2010 STATE OF THE INDUSTRY
Gardening’s true value
Our 2010
state-of-the-industry report reveals that the garden centre sector is
alive and kicking. Despite challenges like big box stores and the
changing consumer base, garden centre operators are rapidly expanding
and diversifying product lines.
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Frustrations around big-box competition and a changing customer base are often part of the conversation at industry gatherings these days, but the reality is that the independent garden centre industry has been a good place to do business in recent years, and may be about to get even better.
That’s not to say the industry is not without challenges. Customers are growing accustomed to low plant prices and now have more options than ever when it comes to where they shop for garden products. Unpredictable, outside forces like weather can make or break a year. But the people who work in the industry are at the core of the businesses – they’re eager to share their passion for gardening with new gardeners and experienced horticulturalists alike. They’re also willing to take risks and expand their businesses and product lines in the face of this growing competition.
To assess the current state of the garden centre industry, we consulted industry members and incorporated the results from a recent Canadian report on the ornamental industry. Here’s a look at the challenges garden centres across Canada are facing and the opportunities they can capitalize on.
A growing industry
In 2009, the Canadian Nursery and Landscape Association (CNLA) commissioned Deloitte & Touche LLP to put together a report entitled “The impact of ornamental horticulture” to examine the economic and environmental impact of the Canadian sector. The research found that “nursery and garden centres are on the rise and their growth has outpaced that of key merchants, big-box and large-format retailers.” It estimates that there are more than 9,000 outlets (including florists) across Canada that carry ornamental product.
Looking at statistics, Canada’s garden centres are growing their operations and sales as well. Each year, Garden Centres Canada, a segment of CNLA puts together a survey that looks at the state of the business and sales levels for garden centres across the country. Rebecca Wetselaar, provincial relations manager for the Garden Centres Canada staff, says that the survey reveals that operations are staying open longer and bringing home a bigger profit. In 2004, Wetselaar says the majority of garden centres were only open for 9.5 months on average, compared to 2009 when most respondents were open for 12 months a year. Looking at the same time frame, six years ago average retail sales fell between $500,000 and $1 million whereas in 2009, this number was between $1 million and $2 million.
Wetselaar says these increases might be credited to inventory changes. “Many garden centres have diversified their business so they’re offering more than just plant products, which is perhaps what they did in the past. Now they’re offering giftware
and/or garden décor and they’re able to capitalize on new business that they might not have had in the past.” She says new technology and greater marketing capabilities also may have attracted new shoppers.
Changing demographic
A baby boomers boom
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The people coming into the garden centre are changing and this will have an impact on the type of products and services retailers offer. North America’s population is aging and some of the industry’s biggest customers are making life changes. Robert Dolibois, executive vice president of the American Nursery and Landscape Association, cites this as one of the sector’s biggest challenges. “Essentially, you had this tremendous category called baby boomer that has been driving the economy since the ’50s,” says Dolibois. Starting in 2010 and beyond, the oldest baby boomers (people born between 1946 and 1964) will be in their early 60s. “The issue, for garden centres, is that there are actually going to be fewer of those traditional customers asking for traditional products that they’ve built their garden centre around for the last 20 years,” says Dolibois.
Instead, this group will be looking for products to suit their aging lifestyle. Baby boomers have bid farewell to their children and are looking to downsize their homes in favour of a smaller house, an apartment or condo. Where they used to take on large garden products and were happy to do-it-themselves, baby boomers will now be looking to garden centres to do all the heavy lifting. This group is made up of gardeners who know the importance of plants and are willing to pay for results.
The statistics show that if garden centres can develop a strategy to cater to this group, the payoff could be huge. Victor Santacruz, executive director of the Canadian Landscape and Nursery Association says that the baby boomer trend has one of the biggest financial impacts for retailers. Research from CNLA’s 2009 Deloitte & Touche report reveals that from 2011 to 2021, between 3.3 million and 6 million people will be at the age of retirement and ideally suited for gardening. Boomers are expected to spend $2,400 a year on garden and garden-related activities and will have almost eight hours of daily leisure time at their disposal. “Right now, there is over $6.2 billion in retail sales in this country from garden centres. They estimate that baby boomers alone, between 2011 to 2021, will spend an additional $5.5 billion to $10.1 billion a year on ornamental horticultural at the retail level,” says Santacruz.
