The Challenges of Running a Split Retail/Wholesale Nursery

May 30, 2006
Written by Michael Lascelle
Simply stated, a split retail/wholesale operation is a garden centre or nursery with both a retail outlet and a wholesale growing operation (or perhaps a storeroom with imported goods).
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The wholesale winter crop of florist cyclamen is being sorted for shipping to the flower auction, where it will be sold to other retail garden centres.
Simply stated, a split retail/wholesale operation is a garden centre or nursery with both a retail outlet and a wholesale growing operation (or perhaps a storeroom with imported goods). Most of these businesses evolved from modest greenhouse operations, which expanded over the years and, in response to public demand, opened a retail store. Others came into being as garden centres proper, which eventually started to import goods (i.e. pots or tools) directly, in order to lower their purchase costs – selling them for retail in their own store, and offering the excess to other garden centres at a slightly higher wholesale cost.

While there is no perfect business model to hold up as an ideal, it still makes good sense to look at what makes these split operations so successful. And while I will admit that many of these are very unique nurseries, it is simply because these operations have evolved and changed gradually over time, as opportunity presented itself.

Still, if you are considering a move into the retail or wholesale market, it might be prudent to consider both the benefits and drawbacks of this particular business configuration. With this in mind, here is a brief listing of pros and cons, each presented in detail, with some advice or cautions to help you make the right decision for your nursery.

Split Operation Benefits
1. You can sell all excess products through your own retail outlet.

The buying and selling of plants (or other products) is not an exact science and even the most diligent of business persons cannot predict when the wholesale market will go flat or disappear altogether. Rather than dumping your plants on the market (or worse, on the compost heap), at or below cost, create your own sales event by selling your plants at a price your retail customers will appreciate.

2. Being able to borrow materials on demand, from either the retail or wholesale side of the business, can save you both time and money.

Having a ready supply of plastic pots, rooting powder and soil medium in your retail outlet can be very convenient, particularly when your wholesale operation runs short. Rather than having to stop your production while you wait for supplies, you simply borrow what you need from your retail division. Just be sure to record these in-house transactions for inventory purposes.

3. You can grow custom crops of expensive or ‘hard-to-find’ plants.

In anticipation of a short supply or high wholesale prices for this year’s ‘hot’ perennial, Leucanthemum ‘Broadway Lights,’ we have decided to grow our own crop. Having the flexibility and growing space to accommodate custom crops will help ensure that your retail outlet has all the new introductions in their first year, when your customers really want them.

4. The ability to buy and sell allows for a more efficient and profitable means of shipping plant material or other nursery supplies.

With the cost of gas and diesel as high as it is, it makes no sense to send an empty truck to the plant auction or broker, just to be able to pick up your current retail needs. As a wholesale grower, we are able to send a full truck of our floral crops to the auction where other retailers can purchase them, and our buyer will in turn fill our retail needs from the other growers who ship their plants for sale. This way, we are able to have a full truck both coming and going from the flower auction, so that it is never running empty.

5. Having two operations on one site can save you capital expenses, when both facets of your nursery share infrastructure or tools.

Our retail/wholesale operation shares one hot water system, which provides heat both to the retail store and a portion of our greenhouse production area. Similarly, both operations are able to share such necessities as the delivery truck, tractor, forklift, pallet jacks, plant carts, hoses, sprayers and pressure washer – saving the owners the expense of purchasing a separate unit for each facet of their business.

Split Operation Drawbacks
1. Your retail customers may also want to purchase their plants at wholesale prices.
The solution here is simple, never sell your products at wholesale prices in your retail outlet, as your retail customers may come to expect wholesale prices on everything you sell.

Instead, offer them volume discounts comparable to what you would offer landscape professionals – usually in the 10-20 per cent range.

2. Are there any circumstances when it might be appropriate to open your wholesale outlet to your regular retail customers?

Yes, if you have a customer who is arranging a fundraiser (i.e. school or church), or someone representing a strata landscape council, looking to purchase a large order of bedding plants for the entire site – then it would be appropriate to offer them wholesale pricing, provided a minimum purchase amount is agreed upon.

3. You cannot expect retail customers to walk about in steel-toed boots, or maneuver through tight rows of plants, or stacked pallets of ceramic pots – as the potential for accidents is more than what your insurance company would probably cover.

You need to clearly separate your retail and wholesale components – providing both an efficient work environment for your production staff and a safe, easily accessible place for your retail customers to shop. You cannot expect your customers to shop in a storage area or an intensive growing block, any more than you could ask your wholesale staff to efficiently pot-up cuttings in the middle of a retail garden centre.

4. Having two operations on one site may require higher levels of staffing.

Yes, you will need to hire enough people to safely manage both ends of your operation – but the advantage here is that staff can be shifted between both business entities, as demand requires – which in the end, may enable you to provide more steady employment for your part-time workers.

5. It can be very difficult to oversee everything that is going on in such a large operation.
As your nursery business grows, you are going to have to delegate responsibilities. In the case of the split retail/wholesale operation that I work for, the husband and wife owners act as the general managers, overseeing the nursery, store and greenhouse managers – who in turn, are responsible for the staff in their respective departments.  This chain of responsibility allows the owners to control and guide their business, without having to deal with the minor ‘day to day’
details.

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