Saturday, 4 September 2010
Wednesday, 28 July 2010
The role of collaboration in building a sustainable Nursery & Garden Industry
The Nursery and Garden Industry is a diverse network of businesses of all sizes that compete for market share in the production, retail and allied sectors of the industry. This articles aims to identify some emerging areas of opportunity for business both small and large within the nursery and garden industry (NGI).
Partnerships
Increasingly, large publicly listed companies are engaging in communities as a means of demonstrating their social and environmental responsibilities which is driven by increasing internal (employees) and external (shareholders) pressures. Partnerships as a form of community involvement have been studied by many in the academic arena and have found that they can have the following returns to a business.
1. Brand differentiation
2. Enhanced brand/image and maintained community trust
3. Enhanced community reputation
4. Improved employee recruitment
5. Employee morale and retention
6. Enhanced government/community relationships
7. Improved competitive context
8. and the ability to reach new customer segments
Many of the above benefits relate to the sustainable management of a businesses risk with regard to reputation and subsequent consumer market share.
In identifying and characterising current community partnerships, which in the NGI often are at a philanthropic level where there is simply an exchange of money, the following Cross Sector Collaboration Continuum (Austin 2000) may be utilised:
Philanthropic – There is a level of altruistic motive and limited or no strategic value. i.e. donations. An example of this includes simply giving to a local charity in any form as a one off donation.
Transactional – Relationship increases beyond basic philanthropy, and may involve a particular project that demonstrates community involvement. An example of this may be support via fundraising initiatives.
Integrative – Embedded relationships with motives from both parties being strategic alliance. Value alignment between missions of the non profit and the business also exists in the activities that are undertaken. An example of this is an ongoing relationship spanning multiple years.
Collaboration
The act of working together and the outcomes that may be the result of a joint relationship has been studied and theorised in detail. If we take a step back and look at human nature for a moment, a theorist called Howard Rheingold stated that ‘biology is war in which only the fiercest survive. Businesses and nations succeed only by defeating, destroying and dominating competition.’ While this is historically true, the argument exists that through collaboration of complex interdependencies, the issue of competition may be somewhat diminished.
Another theorist (Rowland 2009) looked to the makeup of businesses stating that the ‘entity [business] exhibits behaviours that emerge from the complex interactions of subsystems or individuals…[and] the emergent entity is more than the sum of its parts.’ This analogy would suggest that there is a collective of working parts (the employees) which work together to attain greater power for a given outcome.
This may also be applied to the culmination of multiple businesses at an industry macro level. Therefore, it may be said that businesses that come together in the form of a partnership may together be stronger, producing greater outcomes than when one is operating in its own individual context. Without taking this too literally, let me explain what this might look like, and the importance of specialisation.
Specialisation
A mutually beneficial collaborative relationship will only ever be such if the values of each business are aligned to one another. It is inevitable in our industry that each of our driving goals is to sell more of our own garden related product.
Specialisation can play an important role in this process. Businesses that are experts in their area are those that hold a level of credibility and subsequently have a reputation of producing a quality product that ultimately fetches a premium price. If two such specialised businesses were to collaborate together to leverage resources from one another (i.e. they are non-competitive and yet complimentary products), you may see:
• Streamlined stock ranges which causes a reduction in your production costs (simpler systems, reduced pest and diseases - monocultures while at an uneducated level can be riskier, they are easier to manage).
• Improved supply chain management resulting again in reduced costs for delivery and sales runs.
• Improved operating systems and a streamlined process of production.
• Greater product offering to the retailer, greater marketing power and reduced sales costs.
Comparative Advantage
This notion of an increasing amount of collaborative relationships based upon specialisation needs one other significant factor to succeed – Innovation. It takes just one mind to have an idea, but it takes a collaborative set of minds to exchange ideas that will have resulting impact. This was outlined by a presentation by British author Matt Ridley titled ‘When Ideas Have Sex’. Ridley draws on a concept called Comparative Advantage which refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party. The following demonstrates this concept in the context of the Nursery and Garden Industry:
Production Nursery Owner Jim takes:
4 hours to pot 1000 pansies
3 hours to pot 1000 chillies
Production Nursery Owner Ken takes:
1 hour to pot 1000 pansies
2 hours to pot 1000 chillies
Ken doesn’t really need Jim because his level of productivity is much greater already. However, if they decided to collaborate and trade their stock then:
If Ken pots 2000 chillies (2 hours), and Jim pots 2000 (8 hours) pansies and then they trade, they will each have saved an hour of work. The more that they collaborate together and act out such exchanges the more efficient they will become in their area of specialisation, reducing costs on both sides. The mutual gains from trade will therefore grow.
The Nursery and Garden Industry has immense opportunity for improved supply chain logistics, competitive advantage, specialisation and innovation. The result of this over the coming years will be a self sustaining, organically comprised system of interlinked relationships providingg mutual benefit to all and subsequent industry growth.
Case Study: Far Plants UK
Farplants is said to be the UK’s largest wholesale supplier for garden plants to the horticultural retail market. Farplants has a turnover of £16 million annually (2008), with a significant proportion of this being generated in Spring.
The organisation is essentially a cooperative (not for profit) of independent companies set up in 1978 and comprising of 7 production nurseries spanning across 13 different production sites (110 acres of mixed facilities). The growers have a board of their own by which they purchase common materials such as pots and media as one sole group, and not independent companies. Farplants works on behalf of the nurseries to carry out three main tasks – Sales, Marketing and Distribution.
The foundation of this working dynamic collaboration of relationships is that of trust amongst each primary stakeholder. Trust plays a key role at Farplants with specific regard to stock management. Each business produces specialised lines that compliment the Far Plants product mix. This product mix is negotiated through round table discussions with a supportive connotation of assisting one another for the greater benefit. With 25 different sites, there is the ability to grow a very wide range of plants that fill the market year round. Additionally, with the majority of stock produced on contract, the relationship and trust between producers and retailers is also significant.
Essentially the producers do what they do best, and that is grow plants while the Farplants organisation does the rest.
References:
1 - Austin, J., 2000, ‘Strategic collaboration between nonprofits and businesses’, Nonprofit and Voluntary Sector Quarterly, 29 (supplement)
2 - http://www.ted.com/
Further Watching:
Sunday, 18 July 2010
Effective Merchandising
anthonycurnow.com
In the last issue of Groundswell, we touched on a number of store design elements and principles which can aid in maximising profit. Following on from this, effective merchandising is the fastest, easiest and most cost effective means of increasing your average dollar per spend and overall sales. In a recent trip around the state with John Russell of Brett & Associates, NGIV members/non-members from retail, production and allied trade learnt about some key effective merchandising principle and practices.
John began by outlining the three ways which customers make a decision to buy:
1 – Planned Purchase – 10-15%
2 – Personal Selling – 5-15%
3 – Merchandising – 80-90%
This clearly demonstrates the importance of effectively merchandising stock in store.