Generation Y
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Looking at the other side of the spectrum, new, young faces are also starting to make an appearance at the garden centre. The gen Y age group (made of of those born between the mid-1970s and the 2000s) is beginning to dabble in the dirt and they represent the future customer.
This demographic is starting to buy their own starter homes and for the most part, are generally not knowledgeable about the horticulture industry. They’ll be looking to garden centres for expertise, for advice and for service – baby boomers aren’t the only ones who want the do-it-for-me service. If you can capture this group of shoppers, chances are, they’ll soon mirror the habits of older generations. “They will then be in that buying period that probably won’t change a whole lot in terms of their interests if they are home owners and doing what their parents did,” says Dolibois.
At Sheridan Nurseries, a company with nine garden centre locations throughout the Greater Toronto Area and surrounding cities, president Karl Stensson says attracting new customers is a challenge they are constantly working on. “There’s a lot of issues with the younger gardener nowadays. They’re finding more information on the Internet and they don’t need to come to an independent garden centre as much as their parents did,” says Stensson. To target this market, Sheridan Nurseries recently hired a web specialist to revamp its website and is looking at how to improve things like e-blasts and incorporate social media. The company also has reworked the images and the message it delivers in its marketing materials. Stensson says they’ve strayed from using seniors in their ads and flyers and are instead showing images of younger people and children.
The economy
The consensus with our panel was that the garden centre industry wasn’t hit as hard as many other sectors during the recession. “I wouldn’t call our industry recession proof, but we are resistant. I believe that overall, our sector wasn’t poorly affected by the recession,” says Santacruz. The economy forced many homeowners to stay home and invest in their property, rather than travel or buy luxury items. “Instead of going away to their cottage, maybe they did something nice in their backyard and hung out on the deck
for example.”
Stensson says that while the industry may have lost a few garden centres in the last two years, he’s optimistic. “For those remaining in it, I think it is growing and there is opportunity to grow. The actual pie is growing but the number of garden centres is not. Many are getting out because the value of their land is high and either their determination to win has weakened or their children have shunned their request to take over the business. Our business takes a lot of drive and also a lot of long hours at certain times of the year and we are seeing a decline in people’s desire to work long hours like we did in the ‘good old days.’”
Succession planning has also taken on an important role in the last few years. Many garden centre owners are aging baby boomers, much like their original customer base. “Boomers in their early 60s are basically saying, you know what, this isn’t as fun as it used to be. I don’t want to, or I can’t, put any more money into my garden centre,” says Dolibois. “What you have is an uptick in the number of people that are looking and considering retirement and who have no exit strategy.”
Big-box battle
The big-box stores haven’t disappeared and have only multiplied but garden centres are adapting. Unlike when they first set up shop, the industry now knows what these stores have to offer and many have developed a strategy to combat their low prices.
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| The model of the garden centre itself has changed. No longer does the customer expect a bare roots experience in a greenhouse with a dirt covered floor. “It has become more sophisticated, more service oriented and more business and retail savvy,” says Sheridan Nurseries’ Karl Stensson of the industry as a whole.
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“You have to be unique instead of being the same as a box store. You cannot just sit there and say I’m going to sell the same products,” says Stensson. “That’s just sort of a death wish if you sit back and don’t try and elevate yourself in some way, shape or form.” At Sheridan Nurseries, Stensson says they’ve hired a full-time staff trainer to educate their employees on customer service to deliver better than the average customer experience. One area they pay special attention to is their cashiers, as these are positions that can easily get ignored and they are the front-line face of the business.
Another way Sheridan is working to stay ahead of the competition is to bring in 20 per cent new products, every year. “That is simply to continuously make people interested in coming to an independent garden centre because it’s so easy to go to the box store but we know with the box store most of the time, you’re going to get the same old thing,” Stensson says.
