November/December 2022 - 28

POHMER ON...
DON'T LET
COMMODITIES
RUIN YOUR SEASON
Garden centers should emphasize the
message that they have something a lowcost
provider doesn't or can't provide.
it, but spend they did - especially on big ticket and highly
discretionary and luxury items.
But when things opened up, they suddenly shifted to
By Stan Pohmer
A
s I write this in mid-September, the economic climate is
tense and uncertain and, as a result, retailers are having
trouble planning for the fall/winter 2022 holiday and
spring 2023 seasons. As Wayne Gretzky would say, it's hard to
anticipate where the puck will be.
Inflation is running wild and the Federal Reserve will likely
continue to raise interest rates aggressively in an attempt
to tame it. This will lead to higher borrowing rates, credit
card rates, and mortgage rates (cooling both new and
existing home sales and making it more difficult for potential
new homeowners) and raising the cost of inputs for most
producers, leading to higher retail price points.
Though wages have increased significantly, they aren't
keeping pace with inflation, so workers have little to show for
their wage gains - in some cases, having fewer discretionary
dollars than before their wage raises. With the midterm
elections coming in November, anything and everything
that can be politicized is, with lots of verbal attacks but little
action to really provide solutions to our economic concerns.
And with the Russia-Ukraine war's economic sanctions being
leveled by both Russia and the Western bloc, Western Europe
is facing severe natural gas shortages resulting in major global
supply/logistics challenges and inflating prices, including in
the U.S., where winter heating and manufacturing natural gas
prices are expected to increase up to 70%. Though no one can
accurately predict the final severity of the economic downturn
and the specific timing, more economists are talking about an
impending global recession early in the first half of 2023.
Consumer Concerns
Retailers are dealing with a dramatically different consumer
than just a year ago. During the pandemic shutdowns,
consumers were flush with stimulus cash and increased
unemployment benefits, with limited opportunities to spend
experiential spending - entertainment, dining out, travel
and visiting family and friends. As inflation kicked in, they
continued to spend on experiences, but dramatically curtailed
their spending on most everything but the basics. This led
to heavy retailer overstocks on higher-priced inventory the
retailers had ordered to catch up to the spending patterns of
the consumer that no longer existed. First-half-2022 results
showed high inventory clearance markdowns, major profit
drops, and break-even (at best) sales with lower traffic and
transactions (most sales increases were achieved by higher
inflation-driven retails).
Retailers are uncertain and hesitant looking forward to the
2022 holidays and spring 2023. They still have no clear picture
on what consumer demand will look like and, with " hangover "
inventory, they are extremely cautious and conservative on
their buys. Likewise, consumers are uncertain on where the
economy is heading and where it will wind up. They are still
battling inflationary expenses and are focused on buying
basics, with the exception of spending on experiential travel
and entertainment.
Where Consumers Are Shopping
In addition to focusing their purchases on basics and
staples, consumers are also changing where they buy
their products and services in this inflationary period. An
example of this is the grocery/produce category. Traditional
supermarkets, whose assortments are primarily based on
national brand items, are reporting lower store traffic and
transactions. The only reason they are showing sales increases
is the higher inflation-driven retail prices on the fewer items
that are being purchased.
Consumers are increasing their grocery/produce purchases
in big box/mass merchandiser stores, dollar stores,
convenience, and low-price stores such as Aldi. These subchannels
are generating higher traffic, transactions, and unit
sales, and are also benefiting from higher inflation-driven
retails. Where traditional supermarkets primarily build their
assortments with national-branded items (with the major
exception of Kroger), these other retail channels are focused
28 | LAWN & GARDEN RETAILER | NOVEMBER/DECEMBER 2022
November/December 2022

Table of Contents for the Digital Edition of November/December 2022
