Retail Reality Checks That Hit Close to Home

By: Robert Hendrickson

From: IGC Retailer, March/April, 2013

 
Retail Reality Checks That Hit Close to Home

You know the cliche about real estate and retail: “Location, location, location.” Especially when it comes to retail, choosing the right location has been accepted as one of the most critical decisions a business can make. So how then do you explain sales problems at a company with, perhaps, the best locations on the planet?

My experience has shown that decisions made in conference rooms play a larger role in business success than where or how many locations may be in play. This conviction was confirmed in an article that arrived in one of the two dozen or more business-related e-newsletters I receive each week. As I began to read this Advertising Age article, I wondered if it could possibly be discussing our industry as well as the one mentioned in its headline. Comments from people asked to weigh in on the discussion began to sound all too familiar with what has been happening over the last decade at many garden centers across the country.

The article begins: “They have aging stores and intensifying competition in terms of innovation, store design and marketing. Something has to happen, either changes to marketing, investing in their stores or all of it. The status quo is not going to work.”

Whew! That’s a little too close for comfort. But do some self-assessment. When is the last time your garden center received a major upgrade? Are there retailers in your market that do a better job than you at incorporating new retail ideas, improved shopping environments and aggressive marketing?

(For affordable ways to make your store more shopable, don’t miss Taniya Nayak’s keynote at this summer’s IGC Show in Chicago. See sidebar, right, for details.)
I ran this issue of aging stores past my mentor and long-time friend Ernest Wertheim. As expected, his quick reply gets right to the point: “Robert, how long has your bride lived in your home?”

“Close to 12 years,” I reply.

“And in those 12 short years, how many times has Wendy completed a major interior remodeling of your home?” Ernest asks next.

“Well, immediately after moving in, since I had always accepted drywall as a color,” I confess. “Then one other major redo I remember, and, now that you mention it, we’re in the middle of what Wendy calls ‘time for a change.’”

“So,” Ernest continues, “during this same time frame, how many garden centers do you know that have gone through that many major upgrades? Not just touch-ups and minor changes, but enough for the public to recognize a brand-new shopping environment?”

I expand the truth quite a bit, saying, “Not many,” knowing I could count on one hand the number of garden centers that have invested in major upgrades to their site over the last several years.

“And you know the difficulty our industry has faced maintaining the level of sales we experienced during our peak volume years. Quite possibly, the person comparing a drop in sales to not staying fresh and current with store upgrades may have made a correct correlation, wouldn’t you agree?” Ernest answers.

More Reality Checks
The next issue in the article deals with decisions on trying to attract more shoppers with reduced prices, or what some in our industry call “known-value pricing.”

“To generate more traffic, they promoted value items, but that’s been tried before with little effect. It’s obviously not working, and they need a new plan.”

Boy, that could be talking about almost any retailer’s recent effort to drive sales. But as a simple discounting chart proves, a small drop in price requires a huge boost in unit sales just to stay where you were. And when you’re suffering from a drop in customer count, generating a lot of additional shoppers even while dropping prices can be a challenge. It’s one of those simple math formulas that elude even the largest retailers in the land. (A simple-to-understand discounting chart for even the most math-challenged among us is available by e-mailing me.)

Issue No. 3 in the article centers on confidence and inventory levels, a strange twosome. “Offering too many items became a problem. They don’t have the confidence as before so they try to sell everything to everybody.”

This is another time-worn cliche I’ve heard hundreds of retailers state, “You can’t be everything to everybody,” but it’s more often in words and not action. Garden center owners who downsized plants and prices in hopes of attracting more budget-conscience shoppers most likely found their sales volume continued to drop. Not having confidence to stand for what makes a company different, including prices needed to make a profit, results in a mixed message that waters down and confuses everyone.

The article ends with a statement of hope that pretty much clarifies my entire career mantra: “They have to get back to focusing on their core business.”

After decades of the industry being told that garden centers have to diversify, bring on new lines like purses, jewelry, home decor and the most recent golden ring, add a cafe, I’m still enough of a cynic to wait for P&L proof. As with all things in life, there are always exceptions, and garden centers who claim “but we’re different” could possibly be so. But as long as the vast majority of sales and margin dollars at the vast majority of garden centers continue to come from what our financial analysis consultant Steve Bailey calls “stuff with roots,” I’ll continue to propose that all the diversification many garden centers found themselves involved with due to industry suggestions and not financial facts has led to a watered-down reason to exist in the eyes of many shoppers, added operating expenses and increased inventory, and has been a distraction for owners and their staff.

Our industry’s “core business,” and my conviction as the reason garden centers deserve to exist, has been, continues to be and until further notice will most likely remain creating the very best shopping environment where consumers can purchase the very best plants any retailer can present. Period. I’ve found little financial proof of an alternative.

Had we focused on this business core instead of being distracted by all the many diversions and suggestions our industry has been presented, I believe our place in the market would have been secure and competition less of an issue, even through these “tough economic times.” To those who may have a different point of view: remember, cynic success is measured in net profit dollars not gross sales dollars.

And the company the article was about? It’s none other than the famous golden arches, McDonald’s, after reports of its first monthly sales decline in nine years and installment of a new president.

Guess that cliche about location, location, location needs a new look.


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