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WARS OF THE ROSES

Independent plant retailers face growing competition from big-box chains

BY STEVE McLINDEN

Independent plant nurseries are digging in deep for a market-share struggle against perennial green giants Home Depot, Lowe’s and Wal-Mart. These and other mass merchandisers have aggressively expanded their garden centers in size, scope and selection these past few years.

Home Depot and Lowe’s, which saturated the airwaves this spring with national TV ads touting their enhanced garden offerings, continue to dominate the market. But independents say they have been anticipating the push for years and that their perishable products will prevent their falling prey to the big-box syndrome that has shrunk the ranks of other retail categories.

“One thing in the independents’ favor — as opposed to an independent lumber yard or independent hardware store — is that these products can die pretty easily,” said Carol Miller, editor of Garden Center Merchandising and Management, a magazine for independent owners of garden centers. “They aren’t something that you can warehouse for six months. They require specialized knowledge.”

Many independents have refreshed their presentation, adding such theater-in-retailing elements as cafés, wine rooms, gift shops, nature walks, conservatories and even elaborate water gardens stocked with water lilies and koi.

“Macro data tells us the big boxes continue to gain share, build more stores, offer low prices and broaden their product offerings,” said Walter Minnick, chairman and CEO of SummerWinds Garden Centers, an independent 12-store chain based in Boise, Idaho, and operating in the Phoenix, St. Louis and Silicon Valley, Calif., markets.

But big boxes are limited in the number of items they can carry and usually do not attract top-caliber help, says Minnick. That leaves the door wide open for imaginative independents, which “tend to recruit empty nesters or housewives who love gardening and are willing to work seasonally,” he said. But independents can no longer afford to completely ignore prices at mass merchandisers. “We’re trying to narrow the gap at least to where [the price difference] is explainable to the average customer,” Minnick said. “But it requires us to be more efficient. We’ve got to do a better job controlling labor while living on smaller margins.”

Home Depot, already the largest seller of garden goods in North America, recently increased the size of its new garden centers to 30,000 square feet, from the previous standard of 15,000 to 25,000 square feet. The chain is expanding its older garden centers too, a feat made easier by the fact that most of the stores occupy end positions at shopping centers. Lowe’s, for its part, has added several exclusive floral varieties to its Garden Club Select plant brand and even teamed up with Medford, Ore-based Jackson & Perkins, a 133-year-old nursery, wholesale grower and mail-order operator, to sell J&P roses in garden centers.

Both retailers now offer e-mailed newsletters containing articles about gardening as well as plant-care advice and special offers. Further, they are tightening inventory control. Home Depot, for example, says it now pays suppliers only for plants that sell, prompting more deliveries of fresh product.

“The mass merchandisers continue to improve and innovate, and they are forcing us all to be better operators,” said Steven Hicks, owner of one of the country’s oldest garden centers, the 152-year-old Hicks Nursery in Westbury, N.Y. “They’ve taught us that we just can’t sit back and think what worked in previous years will work again this year.” Hicks Nursery recently added a Gardener’s Café to its 150,000-square-foot indoor/outdoor complex, complementing its Aquatic Center, wine area and numerous other lifestyle components.

About 4,000 Home Depot employees have completed an online gardening course created in conjunction with the University of Georgia’s horticulture department. And Miller says Lowe’s has developed a more extensive internal training and education program to promote more product knowledge.

But there’s a “world of difference between an employee who has gone through one season of training, and a person who eats, sleeps and breathes horticulture,” said Jere Stauffer, principal of Lititz, Pa.-based Stauffers of Kissel Hill, a seven-store nursery chain and grocery retailer with locations in Lititz, Lancaster, Leola, Harrisburg, Dover and York, all in Pennsylvania. Stauffer says the 73-year-old company has a built-in hedge against the industry’s seasonality: It operates full-service Stauffers grocery stores at four of the garden centers, complete with delis, bakeries and food service, besides the home and seasonal decor, indoor and outdoor casual furniture, designer gifts and other merchandise it sells.

