This year isn’t starting out much different from 2009 in many ways. Garden retailers are still uncertain about what to expect from spring, and are heavily relying on the weather to bring customers out in droves. Credit appears to be a bigger issue this year, and inventory management is the name of the game.

“IGCs are scared. Some won’t admit it but they are,” writes Jim Monroe of Greenbrier Nursery in West Virginia. “Credit is tight, margins are shrinking and the big boxes are getting better. We have to make the IGC a more upscale brand of products and work within that dimension to grow the IGC brand.”

One thing that may help retailers is unusual winter weather patterns that dumped snow and freezing weather in regions of the country that normally aren’t hard hit. That could mean more people replacing landscapes and returning to garden centers this spring.

And while retailers this year have a slew of challenges facing them, the biggest dragons to slay are still the economy’s impact on customers and the weather.

Still, many are optimistic that despite the economy, they can persevere with good business practices to turn a profit in 2010. “We’re sure that the economy is hurting customers, but when summer is so short, everyone seems to be willing to buy something green,” writes Maria Kreidermacher of Pork & Plants in Altura, Minn.

It’s Still The Weather

For the second time in as many years, the economy’s impact on customers is the biggest challenge retailers cited in our State Of The Industry Spring Expectations survey.

The key to success? It’s still the weather. More than 62 percent said good weather is the single most important factor to success this spring, with a change in the economic climate coming in a distant second at more than 21 percent.

That means even if the economy stays the same, retailers are confident they can at least have a strong spring with good, solid weather.

“In 43 years, I’ve been through a number of recessions and downturns,” notes Del Brockshus of Del’s Garden Center in Spencer, Iowa. “My business has grown during every one of those periods including 2009. Folks hunker down when they hear bad economic news everyday even though they may not necessarily be affected. When this happens I don’t have to compete with new boats or other toys, vacations and the like.

“Folks plant gardens; they stay home and improve their environment, all of which is good for our business. Hard times are good times for me if I do it right.”

Balancing The Investment

Retailers are still trying to find the right balance of labor, product mix and investment back into the business for spring 2010 in order to keep as much as they can in profit. The banks haven’t made it easy, either. More than 43 percent said it has been more difficult to secure a line of credit this year than it was last year. On our survey last year, only 18 percent said they were having trouble securing a line of credit. So the lending situation has tightened up dramatically in the past 12 months.

“It’s been a tough couple of years,” writes John O’Reilly of Otten Brothers in Long Lake, Minn. “I know of a couple places that will not open this spring because they can’t get a line of credit. I see too many companies giving product away on poor margins. It’s no way to stay in business. We have learned our lesson on margin. We didn’t raise prices last year in a couple of areas and it hurt our
bottom line. It’s a mistake we can’t afford to make again this year.”

Speaking of product, more than half of retailers said they are continuing to change the amount of SKUs they are ordering for the spring. Of those, nearly half are ordering fewer SKUs overall, while about 29 percent said they are ordering a similar number of SKUs, just not as deep into those lines.

They’re changing the way they buy, too, with more than 73 percent saying they are taking smaller shipments more frequently. However, despite concerns about margin, nearly 74 percent of those surveyed said they will not raise prices and will stay the same.

Some retailers are making more investments into the existing structures and building new ones in anticipation of a busy spring. Thomas Fennell of Clegg’s Nursery in Baton Rouge, La., is one of those retailers.

“We are currently rebuilding one of our existing locations (we have four retail garden centers in the Baton Rouge area) with a 100x100 retail building and a 114x100 Rough Brothers greenhouse,” he explains. “Although many have expressed some skepticism rebuilding in today’s economic climate, we feel that we need to be ready when the economy rebounds fully. I also think like Kevin Costner’s character in Field Of Dreams: ”Build it and they will come.” Due to our extremely cold, wet winter, many of our customers are experiencing “cabin fever” and I am looking forward to a fast-paced spring season.”

Customer Focus

In the end, it’s all about what customers want, and carrying the product mix that drives them into the stores. Depending on what that product is, retailers may have a difficult time finding more of it if and when it sells out. Edibles, for example, are already coming out on top as one of the live goods some retailers are having trouble locating for spring.

Retailers have switched the name of the game, too, when it comes to which customers they are targeting. Last year the majority said they would focus on retaining and catering to existing customers. This year it’s all about driving new customer traffic, with more than 41 percent saying their main focus is to bring in new customers.

They continue to reach customers through traditional forms of advertising, with print newspaper and magazine ads still the overwhelming favorite. E-mail blasts are a close second with more than 61 percent relying on them to drive traffic. Rounding out the third and fourth spots in advertising popularity are direct mail and radio ads.

The Final Assessment

While there are signs of cautious optimism for 2010, some retailers are taking a big-picture view of the economic recovery and predicting another year or more before garden retail returns to greater profitability.

“Yamagami’s is in Silicon Valley, and we seem to be maintaining our customer count but we are losing sales by having a lower ‘average per sale,’” says Ronald Kanemoto of Yamagami’s Nursery in Cupertino, Calif. “As far as we can determine, our contemporaries are experiencing similar results. I do not foresee a recovery until 2011 because the West Coast typically trails the national recovery by 3 to 6 months. A bit scary; you are beginning to see small business ‘going out of business,’ and more empty retail spaces.

“We will see huge increases in edibles but nothing else. Drought in California is still a possible factor, although we have done well to OK in drought situations before. Basically, we will be trying to ‘hang on’ until 2011.”