Greenhouse Grower: Ordering Live Goods At Retail

FOR anyone who has ever spent time in a position as a live goods buyer or merchant, this is probably the hardest task you can possibly undertake. Doing plan-o-grams on how to set product, putting together point-of-sale signing and labeling and putting together killer product assortments by category all pale in comparison to actually figuring out how much of what to order and when by store.

Obviously, the fewer the stores, the less daunting the task. In the multi-store chain environment, this can be the equivalent of playing Russian Roulette. There are so many variable factors affecting the outcome of your decisions, such as store volume, store physical layout, store capability to manage product from a staffing or talent level, weather, time of year or season, plant specifications, retail pricing and, last but not least, competition.

Let's Build A Hybrid Method

Almost everybody I've met on this side of the business has their own opinions about how to handle this enigma. In the beginning, there are typically two divergent schools of thought on how best to manage the ordering process. First, the school of thought for the merchants to do it for the stores via hosts are centrally placed orders from a buying office. second is the method of allowing stores to control their own destiny and order on their own. Both methods have many advantages and disadvantages. I'm only going to attempt to cover a relatively small sampling because someday I may actually write a book about it.

"Host" orders are the ones suppliers love and stores either love or hate, depending on whether they view a glass as half full or half empty. In an entrepreneurial environment, these process can be very unpopular. However, from the supply side, these types of orders provide tremendous efficiencies in production and logistics, and generally make for a much more orderly process. On the sell side, it gives a retailer uniform product mix in multiple outlets. It usually is intended to get the right product to the customer when demand is greatest. It also provides the opportunity to advertise the various hosted products.

Back to the store side - they don't always get what they want or, more importantly, what the customer wants. Everybody who has every worked in a nursery has an opinion about what they want to carry and sell, usually based on personal preference. This can be good and bad, but allowing flexibility to order what store personnel crave gives the individual store sites empowerment that can be very fulfilling. It can also lead to a random chaos store-by-store in a mass grouping of stores in a region.

So one of the solutions is to create a hybrid version of the two philosophies. What I mean by that is host ordering product with the store's influence ahead of time. This can be and is a very challenging and time-consuming process. In very short product lines such as Christmas, Easter or Mother's Day assortments, the process can be managed to a degree. When you come up against categories with broad assortments such as woody ornamentals, the task is extremely demanding. We've actually spent many a day meeting with store management personnel in preseason order writing sessions to accomplish just what I'm describing.

Usually the process is a very healthy one, creating a stronger bond between store and grower, but there's also been many occasions when someone develops "buyer's amnesia" when reminded about what they actually committed to on the order writing day. It's an exciting event that can really help to set expectations on both sides of the buyer/seller equation.

Merchandising Mania

Of course, there is another variation to this ordering madness and this is where growers actually help manage the process, a Ia "vendor managed inventory." This is not to get everyone all worked up about "pay-by-scan," but more about the fact that probably more times than not, our growers will know as well or better than our stores what our plant ordering requirements will be for any given timeframe. When stores have good working relationships with their suppliers, this process is poetry in motion, leading to satisfied customers. If the relationship is contentious (this never happens in our store), then there is much blame tossed around in both directions. This to me is the smartest approach to maximizing product flow and retrun on investment in the retail plant world.

Growers love host orders, provided they are clearly communicated, done well in advance of actual shipping, are thought out well, based on store history, and ship in full. (Yes, it actually has happened a few times.) One of my biggest frustrations through this buying process is the failure of growers to use individual store histories and performance to write actual proper orders. I mention performance because many times there can be a huge gap between stores of similar overall sales volume versus their sales in a plant category that was run at an exceptional level or not run well at all. And you end up working off bad history.

This syndrome is what we commonly refer to as the "downward spiral sydrome." When history is used from actual performance that grossly underperforms the surrounding marketplace, stores can actually be "rewarded" by using this history and writing less product for the next year's season in that category. This is where a merchant must intercede and use the "fair share" ordering methodology. Simply stated, if all stores in a marketplace of similar overall volumes perform at a certain sales history level, then the store with bad history needs to take on more of a "fair share." Sometimes bad history can be created simply by lack of watering or poor product location, and possibly a lack of intermediate markdowns to unclog a clogged product pipeline.

The Bottom Line

Any way you look at it, ordering processes will make or break you in our business. I believe most folks understand that inventory turnover drives return on investment (ROI). Lack of sales due to poor or lack of product is the surest way to take the luster off your ROI. Replenishment can seem so simple, but can be so difficult. Just look at how weather can influence the whole process. Even with the best designed plans for ordering, merchandising and so on, poor weather will bring the ordering process to a dead stop.

Saleability of live inventory is another huge factor in the ordering process. all too many times, we experience a buildup of picked over, past prime product that doesn't look too bad but also doesn't look too good. When a manager who lacks seasoning looks at a mass of inventory and cannot determine that much is unsaleable at full retail, that can many times lead to the order or reorder process drying up and making it tougher to "prime the pump" to get it going again.

The bottom line is the ordering process is a challenging but rewarding one. The more you an create a three-way partnership with individual stores, individual growers and the buyer or merchant, the higher your success rate will be in this area.

Vincent Naab

The Home Depot

vincent_naab@homedepot.com

About the author: Vincent "Vinny" Naab is the Northeast buyer of live goods for The Home Depot, South Plainfield, N.J.