Merchandising Techniques
The following techniques were detailed in the workshops, and can be utilised to maximize visibility and appeal:
1. Block product by colour. The more product you have (particularly popular products), the greater the impact and likelihood of multiple sales.
2. Vertically colour block products rather than horizontally, as this increases shop ability and is more likely to attract the customers eye.
3. The area between waist and eye level is where customers pay most attention. This demonstrates the importance of having stock at least at waist height, and placing the products you wish to turnover in this zone.
4. Multi-face products on shelving – this is most effective in the sundries category, where having multiple facings of popular products such as weed killers, general fertilizers or potting media can further increase and encourage sales of those lines.
5. Keep cross merchandised displays simple. As John said – “You’ve either got a plant display with a pot highlighting the plants or a pot display with a plant highlighting the pot”. Use props sparingly to add interest and attract attention.
6. Cross merchandise in uneven numbers and follow the same principles that apply to designing a garden. Think about whether you are producing a symmetric or asymmetric display.
7. Display by end use. This means putting the plant into context for the customer by producing small courtyard like displays. Always feature the products used in the display en masse nearby, so that people don’t feel uncomfortable having to pick apart a display.
A practical example for applying these principles - Select three different plants of contrasting colour, texture, form but with similar growing conditions and display these separately on benches with a single prop to tie the products together. You need to take the guess work out of the customers buying decisions.
A great display at Grevillea Nursery (Werribee). Signage demonstrates the features and benefits of the plant. The large advanced specimen also attributes to the display, showing customers what they are buying into.
Vertical blocking and multiple facing products in the sudries department at Faggs Mitre 10 Geelong.
Signage Techniques
The other most important element to effective merchandising is clear and concise signage, as this will increase sales rather than having staff push face to face sales – they produce a high return for little investment. John suggests A4 signage utilises the following principles:
1. All signage should be uniform and inc
lude your branding and logo towards the bottom as you are not selling your brand as they are already in your store, but rather reminding them of where they are shopping.
2. If there is just one thing to remember when it comes to developing signage which sells product for you, it is:
Feature then Benefit
3. The feature of the product refers to the characteristics of the product which will appeal to the customer. The benefit however refers to what the characteristic will do for the customer. For example, a Photinia ‘Red Robin’ means nothing to the customer. The features are new red foliage, responds to pruning and drought tolerant. The benefits are that Photinia ‘Red Robin’ is fast growing, a good hedging plant and is a low water user.
4. Generally, customers want to know:
a. What can I use it for/where can I use it?
b. Why should I buy it (benefits, reasons to buy)?
c. How much does it cost?
5. Prices printed in red have a psychological reaction that sends a perception of value, even if the item is not on sale.
Following on from the presentation by John, attendees to the workshop had the opportunity to actively merchandise stock at the garden centres hosting the workshops. This process was similar to a cook off on Master Chef – the energy and competitive streak in us all came through, spurring the implementation of their newly found skills in re-merchandising stock. A few examples of the outcomes of this process can be seen here.
Johns Suggested Props
- Umbrellas
- Pots and ornaments
- Painted pots or boxes
- Wooden tubs
- Wooden wheelbarrows
- Trellis
- Driftwood
- Sawn tree rounds or blocks
- Rocks
- Bricks and pavers
- Pebbles shell and bark
- Pine cones
- Fruit and vege - real & artificial
- Silk and crepe paper flowers
- Hessian- good colours now
- Cane baskets
- Coloured plastic pots
- Coloured watering cans
- Candles - chunky
- Ribbons
- Coloured paper
- Balloons
- Toy figures - scarecrow
- Florist boxes
- Archways
- Scarecrows
- Carts
- Old bicycle
- Old car
- Carts
- Wheels
- Gates
- Old tools
- Old boat
- Letterbox
- Birdcage
- Old boots
- Telephone box
- Mannequin
- Gazebo
- Flower cart
- Wooden crates
- Straw bales
- Bucket & spade
- Sunhat or bonnet
- Painted mural
- Corrugated iron
- Old cauldrons, water cans, tea pots, baking dishes etc.
- Mock patio ,verandah, front entrance etc.
- Hired costumes for theme promotions
Johns Suggested Merchandising Solutions
- cottage
- tropical
- woodland
- mediteranean
- Japanese
- formal
- native
- shade
- hot & dry
- seaside
- autumn tints
- winter
- spring
- summer
- patio
- Containers
- front doors
- structure plants
- climbers
- easy care
- herbs
- the edible garden
- kids garden
- bird scaping
- screens
- ground covers
- fragrant
- flowers for picking
- rockery
- water gardens
In the last issue of Groundswell, we touched on a number of store design elements and principles which can aid in maximising profit. Following on from this, effective merchandising is the fastest, easiest and most cost effective means of increasing your average dollar per spend and overall sales. In a recent trip around the state with John Russell of Brett & Associates, NGIV members/non-members from retail, production and allied trade learnt about some key effective merchandising principle and practices.
John began by outlining the three ways which customers make a decision to buy:
1 – Planned Purchase – 10-15%
2 – Personal Selling – 5-15%
3 – Merchandising – 80-90%
This clearly demonstrates the importance of effectively merchandising stock in store.
Merchandising Techniques
The following techniques were detailed in the workshops, and can be utilised to maximize visibility and appeal:
1. Block product by colour. The more product you have (particularly popular products), the greater the impact and likelihood of multiple sales.
2. Vertically colour block products rather than horizontally, as this increases shop ability and is more likely to attract the customers eye.
3. The area between waist and eye level is where customers pay most attention. This demonstrates the importance of having stock at least at waist height, and placing the products you wish to turnover in this zone.
4. Multi-face products on shelving – this is most effective in the sundries category, where having multiple facings of popular products such as weed killers, general fertilizers or potting media can further increase and encourage sales of those lines.
5. Keep cross merchandised displays simple. As John said – “You’ve either got a plant display with a pot highlighting the plants or a pot display with a plant highlighting the pot”. Use props sparingly to add interest and attract attention.
6. Cross merchandise in uneven numbers and follow the same principles that apply to designing a garden. Think about whether you are producing a symmetric or asymmetric display.
7. Display by end use. This means putting the plant into context for the customer by producing small courtyard like displays. Always feature the products used in the display en masse nearby, so that people don’t feel uncomfortable having to pick apart a display.
A practical example for applying these principles - Select three different plants of contrasting colour, texture, form but with similar growing conditions and display these separately on benches with a single prop to tie the products together. You need to take the guess work out of the customers buying decisions.
A great display at Grevillea Nursery (Werribee). Signage demonstrates the features and benefits of the plant. The large advanced specimen also attributes to the display, showing customers what they are buying into.
Vertical blocking and multiple facing products in the sudries department at Faggs Mitre 10 Geelong.
