May 2024 - 26

MANAGEMENT
I
By Tim Quebedeaux
Why are you what you
sell, and why is this
so important?
was always told in jest: You are what you eat! Having loved
bacon as a kid, the joke didn't make me laugh back then.
Now, I love it. When looking at your garden centers, you can
say something similar: " You are what you sell. " How do you
determine what that is? Measure your revenue product mix,
and it will define what you sell, thus who you are. But why
does this matter so much? In one word - profitability!
So, what is revenue product mix, and how do you
measure it? It is how much of each category you sell
compared to your total revenues. Basically, which category
do you sell the most of in your garden center?
Often you will see annuals, perennials, shrubs or trees
as the defining category for a garden center. How do you
measure this key performance indicator (KPI)? Simply take
the revenue of a category and divide it into the total revenue
for the garden center. The percentage by category will show
you how much of each category you sell, and the picture of
all those percentages will give you your revenue product mix.
The Origins of Your Mix
Ask any retail garden center owner how they started
their business - what a great story that always is! And if
you listen closely, you will find the origins of their revenue
product mix. From the beginnings of the garden center,
there was always one or two product lines that had the
heart of the entrepreneur. Whether it was flowers, shrubs,
trees or even tropicals, it all started somewhere. The
business grew from that as its base, but how and why are
the ones I listed all plants?
Think about what defines a retail garden center: the
selling of plants and products that complement them. So, it
follows that a plant category is the No. 1 defining category.
That's where the profitability starts to show up in the
lifetime of the business. Plant or perishable categories have
a higher propensity for profit. They have a forced efficiency
seen in the limited shelf life that lends to higher turns and
gross margin return on inventory investment (GMROII) -
two KPI terms that were probably never thought of years
ago when the business started! Because of this innate
property of perishables, it was easy to get into business and
stay in business.
Why does this matter to you today?
Because as the garden center grew, the chase for more
revenues led to more complementary product lines. These
lines tended to be nonperishable; categories such as
chemicals, fertilizers, tools, outdoor décor, gifts, mulch,
soil and pottery. All these categories helped revenues
climb - until they didn't. Once revenues started leveling
out in a business, then problems started to arise. Higher
percentages of these nonperishable categories compared
to the perishables started to affect the profitability of the
garden centers.
The fact that these nonperishables have a longer shelf
life in contrast to perishable products led to garden centers
stocking them in such a way as to realize this extended
shelf life. Simply saying, they could keep these products
26 | LAWN & GARDEN RETAILER | MAY 2024
Your Revenue
Product Mix
Matters
May 2024

Table of Contents for the Digital Edition of May 2024