“The discounters create value for the customer in price and self-service,” he said. “We provide value with personalized service and product knowledge. We offer a solutions-based, one-on-one dialogue where we determine what project the customer is involved in and what we can do to make it easier.”

Although Home Depot, Lowe’s and Wal-Mart now dominate garden product sales, Kmart was actually the early prototype for big-box garden departments, recalls Stauffer. “The [big-box] stores have been a perennial challenge for a number of years.”

Even with their expansions, the big boxes still basically cater to beginners, says Susan McCoy, president of The Garden Media Group, a public relations firm based in Chadds Ford, Pa. “People go to the boxes for annual plants, tools, potting soil and fertilizer,” McCoy said. “Then they tend to get hooked on the hobby and gravitate to the independents for new and hard-to-find items and to get answers.”

But is there room for all the competitors? Garden centers are augmenting their offerings at a time when national sales are basically flat. Consumers spent $36.8 billion on garden products last year, down 4 percent from $38.4 billion in 2003, according to a survey conducted for the National Gardening Association (NGA) by Harris Interactive.

Troy, Mich.-based Frank’s Nursery liquidated all 169 of its stores late last year following two Chapter 11 filings as it failed to find a niche between independents and mass merchandisers, industry experts say. Ontario-based White Rose Home and Garden Centres, a chain of 60 stores, also liquidated last year.

Research firms say there is still plenty of green in the garden business, however. U.S. consumers dole out more than $40 billion annually on these products, with the average household spending $444 a year and the typical luxury-segment customer close to $1,000, according to Stevens, Pa.-based Unity Marketing. Three out of four U.S. households, an estimated 82 million homes, participated in lawn and garden activities last year, about equal to the five-year average from 1999 to 2003, according to the NGA. Among the groups outspending the average were households with no children and annual incomes exceeding $50,000.

Independents may not have the cost efficiencies the national players have, but they can hold their ground by catering to the upscale end with specialty products, observers say.

One such, Matterhorn Garden Center, in Spring Valley, N.Y., has two Home Depots within a three-mile radius but has felt minimal impact. The 35-acre, village-style spread, frequently called the Disneyland of garden centers, features a conservatory, a bookstore, an aquatics building, a Matterhorn Café and a 10-acre display garden showcasing the roses of British grower David Austin. It also offers nature tours.

Matterhorn is “more of a day out than it is just a place to shop,” said owner Matt Horn, who won an award for innovation from Garden Center Merchandising and Management magazine in 2003. “We have made ourselves a quality-of-living choice. … Do you want to shop a big, hectic business or have a leisurely stroll through a quaint garden center?”

Many other independents use Matterhorn as a model, Horn says.

Unlike other retail genres, independent garden stores commonly share their sales, marketing, benefits and labor data with other independents and will often jointly sponsor tours, says Miller. “They have recognized the threats from the mass merchandisers and banded together,” Miller said. “They’ll disclose how much each department earns, what their labor costs are and even who designs the most effective advertisement.”

SummerWinds owner Minnick says independents do well in areas with the highest discretionary income levels, such as upscale suburbs. “But if you’re inside the beltway, where people are trying to subsist on service industry jobs, you probably won’t,” he said. “Location selection is critically important to the independent.”

Few garden centers occupy traditional shopping centers, although some independents bolster their numbers with seasonal “pop-up stores” on endcaps or in parking lots. Upmarket gardening vendor Smith & Hawken, a Novato, Calif.-based chain of 55 garden and lifestyle products stores, operates most of its units in lifestyle centers. The chain is owned by The Scotts Co., the world’s leading manufacturer of lawn and garden products.

Some suppliers, including Scotts, operate under exclusivity agreements whereby they sell the independents products that differ slightly in content and packaging from those available at the big boxes.

“If we can get a product that is different,” said Minnick, “at least we have ability to explain value-added.”