GLEE is the huge garden center show held every year in Birmingham England. With over 25,000 visitors, it's Britain’s biggest wholesale garden center show. GLEE also has a large area dedicated to pet supplies and aquatic supplies, reflecting the diverse range of products sold in British garden centers today.
Peter Dawson of PJMD Horticulture gave a press briefing to describe the current state of the garden center industry. The bottom line is that 2007 was a difficult years for British garden centers due to a very cold and rainy spring. Retail sales at garden centers have been in decline for several years running: $8,892,000 (2004); $8,002,000 (2005); $7,534,000 (2006). Preliminary information indicates 2007 sale are well below 2006 numbers.
New strong forces are entering the market. The powerful entrepreneur Tom Hunter has controlling ownership in Blooms of Bressingham and in Wyevale, which, with over 120 locations, is England’s largest garden center chain. The giant retailer Tesco has purchased the 21-garden-center chain, Dobbies. Asda (Wal-Mart) has informed some suppliers of its intent to build 30 garden centers. At the same time, other major retailers are offering garden items during the peak selling season. Internet sales have taken some of the market share and are growing fast. Meanwhile, B & Q with 340 DIYs operates 340 garden centers as part of their stores. Home Base and Focus—large DIYs—compete in the garden center space. There's plenty of competition in the garden center business.
Sound like anyplace close to home?
Part of the trip included tours of two of the leading garden center around Birmingham. One was a single-unit operation that had the distinction of being voted the best garden center in England and the other was part of a chain owned by a French company. Both operations were amazing places to visit and spend time. Our hosts were open about percentages and business. The most astonishing number for me was that the sale of plants amounted to 18% of gross sales. Plant sales just equaled the sales of prepared food in the in-store restaurant. The stores sold a wide variety of gourmet food and gift items, and one had a fine meats counter. Both of these stores have succeeded in becoming compelling destinations, a wonderful place to spend time wandering around and buying stuff.
Before going to GLEE, I was in Cleveland for Green Profit's Retail Experience, which had two days of garden center tours. These American operators were just as compelling as destinations as their British counterparts. My favorite experience was seeing the gourmet dog treats at Petittis. It still hurts my head how many of these dog treats they sell. One of the garden centers had wonderful greengrocer produce within the store. Another sold clothing in some volume.
My conclusion from visiting all these retail masters: They have figured out that the experience is far more important to the shopper than the individual price of each item. People paying $1.75 for a fancy dog biscuit just aren't very price sensitive; they are very experience sensitive. Good experiences keep them coming back and buying things they may or may not need.
The number of affluent people and the level of that affluence have grown remarkably worldwide. While these people aren't particularly price sensitive, they are, however, value sensitive. Just because they have a lot of money doesn't mean they'll allow themselves to be taken advantage of. It's probable that they may be more value sensitive. They don’t want the really cheap product that won't last. "Poor people" have to buy that stuff because they have no money to buy the better quality.
This summer has proven to me that the experience, including service and atmosphere, is something that people value a great deal. It's part of the product price and clearly something a lot of people are will to pay for. It was nice to see that independents are alive and well, even if it means they don’t sell as many plants as I'd like.
Tuesday, September 16, 2008
Garden Center Summer - 2007
The OFA Short Course begins the summer trade show season. Always well attended by growers and retailers, it has become a must-attend event. This year saw the birth of a new show: The Independent Garden Center Show in Chicago was held in August. Many independents garden center operators were at the show looking for things to put in their centers. For sure, this show will grow, though hopefully not so fast that exhibitors are drastically increased for the benefit of the show owners while the number of buyers does not proportionally increase.
I wasn't able to attend many of the education sessions, but I did see the color trends put on by the people who own Pantone. My one complaint was that there were so many colors and pallets selected as “trends” that it seemed pretty useless to me. In my opinion, there are very few “bad” colors, only bad combinations of colors. Clean, clear colors, including black and white, are always “in style.”
September brought the Retail Experience conference, put on by Green Profit magazine, in downtown Cleveland. Retail Experience is much more of a pure-education conference with a mini trade show. Split sessions made for very difficult choices. Part of the conference included two days of touring local garden centers: one day on the east side and the next on the west side, three each day. I've never done one of these arranged garden center tours, so it was wonderful for me. Each garden center was completely different from the others, and all were real destinations where you could spend a chunk of a day. All of the operators were beyond generous in opening their operations and sharing their knowledge with the group.
Our last stop was the Petitti Home and Garden Center, one of eight operated by the Petitti family. This was their flagship store, which backed up on a freeway and wow, what a place. Although there were many very interesting areas of the garden center, the one that took me aback was the free-standing display of the most beautifully decorated cookies. It took a while to realize (and even longer to accept) that these were gourmet doggie biscuits for sale. One of the tour guests asked A. J. Petitti what kind of shelf life the biscuits have to which he replied, “I’m not sure since we have to restock a couple times a week anyway.” I've lost sleep over this experience.
