I started this blog for the benefit of Independent Garden Centers everywhere because it is not a profession chosen out of a desire for fame or fortune. Owners, operators, and employees of IGCs are overwhelmingly involved because they are passionate about the nature of our shared industry. We are unmatched by box stores and direct-to-consumer online retailers when it comes to the knowledge of our plants, products, and growing environments. With these essential elements covered, we need to share the best operational business practices we have in order to compete with larger companies that will ultimately underserve the needs of our valued customers.
By managing a blog concerning best practices and marrying quantitative analytics to practical application, I am in no way meaning to present myself as an expert. My purpose is to raise subjects of discussion and points of view that someone, somewhere in our local garden center industry, may not have considered before. Engagement and input from knowledgeable professionals like you will hopefully broaden depth and perspective of the topics posted here. I view Independent Garden Centers on a national, continental, or global scale as having interests that are more aligned than they are not, so we should take this opportunity to share our secrets of success and strengthen our collective position.
Topics covered in this blog will at some point hopefully touch all the corners of the Independent Garden Center business. There are so many things to be covered and so many lenses through which to view them. I hope together we can illuminate some paths to improvement for individual IGCs (including our own), because again, in these days our cumulative success contributes to our individual success. Some upcoming topics in this blog will include the following subjects: In Search of Optimal Labor Productivity, Goals for Shrinkage and Spoilage, and Get-in Get-out Strategies for Seasonal Categories. Stay tuned!
Owners and managers spend a lot of time wondering how to motivate key employees and how to encourage them to consistently make everyday decisions that help the company. Leading by example, training, corrective action, and professing until you’re blue in the face are things we’ve all done as managers. There are many theories out there about what motivates people, but the truth is that everyone values different things and everyone gets motivated in different ways. The one commonality we all seem to share is that we do place some degree of value on financial compensation, so if you haven’t considered a cash-based performance incentive, now may be the time to do so.
Another positive aspect of financial incentives is that it can be directly tied to company performance in a transparent and mostly fair manner. By aligning your business interests with your employees’ personal interests, you will find that your decision makers will begin to act much more like true stakeholders. If an employee knows that they will financially benefit from more sales, then they are likely to sell a little more. If they understand that they will earn less if they do not make frugal decisions, you may find that they use labor more efficiently. Handing out profit sharing checks is a great thing to do for employees and your business will have benefitted as well.
Experiment with your numbers by asking what degree of profitability might need to justify a given percentage of it going to your team as profit sharing. Once you know what you can afford, and what would be a suitable/motivating amount of compensation, share this with your team and give them regular updates on where they’re at, all the while reinforcing that the better the company performs, the more they will take home. When it comes to distributing the profit sharing, I recommend rewarding your biggest decision makers the most and tie it to the revenue they helped generate, and then go proportionally down the line. Always be prepared to explain why certain people got what they got so that they know fairness was at top of mind.
Anyone who has worked in a garden center for any considerable period of time knows that the inventory numbers shown on your point of sale are often dubious. Plants die and go straight to the trash, tags blow off in the wind, and the borderline chaos of the spring season does not exactly lend itself to perfect receiving.
Despite our inherent challenges, inventory accuracy is extremely important. For one, inventory is money on the books, and when you don’t have what you thought you had it’s just like losing money. An unreliable inventory wreaks havoc on buyers who need to carefully weigh what to bring into the store. Customer facing teammates lose efficiency when they need to go physically check just to make sure an item is actually in stock.
So, what can you do? Aside from best practices in receiving and ringing customers up, doing a fair amount of cycle counts seems to be the best way to keep things relatively in line. Doing a single large inventory count once a year never ends up being very accurate, and when problems occur, they can remain for several months. Counting each department a handful of times throughout the year will get you more accurate counts, and more consistently reliable inventory numbers.
Make sure to track and report on your variances as well – you won’t learn how to fix systemic issues if you don’t analyze your results. After doing this for a while, problem departments and problem stores will make themselves apparent, and then you can count the problematic departments more often and the more accurate departments less. Try also to get a good understanding of how accurate your inventory was just ahead of a count too, by dividing your complete variances (sum of the integers, both negative and positive) by the total number of units on hand before you counted. Try setting a goal for 90% and above, which can give you a little more comfort in believing what your point of sale is telling you.
Comment if you have any other good tips for keeping a clean inventory!
Previously I made a post concerning seasonal hiring in the garden center industry, and more specifically, about how to conduct interviews to help ensure you are getting the best fit for you and for the potential hire. In this post, I will give a few tips about hiring and onboarding that helped me in my time as a general manager.
