Create value for your customers through creative branding and presenting products in a new way, like this indoor gardening store-within-a-store concept.
All photos courtesy of Homestead Gardens

Earning what you are worth and feeling good about it — it’s what we all want, right? But it’s not always easy to do, especially in garden center retail. Pricing strategy plays a big part in your revenue and profits, as does your customer’s perception of the value you provide. When you can match them, you just might find your pricing sweet spot.

Differentiate with value

I’m sure everyone is getting a little sick of hearing that they need to “differentiate or die.” Nonetheless, that’s still the game we all have to play in today’s marketplace. Differentiating to create value can be accomplished in a number of ways; be it the specific products and services you offer, house brands, the experience customers have with your business, your staff’s knowledge, special events or your community involvement and cause marketing. However you choose to sell your business as “special,” it needs to resonate with the right target customers in a relevant way if you want them to value your individuality over your prices.

When it comes to differentiating, Homestead Gardens, with locations in Severna Park and Davidsonville, Md., is constantly developing new programs to drive perceived value with customers. “We do this through branding, both with private label products and others,” says Brian Riddle, owner of Homestead Gardens. “We use the store-within-a-store model in several of our departments.”

They’ve also focused on offering specialty services they feel help them stand out in the DIFM (do it for me) marketplace. According to Riddle, their customers are “very willing” to pay a premium for their custom on- and off-site potting services, as well as delivery, installation and maintenance services; all of which have been strong growth areas for Homestead.

“We are constantly focused on our brand, our image and our values. What we sell is an experience and everything speaks.” – Brian Riddle, owner of Homestead Gardens

Match value with price

When it comes to matching up the value they provide through differentiation with the prices they choose, Homestead Gardens is always analyzing and re-evaluating. “We are constantly focused on our brand, our image and our values,” Riddle says. “We never look at our products as exclusive and always remind our team that there is nothing that we offer that they can’t buy somewhere else. What we sell is an experience and everything speaks.”

Homestead owners and staff keep a keen eye on company culture and customer experience. Facility cleanliness and improvements are crucial to meeting their customer’s expectations. “People who shop retail are looking for the experience and engagement, and we have to constantly work on ways to maintain and improve,” Riddle says.

Customer experience is also at the top of the list at Moore & Moore Garden Center in Nashville, Tenn. Duncan Borders, owner of Moore & Moore, says it’s not just about product selection; his customers are happy to pay more for the store experience and the confidence their staff inspires in customers to be successful at “this gardening thing.”

Customers have many options when it comes to retail, and can find many items online. Creating an experience to draw them in is key.

Clear targets

In combination with differentiating your business and creating a customer experience that exceeds expectations, you’ll also have to develop a solid pricing strategy to maximize your margins. While raising prices is something most of us need to do, you should be selective and strategic about which items you bump up. Raising prices across the board may not net you the best margins or profits.

Within each category, work to identify your commodity items — the products the mass merchant down the street also sells, possibly for a lower price. Raising your prices on these items will probably only result in fewer sales and stagnant shelf turns. Consider price-matching or eliminating these items from your inventory. To accomplish this, you’ll have to visit other retailers often to keep an eye on both product selection and prices.

That’s exactly the approach Homestead Gardens takes with its pricing strategy. Riddle says they set comparative target price ranges for commodity items.

“We actively discuss known value items, and we price compare on these with other independent, co-op and box store prices,” he says. “As a general rule, we are comfortable within 10 percent of the known value, but seldom will exceed.” Knowing your limits on these items is crucial.

Borders employs a similar strategy. “We try to drive up retail prices on items that are more "specialty" items, and we are slower to do that on more ‘commodity’ type items,” he says.

The fear of buying too much inventory to sell is natural, but customers react favorably to variety and depth of product.

More is more

A lack of inventory, or a commitment to buying enough inventory depth, is a common problem I see at independent garden centers these days. Fear can play a big part in buying practices; when it does, you typically lose margin and turns. Customers not only want a good variety of products to choose from in order to have a good shopping experience, they really need depth of that product. No one wants to buy the last plant, pot or other product on the shelf. Low inventory volume sends a bad subliminal message to customers, and it will decrease their perception of your value, which will lead to them questioning your prices.