Signage Techniques
The other most important element to effective merchandising is clear and concise signage, as this will increase sales rather than having staff push face to face sales – they produce a high return for little investment. John suggests A4 signage utilises the following principles:
1. All signage should be uniform and inc
lude your branding and logo towards the bottom as you are not selling your brand as they are already in your store, but rather reminding them of where they are shopping.2. If there is just one thing to remember when it comes to developing signage which sells product for you, it is:
Feature then Benefit
3. The feature of the product refers to the characteristics of the product which will appeal to the customer. The benefit however refers to what the characteristic will do for the customer. For example, a Photinia ‘Red Robin’ means nothing to the customer. The features are new red foliage, responds to pruning and drought tolerant. The benefits are that Photinia ‘Red Robin’ is fast growing, a good hedging plant and is a low water user.
4. Generally, customers want to know:
a. What can I use it for/where can I use it?
b. Why should I buy it (benefits, reasons to buy)?
c. How much does it cost?
5. Prices printed in red have a psychological reaction that sends a perception of value, even if the item is not on sale.
Following on from the presentation by John, attendees to the workshop had the opportunity to actively merchandise stock at the garden centres hosting the workshops. This process was similar to a cook off on Master Chef – the energy and competitive streak in us all came through, spurring the implementation of their newly found skills in re-merchandising stock. A few examples of the outcomes of this process can be seen here.
Johns Suggested Props
- Umbrellas
- Pots and ornaments
- Painted pots or boxes
- Wooden tubs
- Wooden wheelbarrows
- Trellis
- Driftwood
- Sawn tree rounds or blocks
- Rocks
- Bricks and pavers
- Pebbles shell and bark
- Pine cones
- Fruit and vege - real & artificial
- Silk and crepe paper flowers
- Hessian- good colours now
- Cane baskets
- Coloured plastic pots
- Coloured watering cans
- Candles - chunky
- Ribbons
- Coloured paper
- Balloons
- Toy figures - scarecrow
- Florist boxes
- Archways
- Scarecrows
- Carts
- Old bicycle
- Old car
- Carts
- Wheels
- Gates
- Old tools
- Old boat
- Letterbox
- Birdcage
- Old boots
- Telephone box
- Mannequin
- Gazebo
- Flower cart
- Wooden crates
- Straw bales
- Bucket & spade
- Sunhat or bonnet
- Painted mural
- Corrugated iron
- Old cauldrons, water cans, tea pots, baking dishes etc.
- Mock patio ,verandah, front entrance etc.
- Hired costumes for theme promotions
Johns Suggested Merchandising Solutions
- cottage
- tropical
- woodland
- mediteranean
- Japanese
- formal
- native
- shade
- hot & dry
- seaside
- autumn tints
- winter
- spring
- summer
- patio
- Containers
- front doors
- structure plants
- climbers
- easy care
- herbs
- the edible garden
- kids garden
- bird scaping
- screens
- ground covers
- fragrant
- flowers for picking
- rockery
- water gardens
Wednesday, 7 July 2010
Maximising Profit with Smart Store Design
anthonycurnow.com
First Impressions
First impressions really are everything. If your business is overcrowded and untidy on entry, it is likely that the customer will not even pass through this clutter to reach ‘the good bits’ of your store. Ensuring your overall housekeeping is of a high standard (raked paths, no weeds, stock is maintained at high quality) will portray an image to the customer, which immediately affects the perception on price. It’s like the difference between going to Myer or a discount variety shop – what the customer expects is different in each experience. The better presented the store the more likely the garden centre will be able to fetch a fair price for their stock. Additionally, you can influence a customers’ mood with your overall livery or theme. This is all about consistent branding throughout every aspect of a customers interaction with your business – from catalogue to face to face sales.
Lintons Garden & Home have introduced seaso
nal themes such as the Summer ‘Burst Into Life’ livery. This has tied in well with the colours of seasonal stock lines and created an experience for the customer that exhibits professionalism and encourages spending.
The entrance may be referred to as the welcoming zone and it needs to have the effect of calming the customer and setting the scene for the experience which is to unfold as they explore your business. It should be well defined in its traffic flow and open enough so that customers feel welcome to come and go at their own leisure. Ideally there will always be a friendly staff person in sight of this area to greet and farewell customers – this has the added bonus of awareness and will reduce the likelihood of theft.
Layout Considerations & Category Management
Balance and Symmetry – people respond positively to symmetrical things, hence our love of formal gardens. People are also naturally inclined to turn left. With this in mind, designing your entrance and exit points is incredibly important as a means of making sure there are few ‘dead spots’ in the entrance area to your store.
Accessibility - Overall, a successful layout is one which encourages spending by guiding customers through every category of the business. In doing so, stock needs to be merchandised to encourage sales by simply making it accessible. Stock that is difficult to access will not sell, so be aware that cramming plants into a bench will have a negative effect on sales.
Gardenworld are increasingly cross merchandising their indoor house plant range and associated products to increase the chance of an add-on sale, while maintaining the accessibility of their products to the customer.
Making Use of Dead Spots and Hot Spots – A dead spot can be utilized by placing either a high selling item which customers will seek out, or alternatively using them for low turnover specialty items such as hanging baskets and wire products. Hot spots on the other hand are made to be used and abused, capitalizing on areas which customers are almost given to buy from. These are key areas throughout your nursery which your customers regularly pass by.
Additionally, locating seasonal hard good lines (fertilizers in Spring) nearby the register can be a simple way of increasing your dollar per spend by having staff up sell these goods. This does not have to be a hard sell, as the tills are a highly impulsive area in themselves and often the item will sell itself.
Merchandising Like Products – You all know what cross-merchandising is, but what is most important is ensuring that what is contained in a cross-merchandised display is relevant. With this in mind, there are particular strategies you can employ to create an effective display. One such method is merchandising 3 different plants together, all of varying attribute – foliage, flowering and structural for example, and most importantly the three plants should all have the same cultural requirements. In incorporating other hard good lines, similarly don’t confuse the customer by placing too much in a display – keep it simple and effective.
Capitalise on Top Sellers – It is a general rule that seedlings should be located at the back of the garden centre as this encourages customers to walk through your store to reach this high turnover category. Regularly reviewing what is selling and what isn’t can guide you in category placement. Native plants for example should also be located towards the back of your outdoor sales area as these too currently contribute to a significant amount of sales for many garden centres. Potted Colour is another category, similar to that of perennial lines which generally have a shorter shelf life and are impulse driven. They must be sold as quickly as possibly before quality deterioration forces discounting which impacts on sales by diminishing margin. Placement of such lines may be between the entrance and a high turnover item like seedlings. There is a reason why milk is located in the back corner of the largest of supermarkets – you pass literally thousands of items along the journey, increasing the likelihood of an impulse purchase. Don’t be afraid to move an entire category and change your whole store should you feel that it will improve the overall movement of customers through the store for the benefit of increased sales.
Category Splitting – Placing the same product in more than one location in store confuses the customer. For example, a recent trip to my local automotive store saw me seeking out some window cleaner. All cleaning products (window and tyre cleaners) were merchandised according to their brand and not use, meaning that novices like myself could not easily compare like with like.
There are always some exceptions to the rule - In most garden centres I visit, all fertilizers, chemicals and herbicides are grouped accordingly. However, with increasing environmental awareness comes a need to have environmentally friendly products highlighted as a first option.