I touched briefly on how important it is that you can visualize your candidate supporting the rest of your team and making a good impression on your customers. Next, I think it is worth spending some time thinking about the correct profiles for your seasonal hire. The independent garden center industry is a relatively pleasant one in which to work if you like people and you like plants, however, be wary of those candidates that give you the feeling that they only are interested in a position so that they can see all the pretty flowers and have more opportunities to stop and smell the roses. Despite the enjoyable aspects of our business, we all know that there is a lot of effort involved and most days are not laidback and carefree. Hiring people that are prepared for hard work is important, and if you watch closely, you will be able to identify the candidates who understand the effort and commitment required.
I also mentioned last time I wrote about this subject how important it is to be honest about the nature of the position. The last thing that you want to do is go through all the trouble of onboarding and training someone who ends up dropping out because they misinterpreted what their role would be. Make sure to ask your seasonal candidates if they are prepared for hot weather, being on their feet all day, and for doing their best to be extroverted and engaging with customers. It’s also important that you reiterate to them that the position is more than likely a seasonal one.
If you’ve been a hiring manager for any considerable period of time, you have probably recognized a pattern the most successful, long-term seasonal employees – they are most often folks that love gardening and who care about making sure others have what they want and also what they need to be successful. They often don’t require or desire year-round employment but want to keep active and productive doing something they enjoy. I’ve also had great returning college or high school-age employees who prefer to focus on school in the offseason. If you live near ski areas, some people like to switch back and forth between a skiing job and a garden center position depending on the time of year. Being able to identify good lifestyle fits will help you hire great candidates that only improve over time instead of leaving due to necessity after one season. That being said, don’t pass up on a potential rock star for a seasonal position because they want a chance at permanent employment – just make sure everyone’s expectations are clear.
I’ve always been a firm believer that if your business isn’t constantly improving or changing to adapt to a dynamic environment, you can only be falling behind the competition. Financial goals are one thing, but the way you fit into the competitive marketplace and how you go about attracting new customers (and keeping existing ones) is another. Setting high-priority, non-financial goals for the next selling season should be a part of every garden center’s yearly process. Input from managers and other key employees should be used to build an organized list of ways that you can improve you operation.
I recommend beginning by meeting with your top-level managers and coming up with your own list of improvements that you can designate as priorities for the coming season. After that, set a time for a meeting with all your key staff members; ideally, these are the people who know your processes, your customers, and pain points. Ask each of them to come prepared with at least two ideas for things that need improvement. Listening closely, write the ideas down on large sheets of tearaway paper that can be stuck to the wall or a board. More than likely, you will be able to pick out a mere handful of broader themes under which the ideas can be categorized.
Having heard from your team and established the basic themes to focus on in the following year will give you some priceless ground-level insight from your retail warriors. Not only that, you have also given them a chance to be heard and included in important decision making. The best part is that I’m willing to bet that a lot of the things brought up by your team dovetail with the priorities previously identified by you and your fellow managers. Make a plan that includes every accomplishable improvement for the coming year and hold yourself accountable to achieving it – then repeat!
Has anyone out there used a method like this for non-financial goal setting? What was the best improvement that come from it?
Being a hiring manager for seasonal work year after year can give you some stubborn ideas concerning your methods and the type of people you look for. I’m certain many garden center managers have developed their own set of practices and criteria that have been formed over time like rocks under running water. Just for the fun of it, I thought I would share some of the mostly subjective hiring advice I’ve accrued over my tenure one by one – not to be taken as gospel!
#1 – Interview Conversationally
If you’re interviewing for a customer-facing seasonal or a possible year-round position, start by making fun small talk about the weather, how your day is going, or whatever other topic might make the candidate feel comfortable so that a trusting, open discussion will happen more easily. Don’t force them to speak first – spend a few minutes describing your business (honestly); what you like about it, and what you are looking for in terms of hiring. Asking a cold series of direct questions that you intend to later decipher and score is the wrong approach. There are a lot of jobs out there that require serious questions about the concrete qualifications that a candidate may or may not have, but seasonal garden center work is not one of them. Even if you are looking for a knowledgeable salesperson, trust me, you can get a good idea of their experience and expertise just by talking.
A personal, conversational approach will provide insight into the two most important factors for a seasonal hire: how will they mesh with your team, and how will they present to your customers. The chaotic and dynamic environment of the busy spring season requires that your teammates collaborate to ensure a [mostly] seamless experience for your customers. Therefore, if you cannot genuinely visualize this person helping or adding value to your existing employees, or can’t visualize your existing employees being willing to help them, then do not offer the position. Secondly, if you got enjoyable value from an honest and open conversation with the candidate during your time spent talking, then it is likely that your customers will too. I have turned away multiple Master Gardeners simply because I knew that they would not provide the right experience for my customers -I don’t care how much you know about fungal lawn diseases, invasive insects, or flowering rhizomes if you can’t make my customers smile at the same time.