One of the educational sessions featured Andy Buyting, the owner of Green Village Home and Garden, who talked on market planning and pricing to compete effectively with the big boxes. Andy also had a book to promote called The Retailer's Roadmap to Success.
Not long ago, I was invited to a Florida Chamber of Commerce session titled "Imagining an Innovative Economy.” The session had lots of high-level business and institutional representatives. They had hired a brilliant third-party consultant from IBM to conduct and moderate the session. During his presentation, he shared the experience of working at IBM during a difficult transition when the company had to change and had no money. He spoke of the three boxes that we live our business lives in: The first box is where we live almost every minute, operating the company to stay in business and on budget. This occupies between 95% and 105% of our time. The third box is where we imagine the future we would like to have, what we would like to be and look like five and ten years down the road. The hardest box to live in, though, is the second box. That is the box that includes the plans and action steps we must take to get to box No. 3.
Andy Buyting wants to franchise the Green Village and Garden Center model, and he decided that the action step for him to take was to write a book sharing his methods with the retail world. I went out and bought the book, despite not being a retailer. After all, isn’t it worth $20 to fast track yourself to mastering the second box like Andy did? For the price of the book and the time invested, you may find yourself well on your way to your third box.
I wasn't able to attend many of the education sessions, but I did see the color trends put on by the people who own Pantone. My one complaint was that there were so many colors and pallets selected as “trends” that it seemed pretty useless to me. In my opinion, there are very few “bad” colors, only bad combinations of colors. Clean, clear colors, including black and white, are always “in style.”
September brought the Retail Experience conference, put on by Green Profit magazine, in downtown Cleveland. Retail Experience is much more of a pure-education conference with a mini trade show. Split sessions made for very difficult choices. Part of the conference included two days of touring local garden centers: one day on the east side and the next on the west side, three each day. I've never done one of these arranged garden center tours, so it was wonderful for me. Each garden center was completely different from the others, and all were real destinations where you could spend a chunk of a day. All of the operators were beyond generous in opening their operations and sharing their knowledge with the group.
Our last stop was the Petitti Home and Garden Center, one of eight operated by the Petitti family. This was their flagship store, which backed up on a freeway and wow, what a place. Although there were many very interesting areas of the garden center, the one that took me aback was the free-standing display of the most beautifully decorated cookies. It took a while to realize (and even longer to accept) that these were gourmet doggie biscuits for sale. One of the tour guests asked A. J. Petitti what kind of shelf life the biscuits have to which he replied, “I’m not sure since we have to restock a couple times a week anyway.” I've lost sleep over this experience.
One of the educational sessions featured Andy Buyting, the owner of Green Village Home and Garden, who talked on market planning and pricing to compete effectively with the big boxes. Andy also had a book to promote called The Retailer's Roadmap to Success.
Not long ago, I was invited to a Florida Chamber of Commerce session titled "Imagining an Innovative Economy.” The session had lots of high-level business and institutional representatives. They had hired a brilliant third-party consultant from IBM to conduct and moderate the session. During his presentation, he shared the experience of working at IBM during a difficult transition when the company had to change and had no money. He spoke of the three boxes that we live our business lives in: The first box is where we live almost every minute, operating the company to stay in business and on budget. This occupies between 95% and 105% of our time. The third box is where we imagine the future we would like to have, what we would like to be and look like five and ten years down the road. The hardest box to live in, though, is the second box. That is the box that includes the plans and action steps we must take to get to box No. 3.
Andy Buyting wants to franchise the Green Village and Garden Center model, and he decided that the action step for him to take was to write a book sharing his methods with the retail world. I went out and bought the book, despite not being a retailer. After all, isn’t it worth $20 to fast track yourself to mastering the second box like Andy did? For the price of the book and the time invested, you may find yourself well on your way to your third box.
Dishonest Behavior - 2007
Our youngest just turned 15 and wanted a Nintendo Wii for her birthday present. She and my wife were unsuccessful after looking for her future Wii at Toys "R" Us and Best Buy. The salesperson at Best Buy told my wife that when they run an advertisement, the product sells out as quickly as it’s shipped in. While a little disappointed, my daughter was willing to wait until another store had a shipment.
I told my wife that I hoped someone other than Circuit City would have the Wii first. Many years ago I had an uncomfortable experience with one of their stores. They had advertised a particular model of video camera and offered a free tripod and camera case with the purchase. Circuit City also made a lot of noise about how they had a “low-price guarantee” on the camera. I purchased the camera and watched as the salesman put in quite a high price for the “free” tripod and camera case and then discounted the camera to get to the advertised total-package price. This would insure they indeed would not be undersold—but the only way I was getting that low price was by buying these high-priced, supposedly “free” items. A perfect example of false advertising.