Reducing Theft - Increase visibility by having open lines of sight and reducing blind spots throughout your garden centre. Additionally, ensure you safeguard your entrance and exit to the garden centre by locking the till and having staff working in the area at all times.
Finally, with regard to layout, the best practical step you can make is having an operational map of your store which allows you to clearly understand customer movement. In doing so, for those of you who capture categorical data, this gives you the prime opportunity to actively promote particular products which are known in previous years to be big sellers, and actively push the sales of these lines sky high based upon sound financial categorical analysis.
Colour Associations
Emotions are undoubtedly a driving force behind sales, and the use of colour can significantly encourage this. We all use red and white or red and black on sales signage as red is the most effective colour for attracting people’s attention.
With this in mind, impulsive purchase are said to occur when reds and oranges are used in store, as they are hot colours and cause the heart to run a little quicker than normal. Within the same colour spectrum, yellow similarly induces emotive feelings of optimism as it is said that the brain releases more serotonin when around yellows.
Colour preference is influenced by our standard of living; brighter bolder colours appear to attract those on a lower income, whilst those targeting higher income brackets should use more subtle colours and shades.
When it comes to branding, we all know the Golden Arches or the white tick or the red cola can. These Associations are psychologically recognized within the consumers mind and are engrained from a very early age. Generations have grown up with some of the largest corporate brands and it is their simplicity that needs to be recognized, in both their design and use of colour.
Should you believe that your overall image is impacting on sales, perhaps consider enlisting the services of a colour consultant to guide you.
Macdonalds Plants Plus Nursery utilized a colour consultant when designing their small giftware area.
Are You Making it Difficult for the Customer? A Few Final Points
Lighting - Lighting has huge benefit in indoor settings particularly, which are often dark and cold in their appearance. Lighting can have a warming effect, encouraging customers to linger and shop while also highlighting various stock lines.
Handwritten Signage – This is a pet peeve of mine and also for your customer. It reflects negatively on your overall brand and may in fact cause a decrease in sales. It’s often painful to read, unclear in its purpose and much of the time would benefit from being discarded and letting the plant sell itself.
Signage at Gisborne Nursery is simple but very effective, with no hand written signs in sight. Stock is also well spaced with labels all facing the front making it easily shopped.
Crowded Layout – Inaccessibility of stock has already been mentioned, and overall having paths not suitably wide will also decrease sales. If you can’t get a trolley (or wheelchair) through every part of your store, you might as well close your doors until you can.
Lack of Shopping Aids – Not having sufficient baskets and trolleys for customers to assist themselves in shopping can have a serious negative effect on your average dollar per spend. Offering customers a trolley or basket will encourage them to fill them, rather than walking to the counter and exiting once their hands are full.
Keep the Staff Informed
Lastly, as always, your staff need to understand the decisions you make with regard to design and layout so that they are not constantly changing things that may negatively impact on sales unknowingly. Listen to your staffs ideas and educate each other in the effort of moving forward for the betterment of your business.
References:
http://www.precisionintermedia.com/color.html
http://retail.about.com/od/storedesign/tp/store_donts.htm
First Impressions
First impressions really are everything. If your business is overcrowded and untidy on entry, it is likely that the customer will not even pass through this clutter to reach ‘the good bits’ of your store. Ensuring your overall housekeeping is of a high standard (raked paths, no weeds, stock is maintained at high quality) will portray an image to the customer, which immediately affects the perception on price. It’s like the difference between going to Myer or a discount variety shop – what the customer expects is different in each experience. The better presented the store the more likely the garden centre will be able to fetch a fair price for their stock. Additionally, you can influence a customers’ mood with your overall livery or theme. This is all about consistent branding throughout every aspect of a customers interaction with your business – from catalogue to face to face sales.
Lintons Garden & Home have introduced seaso
nal themes such as the Summer ‘Burst Into Life’ livery. This has tied in well with the colours of seasonal stock lines and created an experience for the customer that exhibits professionalism and encourages spending.The entrance may be referred to as the welcoming zone and it needs to have the effect of calming the customer and setting the scene for the experience which is to unfold as they explore your business. It should be well defined in its traffic flow and open enough so that customers feel welcome to come and go at their own leisure. Ideally there will always be a friendly staff person in sight of this area to greet and farewell customers – this has the added bonus of awareness and will reduce the likelihood of theft.
Layout Considerations & Category Management
Balance and Symmetry – people respond positively to symmetrical things, hence our love of formal gardens. People are also naturally inclined to turn left. With this in mind, designing your entrance and exit points is incredibly important as a means of making sure there are few ‘dead spots’ in the entrance area to your store.
Accessibility - Overall, a successful layout is one which encourages spending by guiding customers through every category of the business. In doing so, stock needs to be merchandised to encourage sales by simply making it accessible. Stock that is difficult to access will not sell, so be aware that cramming plants into a bench will have a negative effect on sales.
Gardenworld are increasingly cross merchandising their indoor house plant range and associated products to increase the chance of an add-on sale, while maintaining the accessibility of their products to the customer.Making Use of Dead Spots and Hot Spots – A dead spot can be utilized by placing either a high selling item which customers will seek out, or alternatively using them for low turnover specialty items such as hanging baskets and wire products. Hot spots on the other hand are made to be used and abused, capitalizing on areas which customers are almost given to buy from. These are key areas throughout your nursery which your customers regularly pass by.
Additionally, locating seasonal hard good lines (fertilizers in Spring) nearby the register can be a simple way of increasing your dollar per spend by having staff up sell these goods. This does not have to be a hard sell, as the tills are a highly impulsive area in themselves and often the item will sell itself.
Merchandising Like Products – You all know what cross-merchandising is, but what is most important is ensuring that what is contained in a cross-merchandised display is relevant. With this in mind, there are particular strategies you can employ to create an effective display. One such method is merchandising 3 different plants together, all of varying attribute – foliage, flowering and structural for example, and most importantly the three plants should all have the same cultural requirements. In incorporating other hard good lines, similarly don’t confuse the customer by placing too much in a display – keep it simple and effective.
Capitalise on Top Sellers – It is a general rule that seedlings should be located at the back of the garden centre as this encourages customers to walk through your store to reach this high turnover category. Regularly reviewing what is selling and what isn’t can guide you in category placement. Native plants for example should also be located towards the back of your outdoor sales area as these too currently contribute to a significant amount of sales for many garden centres. Potted Colour is another category, similar to that of perennial lines which generally have a shorter shelf life and are impulse driven. They must be sold as quickly as possibly before quality deterioration forces discounting which impacts on sales by diminishing margin. Placement of such lines may be between the entrance and a high turnover item like seedlings. There is a reason why milk is located in the back corner of the largest of supermarkets – you pass literally thousands of items along the journey, increasing the likelihood of an impulse purchase. Don’t be afraid to move an entire category and change your whole store should you feel that it will improve the overall movement of customers through the store for the benefit of increased sales.