On a positive note, Santacruz says these outlets may have helped to increase garden awareness for some shoppers. “There are many times we look at the big-box stores as competitors, but they have also done an incredible job promoting gardening in the last several years. I think that a lot of times when they promote and when they do a
lot of adverts, we are the benefactors of those as well,” he says. “Because they can’t carry as wide a spectrum that would be carried in an independent garden centre, they’re cheaper. But they can’t carry the variety or the quality so I think that’s where we’ve benefited.”
Because the industry is strong and full of potential, Santacruz says garden centres need to be aware that new outlets will want into the market. “As this industry grows, it’s going to attract more competition,” he says. “This is a good industry, a good business and that’s why we are starting to see more grocery stores and other retailers that are diversifying into ornamental products, so I think that will be an issue.”
Going green
Promoting and selling green products is a natural extension for garden centres as they already offer items that have a direct and positive effect on the environment. This sector is also a great opportunity for garden centres as many consumers are willing to pay more for something that will help the earth, rather than harm it.
As pesticide bans sweep Canadian municipalities and several provinces, garden centres are faced with the challenge of educating consumers – accustomed to spraying toxins and achieving quick fixes – about how to solve pest and weed problems. Educational seminars represent a huge opportunity in this area – garden centres can position themselves as experts and give both new and old customers a reason to come to their operation.
In terms of day-to-day operations, garden centres need to go the extra mile and make changes to their businesses to demonstrate they are truly eco-conscious. Stensson also advocates that garden centres go green by applying environmental practices and bringing in eco-friendly products. He says it’s not as simple as saying that the business is green because of the plants but admits this is a big challenge for the industry. Speaking from his own experience, he cites biodegradable pots as one example. “We’re offering them in our stores, side-by-side, now,” he says. “It’s one thing to offer them, it’s another thing to get people to buy them. The one problem we have with biodegradable pots is that they are a lot more expensive than plastic pots.” This is proof that the industry needs to lead its
customers to act more eco-friendly or risk losing these shoppers.
The value of landscaping
It’s no secret that a beautiful landscape can help increase the price of a home. Despite the recent housing sector slump, the lawn and garden market has held steady, helping to boost sales at garden centres. “We didn’t see a decline in housing until recently but that decline in housing usually has a delayed effect of a couple years to the industry. For example, if you bought your new home two years ago, sure the economy went down, but you still need to start doing your gardening within those two years,” says Santacruz.
Dolibois says garden centres need to stress the importance and value of garden products to their customers in all aspects. “As an industry, we need to figure out how many different ways we can monetize the value of landscaping. By that I mean, how can we educate the consumer that a dollar spent on landscaping is a dollar well spent in terms of either improving the value of their home or increasing the quality of life or from an environmental standpoint.” The statistics further back up his point. CNLA’s 2009 Deloitte & Touche report found that a well-landscaped property can add 20 per cent to the value of the home and landscape can bring a recovery value of 100 to 200 per cent at selling time.
“The garden centre industry needs to position itself so it is top of my mind when a consumer is looking for ways to increase the value of their home. That expensive shower in the bathroom three years from now is a three-year-old model,” says Dolibois. “A tree is three years older and bigger. So how do we monetize the value of landscaping? If we really want to increase the price points and increase our profit margins, we’ve got to redefine what we do and what we sell as being more than just a pretty face.”
The customer, first and foremost
At a time when many industries are struggling to survive and remain relevant to today’s consumers, the garden centre industry is a sector that’s full of opportunities. A garden centre’s product is one that serves many purposes and can improve the life of your customer’s surroundings esthetically, financially and environmentally. The challenge for garden centres will be to make sure they’re serving every customer to the best of their ability.
Stensson says it best: “We need to take hold of every guest that walks through the door and sell them everything they need. We are a destination store and therefore the guest made a special trip to see us. Shame on us if we don’t sell them everything they need to complete their project.”
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