The past few issues we have been looking at Marketing in retail garden
centres with a focus on traditional advertising techniques right through to big picture strategies. One part of retailing which has significant impact on both your brand and bottom line is that of pricing strategies.All too often I hear about retailers attempting to beat their competitors on price. The profitable retailers are those that keep an eye on competition, but do their own thing and actively promote their brand and product to a specific local market. Most garden centres typically apply a generalised 100% mark-up on their green life, with some hard goods being an exception. While this may recoup your investment in stock, you can potentially maximise your stock turns and profit by varying your margin and manipulating the ‘value perception’ of an individual item.
Stick with the SAS philosophy – Simple and Smart!
Price Strategies
Price Points – There is a significant amount of psychology involved in the decision process when a customer looks at a price. Buying decisions are often made on an emotive notion, rather than rationally. Which series looks cheaper to you?
Series 1 - $9.95 $10.95 $12.95
Series 2 - $10.00 $11.00 $13.00
This is a simple way of manipulating the perceptive value of a plant, and a reason why applying a 100% margin does not always work. I was in a garden centre recently and saw a plant retailing at $404.95. It would hold much greater value in the consumers’ eyes if it had the price of $399. This is likely to have the effect of multiple stock turns, returning a great overall profit in that square meter. If you are currently working at different price points, this will be negatively impacting on the consumers’ decision to buy particular products. Simplify your price points, and be strategic about marking up and sacrificing margin on some lines. Your aim is to increase stock turns, maximising your return on that product line.
Price Skimming – This is when you have a competitive advantage on a product, and may also be applied to those products of unknown value by the customer. New products have great potential, with limited numbers available on the market to be consumed. As demand drops, and supply increases, the retail price will inevitably decrease.
Package Pricing – Refers to packaging like products together (i.e. seedlings and fertiliser) for marketing advantage, increasing stock turns but sacrificing a margin percentage on each sale. If you alter the package in any physical way (i.e. planted containers), you can quickly add consumer value driving margin higher – convenience should always be factored into price.
Value Perception Strategies
The perception of product value is one of the most relevant for our industry. As I have touched on with regard to price points, strategic pricing can be manipulated to maximise your return, increase stock turns and increase average dollar per spend.
Driving stock turns through value perception pricing is how the big box drives their sales. By providing hot offers on product lines that have been negotiated for in wholesale price, allows them to pass this saving onto consumer. By dealing in quantity, it requires you to drive sales with an offer, while relying on the consumer to see the value when in store turning them into potential repeat footfall. There is no reason why independent retailers can’t adopt similar strategies by providing offers on plants in store, to create the perception of value in the customers mind.
Additionally, unknown value items such as large specimen plants, furniture, new items, or infrequent purchase items can easily be priced simply based upon what the customers’ perception of value might be. This may fetch a margin well in excess of 100%. Consider doing this particularly with bare root stock. You may end up potting into smaller containers to manipulate the shoot to pot ratio, decreasing your resource costs and increasing the value perception of the plant. Have a look at the plant and ask yourself if you would pay the price. You need to disperse the paradigm that an independent garden centre is ‘more expensive’ than a big box, through careful marketing, merchandising and pricing strategies.
Further examples of Value Perception Strategies
As mentioned, the big box trade in volume, but commonly these ‘hot offer’ or ‘bulk buy’ discounts are offered on known value items – your bread and butter. These are lines (i.e. Dietes, Convolvulus, Diosma, Nandina) you should consider having offers on intermittently. You should not make them permanently cheap, as you run the risk of entering into price wars. Instead, consider having seasonal offers and keep the customer guessing. Additionally, the perception of an offer can also be manipulated –Buy 5, get 1 free. Or, buy 5 for $40. Which sounds better to you?
Another way you can manipulate perceived value is by adding that little ‘personal touch’ to an item. Rivers of Yarrambat and other garden centres I’ve visited have been known to place little lady birds onto the rim of containers, or a leaf of the plant. Low cost items such as this allow you to add value and margin.
I visited Pearson’s Nursery in Warnambool recently and was amazed at the sight of potted colour being given away freely to the oldies and children. The word of mouth that this business gives away free stuff causes a real stir in the market. The margin on items such as this is often low, and rather than waiting for stock which is highly perishable to go off, give it away! I often see valuable resources constantly being pumped into stock which has already passed its best, or had a birthday. The important lesson to learn here is, offload stock before it shows any sign of turning.
Discounting
Discounting can be damaging by cheapening your brand, and also the consumers perception of product quality. Discounting should ideally take place on a good before quality begins to degrade, allowing you to reclaim your investment on that product line, while cutting your losses in potential profit. The reality is, some plants are ‘dogs’, and simply won’t sell in your area. Most plant buyers will know after a week of a new plant hitting the shop floor whether it is doomed for failure. Often this may be influenced by your ability to merchandise, and actively sell the product itself. Positioning in store plays a very important part of this.
Beasley’s Nursery and Tea House has one of the most impressive ‘discount tables’ I have seen. Their philosophy is simple – If you order 6 new plants, and there are already 2 left over, it is inevitable that the new stock will be better quality than the old stock. Rather than continuing to merchandise this in the same room, it gets fed and cared for and presented on a ‘discount table.’ If it is of poor quality, it gets composted.
Consider the few examples that have been mentioned and the way you might be able to address some of your pricing challenges. In doing so you will increase your turnover, reducing the amount of stock ‘birthdays,’ which will improve stock quality, your brand and the bottom line.