Category Splitting – Placing the same product in more than one location in store confuses the customer. For example, a recent trip to my local automotive store saw me seeking out some window cleaner. All cleaning products (window and tyre cleaners) were merchandised according to their brand and not use, meaning that novices like myself could not easily compare like with like.
There are always some exceptions to the rule - In most garden centres I visit, all fertilizers, chemicals and herbicides are grouped accordingly. However, with increasing environmental awareness comes a need to have environmentally friendly products highlighted as a first option.
Reducing Theft - Increase visibility by having open lines of sight and reducing blind spots throughout your garden centre. Additionally, ensure you safeguard your entrance and exit to the garden centre by locking the till and having staff working in the area at all times.
Finally, with regard to layout, the best practical step you can make is having an operational map of your store which allows you to clearly understand customer movement. In doing so, for those of you who capture categorical data, this gives you the prime opportunity to actively promote particular products which are known in previous years to be big sellers, and actively push the sales of these lines sky high based upon sound financial categorical analysis.
Colour Associations
Emotions are undoubtedly a driving force behind sales, and the use of colour can significantly encourage this. We all use red and white or red and black on sales signage as red is the most effective colour for attracting people’s attention.
With this in mind, impulsive purchase are said to occur when reds and oranges are used in store, as they are hot colours and cause the heart to run a little quicker than normal. Within the same colour spectrum, yellow similarly induces emotive feelings of optimism as it is said that the brain releases more serotonin when around yellows.
Colour preference is influenced by our standard of living; brighter bolder colours appear to attract those on a lower income, whilst those targeting higher income brackets should use more subtle colours and shades.
When it comes to branding, we all know the Golden Arches or the white tick or the red cola can. These Associations are psychologically recognized within the consumers mind and are engrained from a very early age. Generations have grown up with some of the largest corporate brands and it is their simplicity that needs to be recognized, in both their design and use of colour.
Should you believe that your overall image is impacting on sales, perhaps consider enlisting the services of a colour consultant to guide you.
Macdonalds Plants Plus Nursery utilized a colour consultant when designing their small giftware area.
Are You Making it Difficult for the Customer? A Few Final Points
Lighting - Lighting has huge benefit in indoor settings particularly, which are often dark and cold in their appearance. Lighting can have a warming effect, encouraging customers to linger and shop while also highlighting various stock lines.
Handwritten Signage – This is a pet peeve of mine and also for your customer. It reflects negatively on your overall brand and may in fact cause a decrease in sales. It’s often painful to read, unclear in its purpose and much of the time would benefit from being discarded and letting the plant sell itself.
Signage at Gisborne Nursery is simple but very effective, with no hand written signs in sight. Stock is also well spaced with labels all facing the front making it easily shopped.Crowded Layout – Inaccessibility of stock has already been mentioned, and overall having paths not suitably wide will also decrease sales. If you can’t get a trolley (or wheelchair) through every part of your store, you might as well close your doors until you can.
Lack of Shopping Aids – Not having sufficient baskets and trolleys for customers to assist themselves in shopping can have a serious negative effect on your average dollar per spend. Offering customers a trolley or basket will encourage them to fill them, rather than walking to the counter and exiting once their hands are full.
Keep the Staff Informed
Lastly, as always, your staff need to understand the decisions you make with regard to design and layout so that they are not constantly changing things that may negatively impact on sales unknowingly. Listen to your staffs ideas and educate each other in the effort of moving forward for the betterment of your business.
References:
http://www.precisionintermedia.com/color.html
http://retail.about.com/od/storedesign/tp/store_donts.htm
Thursday, 13 May 2010
Greener Bags for the Future
athonycurnow.com
The 2010 NGIA Conference had a clear theme of both environmental and economic sustainability dominating many of the presentations.
Building a sustainable business is something that most successful businesses aspire to, with the ability of the owner then being able to step away from the business for any given period.
Confusion is often common when it comes to defining the meaning of a ‘sustainable business’. To clarify, sustainability may refer to a businesses social, environmental or economical impact of their operations. These three factors are often referred to as the triple bottom line, and is increasingly important with larger corporations who are committed to corporate social responsibility. This is evident across most industries, and the banks are a good current example whereby they are marketing their change in operations by focusing on community and environmental impact to steer consumer perception of the banks being solely money hungry.
A successful business means a lot of things, and this article looks to identify opportunities for independent garden retailers to harness ‘sustainability’ trends and environmental awareness.
A case in point: Plastic Bags
Ok, so I admit, my personal carbon footprint is pretty high for one sole reason - I love to travel. In a recent trip aboard Virgin Blue, I was reading their in flight magazine (2) and found an article on the impact of plastic bags. It made the following key points:
1 – Australia uses over 6.9 billion plastic bags a year – 326 per person.
2 – The production of plastic bags produces less carbon emissions than paper, yet plastic bags take up to 1,000 years to break down and are made with oil, a non-renewable resource.
3 – Paper bags are no better than plastic – de-forestation, habitat destruction, fossil fuels produced by machinery – and that’s before the bag is produced and transported around the world.
The ‘green-bags’ which we see for sale at a nominal fee in supermarkets is one of the largest corporate bluffs of the past decade. In most consumer minds, the thought that they are doing a good thing for the environment is engrained into their psyche through strong marketing techniques. In fact, recent research by RMIT University shows ‘that a green re-usable bag is only more environmentally friendly than a plastic bag when it is used more than 100 times because it uses more material and energy to make than a plastic bag’ (2). Essentially, for most users – they are far worse in their environmental impact than the plastic bag of last millennium.
I say last millennium because there are now suitable alternatives, that while seemingly costly should be strongly considered by industry as a means of taking a proactive lead in tackling such environmental issues. One thing to be aware of though, is that over time it will be government legislation that leads such a debate as we have seen recently take place in South Australia. South Australian Minister for Environment and Conservation Jay Weatherill re-introduced state legislation on September 24 2008 to ban lightweight plastic shopping bags throughout SA. This legislation passed in both houses of the SA Parliament .
It is highly likely that in the near future Biodegradable and 100% Compostable bags will be the only option available. With improved manufacturing technology (reduced emissions and overall environmental impact), a reduction in the cost of production will occur. In moving forward, there are numerous options available to you that are a step up from plastic:
Degradable bags are widespread, and many garden centres have these, but they are still a mixture of plastic and other additives that degrade through reacting to environmental conditions (such as oxygen, light and heat) at land fill (3).
Biodegradable Bags are becoming more common, with an increasing differentiation between biodegradable and compostability too. The key difference with biodegradability is that they are manufactured from farm products such as corn starch. To meet international standards, they must break down within 6 weeks and fully biodegrade within 6 months (3). Biodegradable bags utilize microbial processes meaning there is a biological component to the degradation process.
