State of the Industry - Garden retail

Recent corporate interest in the garden retail world suggests that the sector is healthier than it might appear.

Garden centre - pot display
Garden centre - pot display

This year’s early summer wash-out quickly dampened hopes raised in spring of a bumper year for garden retail, after three indifferent seasons.

No one has been immune from the variable fortunes. According to B&Q group chief executive Gerry Murphy: “Abnormal weather patterns boosted sales in the first quarter but were very unhelpful in the second.”
The company’s outdoor product sales fell sharply in the second quarter, reflecting the poor weather and the forward-pull of sales into an unseasonably warm first quarter.
Sales of weather-affected categories increased by more than 20 per cent in the first quarter but decreased by nearly 20 per cent in the 10 weeks to 14 July.

HTA commercial director Andrew Maxted says the trade should not be too despondent. “We’ve had good Septembers and Octobers in recent years. Retailers recognise that there’s still a lot to play for this season.”
According to HTA figures, garden centres outperformed DIY chains in the year to the end of May (see Chart 3, p30). “They’re fighting more aggressively for business than a few years ago,” comments Maxted.
“In 2002-03, there was plenty of consumer demand, but the past couple of seasons have been tougher — the consumer has become more discerning, so everyone has been looking at direct marketing and other forms of promotion.”
Many garden centres have instituted “gardening clubs” or other loyalty schemes, and use this data to target offers, not just by post but also via email and even by SMS text messaging.

This year’s figures  show a continuation in the fluctuating, weather-dependent market of recent years.
The total figure for retail sales in 2006 was £3.8bn — down eight per cent in real terms on 2005, although sales of horticultural stock were up four per cent over the same period.
A particularly encouraging area has been young edible plants, sales of which rose 22 per cent last year over the year before — a trend that has yet to level off.

Pricing

With sales volumes remaining broadly static overall, though, retailers are seeking a variety of ways to boost prices per unit. But such a boost is unlikely to come from bread-and-butter plant lines, believes Maxted. “Bedding has, unfortunately, become a commodity product, where price is king,” he says. “But companies have developed premium products — roses, lavenders — that can command an extra £1 for a three-litre pot.”By working more closely with growers, retailers can develop higher-value lines, he believes. “The industry needs to take better control of the product, and growers need to give retailers a reason to stock their plants, or even to develop products specific to them.”

The HTA maintains a key role in bringing different parts of the supply chain together, he explains. And smart promotions can at least increase volumes of “commodity” lines if tackled properly. Scotsdale Garden Centre managing director and HTA Retail Management Group chair Caroline Owen says: “Shoppers are used to promotions — we’ve got a three-for-two offer on perennials right now. We’ve put some thought into the positioning and the merchandising, and as a result they’re selling by the trolleyful.”

And however modest their turnovers and margins, retailers can take heart from the recent flurry of corporate activity around the gardening sector, which suggests it still offers growth potential overall.
At the time of writing, the fate of Dobbies Garden Centres remained in the balance, as retail giant Tesco, which had attempted to woo shareholders with a bid that would give it a 50 per cent stake in the company, waited to hear whether its rival Wyevale owner West Coast Capital (WCC) would mount a fresh bid. Whatever the outcome of this potential battle, it is clear the big supermarkets seem to have concluded that they are unlikely to conquer the garden market from their existing outlets.
Sainsbury’s this year abandoned its troubled plant marquee format, while Tesco has reduced the number of plant marquees by a third.
WCC bought Blooms of Bressingham’s 10 stores in February, to add to the 100-plus Wyevale stores it bought out in April last year. WCC also owns 30 per cent of home-shopping company Flying Brands.
Green services provider Glendale, meanwhile, expanded into retail with the opening of its first Coblands garden centre this spring, with more likely to follow.

Maxted concludes: “We have an ageing, green-minded, time-pressured population wanting garden services as well as products. Those are the fundamentals, and they’re not going away.
“Garden retail has an exciting future, and entrepreneurial minds have seen that. New players will bring an increased level of professionalism to the sector, so everyone will need to up their game.”

Green fingers

Part of gardening’s appeal to the corporate world, if its own claims are to be believed, is the access it provides to the “green pound” as well as the grey.
Tesco chief executive Sir Terry Leahy said of the company’s bid for Dobbies: “The deal is an important part of our strategy to provide customers with greater access to affordable energy saving and environmental products.Garden centres are ideally placed to support this, because for many people, gardening is the way in which they express their desire to be green.”

Wyevale, meanwhile, announced in April its intention to become carbon-neutral by 2010 and has already pulled out of selling patio heaters because of their poor environmental credentials.
And new stores such as Lintzford Bridge Garden Centre in Tyne & Wear and Coolings Nurseries’ planned Outdoor Inspiration centre in Kent are making a virtue of their eco-friendly building design.
According to Maxted, the greening of the sector “is a trend, not a bandwagon”. He adds: “It still has some way to run, and isn’t going to reverse any time soon.”
He cites a survey of over 1,000 adults conducted by the HTA earlier this year. “One of the key messages from our research is that gardeners are concerned about the environment — in fact, the keener they are, the greater their concern,” he says.
“It would be very easy to cynically exploit that concern by just sticking a green badge on products with no substance behind it. But we’re looking at the science — the role of plants in coping with the effects of climate change or gardens’ carbon footprint, so we have evidence to support the claims we make to customers. A primary issue for the industry as a whole is to manage consumer expectations against what we actually deliver.”

Another HTA finding is that consumers are prepared to pay more for locally sourced plants and other products, he says.
Many people will be familiar with consumers giving what they perceive to be the “correct” answers to pollsters’ questions, which are then contradicted by their actual spending behaviour.
“There may be some difference there,” concedes Maxted. “But some of that intention will translate into actual behaviour — look at the success of ‘locally grown’ promotions already.”

Garden retail consultant John Stanley believes this trend could extend to other product categories.
“With the growing movement to reduce carbon miles and source more locally, the consumer will start questioning where products are coming from and the rebellion to not buy from China, which is starting in the US, will spread,” he says.
“The consumer is more likely to believe a local, trusted independent than a multi-national or national conglomerate.”
In general, garden retailers are well positioned to benefit from current environmental concerns, says Maxted. “Why do people pay more for any product in the high street? It’s because they get some psychological benefit from it. We garden because we enjoy it, and we get more satisfaction from it if we feel we’re helping the environment at the same time.”
He admits that retailers will lose income streams from product lines like pesticides, “but there are compensatory revenue sources”. Stanley adds: “I expect to see a downsizing of gift and garden-care departments in the garden centre, while categories that help save the environment will increase in size and product range.”

Going green serves not only to lure in environmentally minded shoppers, though. It can also boost business efficiency, as the HTA’s Environmental Management System appears to show. This pilot scheme, so far involving three garden centres and three growers, has had “amazing results,” says Maxted. “It’s a more positive message to give to both customers and staff, and also a real opportunity to drive down costs such as heating and waste.”
Other efficiencies have been achieved by retailers working more closely with suppliers. Owen says: “We’ve been working together to iron out problems between retailers and growers, addressing how to deal with the competition from the Netherlands, reduce delivery times, or even just problems with trolleys.”
A lot comes down to training, she says. “If growers come in and train our staff, they can then take management of the plants, which really helps.”


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