Business Planning - Multiple retailers: threat or opportunity?

Major retailers moving into the garden sector need not spell doom and gloom, Neville Stein suggests.

Waitrose: Flower garden
Waitrose: Flower garden

Growing up in the 1970s, I remember shopping with my parents being a bit of a chore. If we wanted groceries we went to the Co-op, for Christmas decorations we went to Woolworths and if we needed clothes or presents we went to the Army & Navy store.

Things, of course, have changed. I now wear smart trousers instead of denim flares and I also have the opportunity at supermarkets and large retailers to buy everything I need in one place. For good or for bad, supermarkets became one-stop shops because they knew that the quickest way to grow a business was to sell more to existing customers.

The same is true today. If you increase your product mix there will be more for your customers to buy. This helps to keep customers coming back and stopping them going to competitors. Supermarkets are not alone in adopting this strategy. Garden centres have also done a great job at having more on offer - and clearly the strategy works.

Cause for concern?

But are there worrying developments occurring with multiple retailers? Recent reports in this magazine have highlighted plans by Waitrose to develop a nationwide plant offer, and anyone who has visited a Next at Home store will be all too familiar with its expansion into our domain.

Multiple retailers have been selling plants for a long time but recent activity among many of the largest of them indicates that they are taking the plant category seriously and planning to exploit it for all its worth. Where does this leave us? Is it a threat or an opportunity and how should our industry respond?

If you are a grower then this must represent an opportunity. Multiple retailers will surely increase demand, which will present new supply opportunities for UK growers. Understandably, growers supplying this market will achieve a lower percentage gross margin on their sales than if they were supplying independent retailers.

The key, if you want to supply this market, is to know your costs down to the last penny. By accurately identifying all your costs you will be able to determine whether the price is right for you. If your costs are too high and you still want to supply this market then you will have to strip some costs out of your business. This might involve implementing a lean management programme to identify waste in your business or aggregating your purchases with a friendly fellow grower to reduce the cost of inputs. It might even mean co-operating with competitors with distribution.

But supplying plants to multiple retailers is not just for the larger grower. Many multiple retailers - the Eastern England Coop is a good example - have opportunities for small producers to supply a handful of selected stores in their immediate vicinity. Smaller growers might even be able to contract grow for the larger nurseries. Again, this will only work with a very accurate handle on costs.

There are risks, of course, in supplying the multiple retail market. The key is to identify those risks, the likelihood of them occurring and what you will do if they do happen. Business is a risky venture so business owners need to be fully aware of the risks and either accept them and try to minimise their occurrence or, if uncomfortable with the risk, find another market channel that involves less risk.

Competitive threat

How should you respond then, if you are a retailer, to the increased competitive threat from multiple retailers? Perhaps it is a mindset thing. We should see it as good news - multiple retailers could be growing the demand for plants.

Imagine this. A novice gardener buys some seasonal plants when shopping for the weekly groceries at the local supermarket, the plants do well in the garden and the novice gets hooked on gardening. Where is he or she going to go for more advice and help. Yes, you've guessed it, the local garden centre. This presents a fantastic opportunity for independent garden centres to promote their expertise and horticultural excellence.

Spending more time on product knowledge training, having educational events for customers, creating how-to leaflets, providing a telephone advice line and ensuring that trained staff are always on hand to answer questions will create a point of difference from the multiple retailers. The supermarkets will not be able to give that level of knowledge and expertise to their customers in the plant category.

The other approach is to work harder on making the shopping experience at your garden centre more enjoyable. Go to a supermarket prior to a bank holiday and there is a frantic rush - surely only the hardened shopper enjoys the experience. Yet how enjoyable can garden centres be on a sunny day? They are fantastic places to visit.

So enhancing the ambience further, creating "wow" and inspiration must surely be the way to compete with the multiple retailers. As with all business there are always opportunities to look at your competitors, find out what they are doing badly and to do it better.

Margaret Thatcher once said that competition is good. What it does is force companies to respond - it unleashes creativity, focus and drive. So just maybe the growth of plant sales in supermarkets is good news. After all, shouldn't we celebrate the fact that more people will be getting access to plants? The more plants we have the better our environment and as gardens are non-static, ever changing things, so too will be the market for those who supply them.

Neville Stein is managing director of business consultancy Ovation

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