Throughout this evolution, Standards Australia has developed a standard for biodegradability to aid decision making and ensure product quality with respect to biodegradability and toxicity claims. “In order to comply with the AS 4736-2006 Australian biodegradability standard - and thereby be considered compostable - plastic bags need to achieve or meet the following requirements:
• minimum of 90% biodegradation of plastic bags within 180 days in compost
• minimum of 90% of plastic bags should disintegrate into less than 2 mm pieces in compost within 12 weeks
• no toxic substances should be formed during the composting of plastic bags
• hazardous substances such as heavy metals should not be present in plastic bags above the accepted levels
• bag should contain more than 50% organic materials.” (1)
While 81% of Australians are currently using plastic bag alternatives (3), you need to question why you still offer plastic given the ‘green’ thinking of the average garden centre customer. Being ‘sustainable’ is incredibly marketable. We have seen this with the way ‘green bags’ have become almost trendy with Gen X and Y. With this group of consumers in mind, they are also the next generation of gardeners, and are attracted by sustainable living principles. Gearing your business to being environmentally sustainable also makes you an incredibly attractive employer, as you represent and stand by the values of that particular generation.
Industry Resources to Assist Your Business in Becoming Sustainable
1 - AGCAS environmental modules – Those who are already Australian Garden Centre Accreditation Scheme accredited will be aware of the environmental modules within the AGCAS manual. There are four modules which focus on Chemicals, Water, Weeds & Waste Management. These, combined with the increasing focus on environmental impact written into the program and audit checklist are key areas that will increase in their value of return on investing in proactive environmental management within your business.
2 – Education and Training with NGIV - EMS
The NGIA have developed a training program titled ‘Environmental Management Systems for Retailer Garden Centres’ and looks to identify areas of environmental improvement within garden centres, and how you can make changes that will pay a return. Dr Anthony Kachenko (Environmental & Technical Policy Manager NGIA) administers the program, and NGIV is currently in discussion regarding running the workshop in Victoria later in the year.
A Final Word
With regard to plastic bag alternatives, I have spoken to retailers who feel that making the change to a more environmentally friendly corn starch based compostable bag has no return on investment. The marketability of such a move, combined with the fact that the cost of supplying the alternative could easily be made up elsewhere, causes for no reason not to be considering other options.
It is amusing to watch large corporations toy with words of popularity and see corporate social responsibility be twisted into a marketing venture. There is honest and true environmental value in the production of plants, and it is for this sole reason that the Nursery and Garden Industry, which means your business, needs to start looking at opportunities to sell yourselves as some of the most truly sustainable around. At the same time, it is also evident that in many areas our industry has opportunity to take a lead role in demonstrating environmental responsibility on a grand scale. Remember, it is about ‘cooling the planet, one backyard at a time’.
When selling the sustainability ideas of industry, keep these two key words in mind – environment and community – they will be the driving force of independent garden centres as educational hubs of the future.
References
1 - http://www.banthebag.com.au/
2 – Virgin Blue Voyeur – April 2010 #105
3 – http://www.noplasticbags.org.au/ - has an exhaustive list of suppliers of various plastic bag alternatives.
The 2010 NGIA Conference had a clear theme of both environmental and economic sustainability dominating many of the presentations.
Building a sustainable business is something that most successful businesses aspire to, with the ability of the owner then being able to step away from the business for any given period.
Confusion is often common when it comes to defining the meaning of a ‘sustainable business’. To clarify, sustainability may refer to a businesses social, environmental or economical impact of their operations. These three factors are often referred to as the triple bottom line, and is increasingly important with larger corporations who are committed to corporate social responsibility. This is evident across most industries, and the banks are a good current example whereby they are marketing their change in operations by focusing on community and environmental impact to steer consumer perception of the banks being solely money hungry.
A successful business means a lot of things, and this article looks to identify opportunities for independent garden retailers to harness ‘sustainability’ trends and environmental awareness.
A case in point: Plastic Bags
Ok, so I admit, my personal carbon footprint is pretty high for one sole reason - I love to travel. In a recent trip aboard Virgin Blue, I was reading their in flight magazine (2) and found an article on the impact of plastic bags. It made the following key points:
1 – Australia uses over 6.9 billion plastic bags a year – 326 per person.
2 – The production of plastic bags produces less carbon emissions than paper, yet plastic bags take up to 1,000 years to break down and are made with oil, a non-renewable resource.
3 – Paper bags are no better than plastic – de-forestation, habitat destruction, fossil fuels produced by machinery – and that’s before the bag is produced and transported around the world.
The ‘green-bags’ which we see for sale at a nominal fee in supermarkets is one of the largest corporate bluffs of the past decade. In most consumer minds, the thought that they are doing a good thing for the environment is engrained into their psyche through strong marketing techniques. In fact, recent research by RMIT University shows ‘that a green re-usable bag is only more environmentally friendly than a plastic bag when it is used more than 100 times because it uses more material and energy to make than a plastic bag’ (2). Essentially, for most users – they are far worse in their environmental impact than the plastic bag of last millennium.
I say last millennium because there are now suitable alternatives, that while seemingly costly should be strongly considered by industry as a means of taking a proactive lead in tackling such environmental issues. One thing to be aware of though, is that over time it will be government legislation that leads such a debate as we have seen recently take place in South Australia. South Australian Minister for Environment and Conservation Jay Weatherill re-introduced state legislation on September 24 2008 to ban lightweight plastic shopping bags throughout SA. This legislation passed in both houses of the SA Parliament .
It is highly likely that in the near future Biodegradable and 100% Compostable bags will be the only option available. With improved manufacturing technology (reduced emissions and overall environmental impact), a reduction in the cost of production will occur. In moving forward, there are numerous options available to you that are a step up from plastic:
Degradable bags are widespread, and many garden centres have these, but they are still a mixture of plastic and other additives that degrade through reacting to environmental conditions (such as oxygen, light and heat) at land fill (3).
Biodegradable Bags are becoming more common, with an increasing differentiation between biodegradable and compostability too. The key difference with biodegradability is that they are manufactured from farm products such as corn starch. To meet international standards, they must break down within 6 weeks and fully biodegrade within 6 months (3). Biodegradable bags utilize microbial processes meaning there is a biological component to the degradation process.
Throughout this evolution, Standards Australia has developed a standard for biodegradability to aid decision making and ensure product quality with respect to biodegradability and toxicity claims. “In order to comply with the AS 4736-2006 Australian biodegradability standard - and thereby be considered compostable - plastic bags need to achieve or meet the following requirements:
• minimum of 90% biodegradation of plastic bags within 180 days in compost
• minimum of 90% of plastic bags should disintegrate into less than 2 mm pieces in compost within 12 weeks
• no toxic substances should be formed during the composting of plastic bags
• hazardous substances such as heavy metals should not be present in plastic bags above the accepted levels
• bag should contain more than 50% organic materials.” (1)
While 81% of Australians are currently using plastic bag alternatives (3), you need to question why you still offer plastic given the ‘green’ thinking of the average garden centre customer. Being ‘sustainable’ is incredibly marketable. We have seen this with the way ‘green bags’ have become almost trendy with Gen X and Y. With this group of consumers in mind, they are also the next generation of gardeners, and are attracted by sustainable living principles. Gearing your business to being environmentally sustainable also makes you an incredibly attractive employer, as you represent and stand by the values of that particular generation.