At Moore & Moore, they recently made a shift in buying strategy and took on several large container purchases of pottery. While Borders admits they probably overbought a bit, the price structure, and thus their margins, were better, and it’s allowed them to still have some good inventory at a time when they would normally be almost out of stock. They’ve garnered better sales, better margins and still look like they are in business with product to offer. This is not to say too much of a good thing will always be profitable; but rather that you need enough of the right things to make customers happy. You can’t sell what you don’t have.

Get fresh

Even if you employ such pricing and buying strategies, it can be tough to maintain a product assortment that looks different from what customers may find at the closest competing mass merchant. Large retailers are adapting fast and adopting more products classically identified as “IGC” items. Clearly, mass merchants are paying close attention to what you’re doing, but are you paying as close attention to their product selection? If not, your buyers should schedule monthly trips to your nearest competitors to keep an eye on product assortment.

Homestead knows this all too well. Riddle says that they prefer to carry mostly products that are exclusive and not prominent in “box stores.” That gives Homestead better pricing flexibility. However, even they have to stay on their toes. “Unfortunately, we are recognized as a leader in our market, and we see our competitors constantly trying to duplicate our mix,” Riddle says.

To keep things fresh, Homestead constantly evaluates new products and categories. Within the past five years, they’ve added three new categories that have garnered higher margins: Farm & pet, women’s apparel and modern homesteading, which primarily consists of indoor gardening, hydroponics and aquaculture products. (You can read more about modern homesteading on page 70 of the July issue of Garden Center magazine.)

Green up

It’s not only hard goods that need to be monitored continually for price adjustments. If you’ve been paying any attention at all, it will be no surprise to you that mass merchants aren’t low-balling plant prices anymore. In fact, I often see exactly the same prices on core plant stock at the local hardware store as I do the local IGC. If “low-price” retailers are getting the same prices on plants as you are (with potentially a much higher margin than you), then you can, and probably should, raise your plant prices.

“We do feel there is an opportunity to raise margins on green goods,” Riddle says. “We have seen significant price increases at our box store competition and encourage IGCs to closely monitor the prices, and they’ll find opportunities to raise prices.”

“We do feel there is an opportunity to raise margins on green goods.” – Brian Riddle, owner of Homestead Gardens

Fly blind

Real margin opportunity can be found not just in “specialty” items, but in items with simply less market familiarity. Some refer to these products as “blind” items. When there is little to no customer (or staff) familiarity with what such an item would or should cost, then an acceptable retail price comes down to the product's perceived value. That often means a higher price tag than you might have assumed. The value they perceive depends on the value you’ve communicated through your marketing and merchandising, potentially giving you a lot more wiggle room on price and better margins and net profit.

Pricing tools

Once you develop a pricing strategy, it can be hard to stick with it, resulting in margin slippage. Open-to-buy processes can help you stay on track both with buying volume and margins, but don’t let your open-to-buy handcuff you. Open-to-buys are best used as a guide. Good buyers will be willing to push outside the bounds of open-to-buy numbers to take advantage of key opportunities and push beyond initial sales goals.

Homestead has invested in some new technology to help them stay on track. “We started using a pricing tool from Epicor to improve compliance with our pricing strategy,” Riddle says. “This tool gives us better insight and consistent rounding rules that will add incremental margins.”

Push back

One fear that may keep you from raising prices is that of customer rejection. But again, price acceptance comes down to the perception of value you create through your buying, merchandising and marketing. If you knock those out of the park, chances are customers won’t prioritize price.

At Moore & Moore, Borders says they’ve experienced virtually no resistance at all from customers when they raise their prices. While he admits that some customers may choose not to buy once the price goes up, Borders says both their average sale and customer count continue to steadily increase.

At Homestead, Riddle says most of their customers simply expect to pay higher prices. In fact, they have the reverse challenge of communicating some of the deals or value items they offer.

“It has been much more difficult to increase awareness among our existing customer base of the great values we do offer,” Riddle says. “We do offer daily deals and regular sales to help improve the price perception. Additionally, we promote our Garden Rewards program with a 2 percent rebate twice per year.”

Sounds like a great problem to have.

Leslie (CPH) owns Halleck Horticultural, LLC, through which she provides horticultural consulting, digital content marketing, branding design, advertising and social media support for green industry. Lesliehalleck.com