If I visit a garden center with 15 percent or less in annuals sales, we begin looking for the cause. Is it too little space, or is another category squashing the annuals percentage? In most cases, it’s too little space, at which time the goal is to reset the store and allow more space for a more productive category. If another category is beating down the annuals percentage, it’s best to ensure that those revenue dollars are higher in GMROII.
One last cause of a “good” category not receiving the attention or dedication it should is the owner or staff’s desire to sell other products with less GMROII. Sometimes what you want to sell and what you should sell are totally opposite.
Tom’s question is a common one — what is the balance between just buying more products to increase revenues, or taking an analytic approach? The best business practice is the latter, and then increase buying if the numbers support it.