Industry Resources to Assist Your Business in Becoming Sustainable
1 - AGCAS environmental modules – Those who are already Australian Garden Centre Accreditation Scheme accredited will be aware of the environmental modules within the AGCAS manual. There are four modules which focus on Chemicals, Water, Weeds & Waste Management. These, combined with the increasing focus on environmental impact written into the program and audit checklist are key areas that will increase in their value of return on investing in proactive environmental management within your business.
2 – Education and Training with NGIV - EMS
The NGIA have developed a training program titled ‘Environmental Management Systems for Retailer Garden Centres’ and looks to identify areas of environmental improvement within garden centres, and how you can make changes that will pay a return. Dr Anthony Kachenko (Environmental & Technical Policy Manager NGIA) administers the program, and NGIV is currently in discussion regarding running the workshop in Victoria later in the year.
A Final Word
With regard to plastic bag alternatives, I have spoken to retailers who feel that making the change to a more environmentally friendly corn starch based compostable bag has no return on investment. The marketability of such a move, combined with the fact that the cost of supplying the alternative could easily be made up elsewhere, causes for no reason not to be considering other options.
It is amusing to watch large corporations toy with words of popularity and see corporate social responsibility be twisted into a marketing venture. There is honest and true environmental value in the production of plants, and it is for this sole reason that the Nursery and Garden Industry, which means your business, needs to start looking at opportunities to sell yourselves as some of the most truly sustainable around. At the same time, it is also evident that in many areas our industry has opportunity to take a lead role in demonstrating environmental responsibility on a grand scale. Remember, it is about ‘cooling the planet, one backyard at a time’.
When selling the sustainability ideas of industry, keep these two key words in mind – environment and community – they will be the driving force of independent garden centres as educational hubs of the future.
References
1 - http://www.banthebag.com.au/
2 – Virgin Blue Voyeur – April 2010 #105
3 – http://www.noplasticbags.org.au/ - has an exhaustive list of suppliers of various plastic bag alternatives.
Saturday, 17 April 2010
Pricing Games
anthonycurnow.com
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.
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.
Friday, 12 March 2010
Customer Relationship Management Systems (CRMS)
anthonycurnow.com
Returning to Your Core Income
Customer Relationship Management Systems
You may have heard of the 80/20 rule or Pareto’s Principle, which suggests that 80% of your income will come from 20% of your customers. It is often true that when a ‘regular’ customer comes into the store, you are more likely to offer them a greater level of customer service than those who appear to be ‘tyre kicking’. The reason for this is obvious; you understand that there is a greater on-going return on investment of your time. Understanding these relationships through an integrated strategic approach is a theory often titled as Customer Relationship Management (CRM).
Customer Relationship Management is the establishment, development, maintenance and optimisation of long-term mutually valuable relationships between consumers and your business. This means that one must take a dynamic and integrated approach to relationship building, and may encompass both relationships with consumers and other stakeholders. In doing so, engagement with the community is the most common for retail garden centers in attracting and expanding their current consumer base. Liaising with local horticultural groups, schools, churches, not-for-profit organisations and other local establishments may be beneficial to the growth of your business. For rural retailers particularly, where there is increasing pressure from the big box encroaching in on potentially already saturated markets, the need to engage with community becomes a necessary and mutually beneficial relationship building exercise.
3 Aspects of a Customer Relationship Management Strategy
1 – Marketing
We have discussed marketing concepts in length over the past two Groundswell articles, and a major part of a CRM strategy is focused around marketing specifically targeted at your customer and their level of engagement with your business. This ultimately means adoption of a multi-tiered approach of marketing to both the Gen Y growing their own fruit and veg to the Gen Y’s grandma who prefers to grow roses for their beauty.
2 – Value Creation
Value creation ties in very closely with the marketing of the business, and refers to the perception of your customers on the goods or services that you are offering to them. It specifically relates to the value on offer to your loyal customers compared to those that walk through the front door at any given time. Creating value in a purchase depending upon the individual comes down to pricing perceptions, of which will be featured in next months Groundswell Retail News.
3 – Innovative IT
While this is least practical for independent garden centres, many of the larger retail stores these days have complex systems where they collect customer information, allowing them to learn about what individuals buy, and the response to target marketing. A prime example of this is fashion brand ‘Country Road’ who took out Australian Retailer of the Year 2009 at the ARA Australian Retail Awards. The company’s reinvention over the past 5 years has been phenomenal.
‘Country Road’s loyalty program consistently delivers response rates above industry standards. While average rates to direct mail campaigns are between 2% and 5%, the response rate from Country Road’s loyalty members to brand communications is up to 30% and makes up almost 80% of the company’s sales.
It’s loyalty program is tiered according to customer spend with high spend customers receiving benefits including spend and save offers, free basic tailoring, free gift wrap, early previews to sales events, invitations to special events such as store openings, occasional gifts with purchases and vouchers on membership anniversaries’ (The ARA Retailer)
Albeit a high capital outlay, this demonstrates the return on investing in an integrated and sophisticated computerised POS and customer management system can be significant. While marketing on this level is structured and targeted upon the information collected about your customers, you can do this on a simpler level by creating a planned e-newsletter that attracts repeat custom. Refer to Groundswell May 2009 article ‘E-marketing for Retailers’.
3 Phases of Customer Growth
1. Customer Acquisition
New businesses and existing ones need to continually market their businesses and its products and services to a wide market in the hope of attracting new footfall through the shop door. It is the first impressions, and the overall experience of their first visit which will determine if they will be retained as a customer of yours.
2. Customer Retention
Once acquired, customers need continual engagement to ensure that you provide them with extended reason for returning. This is the period of building a relationship with this individual which can be influenced through not only by their direct experience with the company and its staff, but also the markets perception and word-of-mouth from customer extension.
3. Customer Extension
The extension of customers involves selling associated products and services to those customers who have shopped with you before. This involves targeting your marketing to this group of customers by offering new products and complimentary services to loyal customers to encourage constant repeat footfall. One of the greatest marketing assets which our industry has with this regard is that of seasonality and the associated lines that come with this – i.e. bulbs in winter, Christmas, summer living, bare root, grow-your-own.
Conclusions
The ultimate goal of implementing a CRM Strategy is to reduce your direct operational costs to the company incurred through uneducated marketing techniques. The benefit of reduced costs is an increase in your overall profitability through the procurement and solidification of a loyal customer base, with whom you are able to develop lasting relationships with.
One final thing to remember is that ‘innovation distinguishes between a leader and a follower’ (Steve Jobs, Apple Co-Founder). Innovation is key to designing a successful CRM strategy.
Case Study: Bay Road
David Howard and Justin Tavernetti of Bay Road understand the importance of communicating effectively with their loyal customers in an increasingly competitive market. As a result of this, they have adopted the Lucky Buys program, which is a ‘points based customer loyalty program.’