Independent garden centers are substantially exposed to changing consumer buying behavior. Even more so than many other retail businesses, garden centers provide a highly discretionary product offering – if someone is concerned about their retirement, a nice big tree is probably one of the first things crossed off the list. The bulk of my experience comes from a nursery whose historical sources of income have been disproportionately heavy in trees and shrubs. This sort of revenue distribution can be highly advantageous in times of economic growth and homebuilding. However, when the economy begins to contract as it did around 2008, it can leave your business overextended in a product that isn’t generating as much cash as it needs to.
Even if your garden center doesn’t sell a large proportion of trees and shrubs, this allegorical evidence holds a basic truth: in tough economic times, your products with faster turns will help you more than your products that come with high gross profit dollars. With the consumer spending being at the very least uncertain in the coming months, assess your high-ticket items and ensure that you won’t need to be relying on them too heavily. Items such as large trees, fountains, furniture, and statuary should probably be kept as lean as is reasonable.
If a recession does in fact occur, you will benefit more from operating on a lean inventory and favoring cash flow over large margin profitability. Beefing up your annuals, perennials, and reasonably priced home and yard décor should allow you to convert your inventory much quicker and give you the flexibility to allocate more resources to purchasing items you see are selling quickly. Don’t let a heavy inventory of large items put you in a cash crunch.
If you have any other tips to share for successfully weathering a recession as an independent garden center, please put them in the comments!
High inflation and other concerns about the economy are going to begin to put significant pressure on your business if they haven’t already done so. Near certain reductions in average ticket prices must be offset somehow by transaction count – you need to make sure that you are giving customers good reasons to shop with you more frequently. The easiest lever you can pull when it comes to motivating price-conscious customers are your promotions. However, ambiguous goals and arbitrary promotional terms are all too common and will ultimately not be as effective as you need them to be. Below, we will discuss a few requirements for motivating customers and tracking success.
The first thing that you want to consider when setting a promotion is: what are the primary and secondary objectives that you are trying to achieve? Your objective(s) can be foot traffic, inventory clearance, revenue generation, transaction value, items per transaction, among other things. Depending on what your objectives are, you can tailor your promotion accordingly. For instance, you probably aren’t trying to reduce inventory or boost your average transaction value with a loss-leader type of promotion. You also probably aren’t going to do a great job with inventory clearance if you set a lukewarm discount on a single SKU. Make sure that your promotion type matches the objective you are trying to achieve.
The second thing that you will want to do is set some goals for your thoughtfully set promotions. What quantities sold or revenue generated will convince you that you have implemented a successful sale? Once your period is over, carefully review performance and discuss the results with your team. You will want to use your quantitative data to say why your promotion was successful, or why was it not. Is the promotion worth trying again in the future? What would you change about it? If it achieved your objectives well, can you apply it to other areas in future promotions? As put by John Sculley, “No great marketing decisions have ever been made on qualitative data”.
Lastly, and most importantly in a contracting economy, make sure your promotions are motivating and communicate them well to your customers. To do this, you are probably going to lose a few margin points, and that’s okay. Keeping customer count up and your cash flowing in a slow economy is much more important than stubbornly holding on to your margins. Not only that, but people will also find your good deals all the more attractive so you can take this opportunity to build your customer base.
Please share any promotional successes or failures you may have had in the comments!
I’ve met a surprising number of buyers whose main direction from company leadership was to simply ‘keep the tables full’ during the busy season, and then when cashflow tightens and customer traffic slows the idea is simply to sell down on remaining inventory. While this approach can be successfully implemented by an experienced and vigilant buyer, it is probably not the finely tuned machine that it could be. Categories that have longer lead times will be even more difficult to execute successfully without the proper planning.
If your organization operates this way, it could be worth establishing open-to-buy budgets for your buyers. This will help ensure that there is enough product to meet demand, and not so much that you end up with a big surplus left over. To establish an open-to-buy by month for a given category, you will need four pieces of information. First, you will want to have a revenue goal, an estimated beginning inventory for the period, a target ending inventory for the period, and you will need an estimate for your gross profit percentage.
