Alliances keep lawn and garden retailers blooming

Home Channel News, March 20, 2000 by Brae Canlen

Peer Group and ECGC Distributors give independents and regionals a better chance against large-chain competitors

NATIONAL REPORT -- When John Cosvy, vp-corporate development of Galloway's Nursery in Fort Worth, Texas, wanted to start importing some pots directly, he picked up the phone and dialed one of the buyers at Sloat Garden Center in Sausalito, Calif.

Mike Kunce, CEO of Armstrong Garden Centers based in Glendora, Calif., needed design advice on new fixtures he planned to install into his stores. So he called Earl May Seed & Nursery in Shenandoah, Iowa, which sent over diagrams of the gondolas its outlets use.

Calloway, Armstrong and Earl May belong to the Peer Group, an informal alliance of Western-based garden retail companies that swap merchandising ideas, financial statements and vendor information. Peer Group members also tour and critique each others' stores during a rotating, twice yearly meeting that is part camaraderie and all business.

In the eastern half of the United States, another group of independent nursery owners belongs to a different organization that is somewhere between a co-op and a trade association: ECGC Distributors Ltd., headquartered in Charles Town, W.Va., is comprised of seven companies operating 19 garden centers among them. Like its Western counterpart, ECGC brings retailers together under the concept that shared expertise can increase profitability.

"We have our philosophical differences," said Gosvy, referring to his counterparts in the Peer Group. But like Galloway's, the other members are nursery retailers with multiple units and thick skins. "It's painful to have a bunch of experts walking through your store," admitted Gosvy, remembering the last time Galloway's hosted a Peer Group visit. "They're not very forgiving. If they see something sloppy, they'll definitely write it up."

But Peer Group members agreed that the critiques, which are usually followed by brainstorming sessions, provide invaluable feedback to everyone involved. "There's a huge transfer of ideas back and forth," said Kunce, whose company operates 37 lawn and garden centers in Southern California. "I've had a dozen consultants over the years, but nothing that can compare to the top six or seven people in your field," Kunce said.

A tough market gets tougher

The need for alliances such as the Peer Group and ECGC -- as well as for buying organizations such as Gro Group in New England and Western Independent Nurseries in Washington State -- would seem more critical than ever, as retail garden centers find themselves in a period of unprecedented prosperity but also mounting competitive pressure.

"It's all about like-minded businesses getting together to do things in a collaborative way," said Joel Albizo, a spokesman for the Washington-based American Nursery-men and Landscapers Association, which for the past two decades has held a three-day learning conference in Louisville, Ky., which provides what Albizo referred to as "cutting edge ... principles and best practices" from companies in the United States and Europe. Last February, the conference drew 1,300 dealers and suppliers.

In 1999, garden centers and nurseries enjoyed an 11.8 percent increase in aggregate revenue, to $11 billion, according to the most recent estimates from the Commerce Department. But those gains have been hard-fought, and that figure represented only about one-third of total retail sales of lawn and garden products, as tracked by the National Gardening Association.

Independent dealers have found themselves up against home improvement centers that have made gardening a focal point of their merchandising strategy and discounters that have greatly expanded their assortments. Last month's decision by Kmart to dramatically increase the number of outdoor living items it sells bearing the Martha Stewart brand was typical of the more aggressive stance larger dealers are taking in this category. Home Depot and Lowe's each gets between 5 percent and 10 percent of its annual sales from nursery and gardening products which, in their cases, could total as much as $5 billion together.

The Peer Group started six years ago when a group of garden dealers met each other through the same consulting firm. After the relationship ended with the consultants, the retailers kept meeting and sharing profit and loss statements, staff training materials and other proprietary information. Membership is by invitation only.

The roster of the Peer Group includes Roland Nursery in Albuquerque, N.M.; Garden Works in Vancouver, British Columbia; and English Gardens in West Bloomfield, Mich. Until Orchard Supply Hardware Stores in San Jose, Calif., joined the group, none of the members operated in each other's market, although the potential for competitive conflict did not appear to bother other members.

Although new members are usually nominated, occasionally a retailer will express an interest in joining. The Peer Group members then evaluate the operation to see if it meets the grade. "We've turned people down," said Kunce, citing size ("not big enough") or persuasion ("a low-price pallet-type nursery") as the typical reasons.