There is no retail division that is more affected by weather conditions than the garden segment. A good spring encourages consumers to purchase plants, flowers and other green products; a warm summer season drives sales of garden furniture, and during the holiday season consumers can enjoy a range of Christmas items to decorate their homes.
At the same time, competition is arguably also more diverse in the garden retail industry than anywhere else: supermarkets, hardware stores, DIY stores and numerous other providers operate in the market segment initially dominated by garden centres with their ranges of green articles (indoor and outdoor plants) and ‘non-living items’ (including garden furniture, indoor and outdoor pottery items, and barbecues). Naturally, these garden centres continue to provide the widest variety of items as well as continuing to determine the trends, but at the same time they feel the competition from all these other sales channels, which are piggybacking on sales successes that have proved themselves in the market.
The market for garden items is substantial: data provided by Gfk shows that consumers spent a total of €3.9 billion in this segment in 2012, down 5% from 2011. Not including the major maintenance segment, which accounts for €1.1 billion of all sales and excluding expenditure on garden timber, the decline according to this market data was 7%. This same nationwide market data shows a 9% decline in the range of ‘living’ items (total revenue: €1.9 billion), while sales in the ‘non-living’ category fell by 5% (total revenue: €1.6 billion). These figures relate to the market as a whole, regardless of the sales channel. Not factoring in expenditure on major maintenance, the garden centres, accounting for approximately 33%, remain the largest providers in the garden retail market, although this share decreased in 2012.
The fact that many sales employees at the garden centres are semi-professional meteorologists in addition to their day jobs shows the importance of the weather as a factor in garden retail sales. About the year under review, staff members recalled that an Elfstedentocht (ice-skating race held in the Dutch province of Friesland during cold winters) nearly happened in February; that the month of March was dry and warm and that April’s weather was erratic. The meteorological map can be completed with the months of May (ranked in the top 10 of warmest months on record), June (the coldest since 1995), July (an abundance of rain) and December (the wettest month on record).
Although the harsh weather with which the year began resulted in many replacement purchases by consumers due to damage caused in gardens, it also marked a poor start to the new sales year. Sales at our stores improved noticeably whenever the weather was conducive to outdoor activity (as was the case in March and May), but the month of April, key to spring sales, was disappointing in both respects. Sales in the garden furniture product group, in particular, were affected by the bad spring, resulting in lower sales and more stock at the end of the year.
The pet and pet supplies product group did show significant growth: the new setup of the pet supplies division paid off and will be replicated at all stores. Replacement purchases, as mentioned above, also resulted in an increase in sales in the fixed plants, trees, shrub and conifer product groups. However, sales in the other product groups were down, including sales in the Gift/Decoration/Interiors segment and the Christmas segment. For the former category, the group began selling select items from sister company Casa (which does not operate in the Netherlands) in 2012 at a number of stores, which increased sales in this segment.
Although the majority of purchases of garden items are made in physical stores, online purchases are becoming more important. Potential customers are naturally using the webshop to find out about the items available before making a purchase. More than 3,000 garden products are now available online through the Tuincentrum Overvecht webshop. Sales through this channel rose significantly in the past year, also thanks to the animal supplies web retailer diervoordeel.nl, which was acquired in 2011.
While total sales at our garden centres were down last year, we managed to increase gross margin (in percentages) by improving the terms and conditions of purchase and reducing loss. Despite these efforts, profit in 2012 was down from 2011, even though total expenses were lower.
The Tilburg store was closed in the autumn of 2012, following which Tuincentrum Overvecht currently has 18 company-owned stores (including the webshop) and 1 franchise store.
Employees who can provide good advice to customers are the bedrock of sales and of building a loyal customer base. Employee training has been a key focus in recent years, which has helped boost motivation. This programme will be continued in the coming year.
Since the garden centres are largely seasonal in nature, we are working on increasing staffing flexibility at the stores. This only makes sense, since, in order to provide the best possible service to our customers, we require more employees on days of strong sales than on weaker days. This also requires a certain degree of flexibility on the part of our employees.
The bulk of the investments made during the year under review were allocated towards setting up the pilot project for the new pet and pet supplies concept and towards the conversion of stores for the display of items from the Casa retail chain in the Gift/Decoration/Interior segment. We also continued to invest in the new cash register system.
In the year ahead, investments will continue to focus mainly on changes to store concepts.
The chain’s sales policy is aimed increasingly at ensuring that the product range becomes less dependent on the weather; new retail concepts, including the pet and pet supplies division and the trend/decoration segments, have been introduced for this purpose, and these concepts will be further implemented across the stores. The display of garden furniture will be improved, and the Beuningen store will be converted and will serve as a pilot project for the new retail format. Although we are generally optimistic, we assume that it will take some time for consumer confidence (on which retail depends to a significant extent) to recover. The first few months of the new financial year were dominated by harsh, inhospitable weather conditions.