Justin clearly noted the key benefits of the system:
1. It enables the business to have a flexible database, and takes the risk of in-house management out of the picture.
2. Information on your customers can be captured easily – this is done through swiping a special card through a normal EFTPOS machine.
3. Luck Buys contacts customers directly via mail, email or SMS based upon any selectively target group, dependent upon information captured about your customer.
4. Quarterly reports are produced allowing you to analyse and see which areas of the business your loyal customers are spending money – i.e. Nursery/Giftware/Café. This is presented in graphical form with valuable numerical sales breakdown analysis’.
5. There are many options to the system all geared to encourage footfall in your business.
Justin previously used this system during his time at the former Essendon Garden Centre, where one day he read an article that suggested house prices in Essendon alone had risen by 29%. He responded to this by offering only people located within Essendon a 29% discount off their next purchase over $100. This was in the customers hands within 3 days of the article being printed.
References
Elliot, Rundle-Theile, Waller & Paladino (2008) Marketing: Concepts & Applications, 2nd Edition. John Wiley & Sons Australia.
http://www.marketingteacher.com/Lessons/lesson_crm.htm
The ARA Retailer – Issue 17, Sept:Oct 2009
Returning to Your Core Income
Customer Relationship Management Systems
You may have heard of the 80/20 rule or Pareto’s Principle, which suggests that 80% of your income will come from 20% of your customers. It is often true that when a ‘regular’ customer comes into the store, you are more likely to offer them a greater level of customer service than those who appear to be ‘tyre kicking’. The reason for this is obvious; you understand that there is a greater on-going return on investment of your time. Understanding these relationships through an integrated strategic approach is a theory often titled as Customer Relationship Management (CRM).
Customer Relationship Management is the establishment, development, maintenance and optimisation of long-term mutually valuable relationships between consumers and your business. This means that one must take a dynamic and integrated approach to relationship building, and may encompass both relationships with consumers and other stakeholders. In doing so, engagement with the community is the most common for retail garden centers in attracting and expanding their current consumer base. Liaising with local horticultural groups, schools, churches, not-for-profit organisations and other local establishments may be beneficial to the growth of your business. For rural retailers particularly, where there is increasing pressure from the big box encroaching in on potentially already saturated markets, the need to engage with community becomes a necessary and mutually beneficial relationship building exercise.
3 Aspects of a Customer Relationship Management Strategy
1 – Marketing
We have discussed marketing concepts in length over the past two Groundswell articles, and a major part of a CRM strategy is focused around marketing specifically targeted at your customer and their level of engagement with your business. This ultimately means adoption of a multi-tiered approach of marketing to both the Gen Y growing their own fruit and veg to the Gen Y’s grandma who prefers to grow roses for their beauty.
2 – Value Creation
Value creation ties in very closely with the marketing of the business, and refers to the perception of your customers on the goods or services that you are offering to them. It specifically relates to the value on offer to your loyal customers compared to those that walk through the front door at any given time. Creating value in a purchase depending upon the individual comes down to pricing perceptions, of which will be featured in next months Groundswell Retail News.
3 – Innovative IT
While this is least practical for independent garden centres, many of the larger retail stores these days have complex systems where they collect customer information, allowing them to learn about what individuals buy, and the response to target marketing. A prime example of this is fashion brand ‘Country Road’ who took out Australian Retailer of the Year 2009 at the ARA Australian Retail Awards. The company’s reinvention over the past 5 years has been phenomenal.
‘Country Road’s loyalty program consistently delivers response rates above industry standards. While average rates to direct mail campaigns are between 2% and 5%, the response rate from Country Road’s loyalty members to brand communications is up to 30% and makes up almost 80% of the company’s sales.
It’s loyalty program is tiered according to customer spend with high spend customers receiving benefits including spend and save offers, free basic tailoring, free gift wrap, early previews to sales events, invitations to special events such as store openings, occasional gifts with purchases and vouchers on membership anniversaries’ (The ARA Retailer)
Albeit a high capital outlay, this demonstrates the return on investing in an integrated and sophisticated computerised POS and customer management system can be significant. While marketing on this level is structured and targeted upon the information collected about your customers, you can do this on a simpler level by creating a planned e-newsletter that attracts repeat custom. Refer to Groundswell May 2009 article ‘E-marketing for Retailers’.
3 Phases of Customer Growth
1. Customer Acquisition
New businesses and existing ones need to continually market their businesses and its products and services to a wide market in the hope of attracting new footfall through the shop door. It is the first impressions, and the overall experience of their first visit which will determine if they will be retained as a customer of yours.
2. Customer Retention
Once acquired, customers need continual engagement to ensure that you provide them with extended reason for returning. This is the period of building a relationship with this individual which can be influenced through not only by their direct experience with the company and its staff, but also the markets perception and word-of-mouth from customer extension.
3. Customer Extension
The extension of customers involves selling associated products and services to those customers who have shopped with you before. This involves targeting your marketing to this group of customers by offering new products and complimentary services to loyal customers to encourage constant repeat footfall. One of the greatest marketing assets which our industry has with this regard is that of seasonality and the associated lines that come with this – i.e. bulbs in winter, Christmas, summer living, bare root, grow-your-own.
Conclusions
The ultimate goal of implementing a CRM Strategy is to reduce your direct operational costs to the company incurred through uneducated marketing techniques. The benefit of reduced costs is an increase in your overall profitability through the procurement and solidification of a loyal customer base, with whom you are able to develop lasting relationships with.
One final thing to remember is that ‘innovation distinguishes between a leader and a follower’ (Steve Jobs, Apple Co-Founder). Innovation is key to designing a successful CRM strategy.
Case Study: Bay Road
David Howard and Justin Tavernetti of Bay Road understand the importance of communicating effectively with their loyal customers in an increasingly competitive market. As a result of this, they have adopted the Lucky Buys program, which is a ‘points based customer loyalty program.’
Justin clearly noted the key benefits of the system:
1. It enables the business to have a flexible database, and takes the risk of in-house management out of the picture.
2. Information on your customers can be captured easily – this is done through swiping a special card through a normal EFTPOS machine.
3. Luck Buys contacts customers directly via mail, email or SMS based upon any selectively target group, dependent upon information captured about your customer.
4. Quarterly reports are produced allowing you to analyse and see which areas of the business your loyal customers are spending money – i.e. Nursery/Giftware/Café. This is presented in graphical form with valuable numerical sales breakdown analysis’.
5. There are many options to the system all geared to encourage footfall in your business.
Justin previously used this system during his time at the former Essendon Garden Centre, where one day he read an article that suggested house prices in Essendon alone had risen by 29%. He responded to this by offering only people located within Essendon a 29% discount off their next purchase over $100. This was in the customers hands within 3 days of the article being printed.
References
Elliot, Rundle-Theile, Waller & Paladino (2008) Marketing: Concepts & Applications, 2nd Edition. John Wiley & Sons Australia.
http://www.marketingteacher.com/Lessons/lesson_crm.htm
The ARA Retailer – Issue 17, Sept:Oct 2009
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