Open-to-buy = Sales Budget × (1 – Gross Margin %) – Estimated Beginning Inventory Value + Ending Target Inventory Value
Let’s pretend that you want to come up with a purchasing plan for Christmas gift. This past November you earned $90,000 in sales revenue at a gross profit percentage of 55%, and this coming November, you’d like to do $100,000 in sales. We’ll take that $100,000 sales goal, multiply it by the cost of the product (45%) which gives us $45,000. We’ll assume a starting November inventory of $5,000 since you wanted the beginnings of a presentation before the end of October. Lastly, we’ll say that target inventory to end the month is $30,000.
Open-to-buy = $100,000 × (1 – 0.55) – $5,000 + $30,000 = $70,000 available to spend
Following this simple equation gives your buyer clear direction on how much they need to purchase so that you can meet your sales goals without overburdening the store(s) with inventory. Just make sure they don’t forget to include estimated shipping cost, because this will factor into your calculations, and unfortunately, shipping cost has become so expensive as of late that neglecting to include it will throw your numbers off significantly!
Please share this if it can benefit anyone inside your organization.
In my last post, I pointed out the fact that inventory can be viewed as cash you hope to get a return on. If your inventory is not moving, or if you have too much or too little, you essentially have a problem with resource management. But how can you tell when your inventory levels are earning you money or if they are tying up your money? Surely there is some point where you don’t have so little that customers can’t find what the want and not so much that you are overburdened.
The best thing to do for this situation is begin to make use of some standard inventory metrics. Unfortunately, you can just take some measurements and then compare them to retail industry standards – even among independent garden centers, there is so much variability in product mix and structural nuance that it becomes like comparing apples and oranges. Not only that, independent garden centers have many different categories of goods that all have very different characteristics when it comes to receiving, storage, and rate of sell through.
I think the best thing to do is gather historical data from your business and set some benchmarks for stock-to-sales ratios in each of your major departments. Due to gardening seasonality, you will need to at least do this by month, if not by week. For instance, if in September of last year, it felt like you had a roughly appropriate amount of color inventory to meet demand, and your average inventory was $30,000, divide that by your total sales for that department – say $100,000. Your stock-to-sales ratio for seasonal color in September was therefore 0.30. Is that good? Is that not good? We’re really not sure, but at least it’s a target that will help your buyers guide their purchasing for next September. [Understanding what your inventory turnover ratio is for each department is great knowledge to have as well.]
Stock to Sales Ratio = Average Inventory Value / Sales
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Value
Next, start tracking GMROI or gross margin return on investment for these major departments. GMROI is calculated by dividing gross profit by average inventory value over a set period. Using a rolling 12-month period is probably advisable in the garden center industry because you can track progress without the aberrations caused by seasonal change in business. Again, we don’t know what a “good” GMROI number for your departments might be because we lack a fitting standard for comparison. However, what you can do is track progress. The if your GMROI number is getting better over time, it means that for every dollar you hold in inventory you are earning more gross profit. Train your buyers what levers they can pull to increase gross margin return on investment: lower inventory value without reducing sales, increase sales without increasing average inventory value, or improve your profit margin by smarter purchasing or raising prices.
GMROI = Gross Profit / Average Inventory Value
Has anyone out there established some good inventory benchmarks for their business? If so, please comment and let us know!
Over the course of the past several years, I have encountered garden centers and garden center managers who I felt like had a very cavalier attitude when it came to their inventory. Whether it was someone who verbally expressed not caring about how many large outdoor pots they had over the winter because “they don’t go bad”, or whether it was obvious that there was a substantial inventory of large specimen trees that had obviously become fixtures over the two or more seasons they had been on the property.
To me, the bottom line is this: if your money is tied up in inventory that is not turning, you are unable to use that money for more productive purposes. $40 tied up in a piece of pottery that hasn’t sold for a year might have been able to be used to sell a different, better product several times over. My advice is don’t be that operator, manager, or buyer who tries to hang on to their profit margin with an iron grip. If you have a slow mover, or simply too much inventory, find a way to get your cash out of it so you can get it working for you again.
One of the easiest ways to go about identifying aged inventory is simply by asking your POS or its analytical add-on to do this for you. With some systems, a query can be created to show all inventory that has not seen any movement in say, one year or longer. If your operating system isn’t all that advanced, you may have to get some help to identify these aged items by sight. Once identified, just place a liberal clearance price on them along with an eye-catching tag to get them moving. Sometimes a high-priced item that is in good condition is a tough sell even with a discount. Try incentivizing some of your salespeople to see who can get it sold – depending on what the item is, it could be well worth a $20 or $50 gift card for the salesperson.
Please leave a comment if you have had success identifying or clearing stagnant inventory!