Let’s face it: Raising prices and margins is often met with emotional resistance.
Yet, with the kind of year we’ve had so far, it seems prudent to take a fresh look at pricing strategies and reevaluate how consumers view and define premium plants and products. Are you missing out on hard-earned margin?
There is no doubt that in 2020, the impact of the ongoing coronavirus pandemic is probably going to mean big changes to financial projections, consumer pricing perception and pricing strategies. The U.S. economy saw a whopping 32%+ drop as of the end of July and a 5% drop in GDP.
Change is inevitable for us all.
It is change, though, that is often the sticking point for growers and garden center retailers alike. Let’s take a look at your current plant availabilities, then ask yourself:
- Are you hanging on to a dated production list of offerings? Are you just growing what you’ve always grown, because that is what is easy and comfortable?
- Are you resistant to growing high-price/high-margin specialty crops because you don’t want to pay a premium price for the seeds or cuttings?
- Or, has your predominantly landscaper customer base forced you to focus on tight margin commodity color?
As a retail buyer, I’m forced to buy based on price if most of my area growers offer essentially the same crops and size. Putting you, the grower, in a race to the bottom for low price customers.
But, if you have specialty items and offer premium crops — plants I know my retail customers will happily pay a higher price for — you will garner much more of my overall business and bigger average sales. I also win because I get to charge higher margins for premium plants and differentiate my offerings to my customers. Not to mention get more of what I need from fewer vendors.
Often, there is a perception that your garden center or landscaper buyers will not pay your higher price for a specialty or premium crop. But have you asked? As retail consumers and homeowners turned to plants and gardening during shutdowns, transitioning to working (and schooling) from home, and staycations, garden centers on average saw a big upswing in sales. The value of flowers, food, and houseplants was elevated for many existing gardeners.
We also gained many new customers who started experimenting for the first time with both outdoor and indoor gardening. The perceived value of many types of plants and gardening products is evolving upwards.
If you doubt this evolution, please take a deep dive into the world of houseplants.
The demand has gotten so high for many tropicals that some savvy retail growers have resorted to high priced auctions. The amount that new plant parents are willing to pay for individual specimens is quite shocking. Realize, this is how many of our up and coming gardeners are being trained to value plants. They love the unusual and are willing to pay a pretty penny for premium plants.
The goal of a premium pricing strategy is higher profit margins, competition pressure and improving overall brand value. Premium products may be new plant introductions, rare varieties, have limited availability, a special color, or they can even be bigger (or smaller) in size.
Premium does not always have to mean new. Big changes in the economy and emotional priorities of our customers can turn a once seemingly ubiquitous product into a high-demand, high-margin item.
The run on seeds this spring is a great example. Traditionally a low-price commodity item for gardeners, seeds transformed — overnight — into a high-demand premium product due to consumer urgency and supply.
Now is a good time to evaluate your offerings to see where you can command better margins.
Many of you were forced to change your product offerings this spring due to shutdowns and restrictions on the types of plants you could sell and transport.
If you already focused on edible transplants and herbs, you may have been able to keep your production lines moving better than ornamental-only growers. You might have even had a bigger spring than usual. What may have once been considered commodity staples (i.e. tomato transplants) suddenly became high-demand, premium crops. There is no need to let that new value perception fade post-COVID-19.
Now, keep in mind that growers and garden centers often see a sales slowdown post-recession. Traditionally, after the economy starts to shift back into a positive gear, homeowners tend to reinvest in big ticket items and cars. They usually stop spending as much on landscape plants.
Truth be told, I have no idea whether that trend will play out the same way during this more unusual recession. But it’s worth keeping in mind.
It is quite possible that consumers will be willing to pay even less for standard commodity crops, but be willing to pay even more for premium crops that became high demand during the shutdowns. However their brains were trained, or retrained, during this stressful time remains to be fully understood.
As we continue to adjust to whatever our new normal will be economically, now is a good time to evaluate your offerings to see where you can command better margins and market higher value plants. Be it with crops you already grow, or new ones that you should add.