For years, I avoided shopping at Circuit City, but Sunday came and sure enough the Wii was on sale there. I drove to the nearest store before it opened, stood in line to get a ticket to buy the machine, and then stood in another line to make the purchase. The salesman behind the counter didn't start selling the product immediately, though. For about five minutes, the young man lectured us assembling customers that the reason we were standing in line for this product was not because it was so popular that Nintendo could not make them fast enough but because the machines overheat and self-destruct. The only way to be safe from this nearly inevitable loss of playtime was to buy the $59 Circuit City extended warranty.
Consumer Reports magazine reveals to us that extended warranties on electronics such as the Wii are very profitable for the retailers but a really bad deal for the consumer; I have to say I am more inclined to believe Consumer Reports than the Circuit City employee making the pitch. However, several people in the line were instantly worried and made calls on cell phones to consult parties at home. Fear was in the air.
When finally I reached the front of the line and exchanged my ticket for a smallish white box containing the object of my daughter’s desire, the salesman asked if I'd be purchasing the extended warranty. I said no.
He said, “Are you sure about that?”
I replied in a less-than-friendly tone, “I am sure that I am sure.”
He snorted in disapproval. I left the store with the desired product feeling a little unclean and happy to be out of there.
At home, I went straight to the computer and googled ‘overheating Wii.’ On the Wii forum, there was much discussion about this topic and it became clear that it wasn't a significant problem. I wasn't surprised; the salesman had lied. When I googled Circuit City, though, there was an article from WashingtonPost.com from March 29, 2007 reporting that the company fired 3,400 employees who were “overpaid” to replace them with people willing to work for less.
What would it take for me to go back into that same chain? I’m not sure I'll ever find out. We, as a culture, despise dishonesty. In my direct experience of 30-plus years, in which I have fouled up orders on occasion and disappointed customers, if you tell the truth, own up to your errors, and apologize, customers may remain angry but they don’t hate you. If you lie to them, they never forget it and they hate you. Nobody wants to do business with people who lie for their own benefit.
How do you build trust? Tell the truth even when it may hurt you. It isn't the easiest thing to do but it's always the right thing to do. Yes, there are rare occasions when telling the truth is cruel and hurtful to someone else; that’s not what I'm talking about here. Telling the truth can be painful in the short-term. Lying destroys your soul long-term.
I told my wife that I hoped someone other than Circuit City would have the Wii first. Many years ago I had an uncomfortable experience with one of their stores. They had advertised a particular model of video camera and offered a free tripod and camera case with the purchase. Circuit City also made a lot of noise about how they had a “low-price guarantee” on the camera. I purchased the camera and watched as the salesman put in quite a high price for the “free” tripod and camera case and then discounted the camera to get to the advertised total-package price. This would insure they indeed would not be undersold—but the only way I was getting that low price was by buying these high-priced, supposedly “free” items. A perfect example of false advertising.
For years, I avoided shopping at Circuit City, but Sunday came and sure enough the Wii was on sale there. I drove to the nearest store before it opened, stood in line to get a ticket to buy the machine, and then stood in another line to make the purchase. The salesman behind the counter didn't start selling the product immediately, though. For about five minutes, the young man lectured us assembling customers that the reason we were standing in line for this product was not because it was so popular that Nintendo could not make them fast enough but because the machines overheat and self-destruct. The only way to be safe from this nearly inevitable loss of playtime was to buy the $59 Circuit City extended warranty.
Consumer Reports magazine reveals to us that extended warranties on electronics such as the Wii are very profitable for the retailers but a really bad deal for the consumer; I have to say I am more inclined to believe Consumer Reports than the Circuit City employee making the pitch. However, several people in the line were instantly worried and made calls on cell phones to consult parties at home. Fear was in the air.
When finally I reached the front of the line and exchanged my ticket for a smallish white box containing the object of my daughter’s desire, the salesman asked if I'd be purchasing the extended warranty. I said no.
He said, “Are you sure about that?”
I replied in a less-than-friendly tone, “I am sure that I am sure.”
He snorted in disapproval. I left the store with the desired product feeling a little unclean and happy to be out of there.
At home, I went straight to the computer and googled ‘overheating Wii.’ On the Wii forum, there was much discussion about this topic and it became clear that it wasn't a significant problem. I wasn't surprised; the salesman had lied. When I googled Circuit City, though, there was an article from WashingtonPost.com from March 29, 2007 reporting that the company fired 3,400 employees who were “overpaid” to replace them with people willing to work for less.
What would it take for me to go back into that same chain? I’m not sure I'll ever find out. We, as a culture, despise dishonesty. In my direct experience of 30-plus years, in which I have fouled up orders on occasion and disappointed customers, if you tell the truth, own up to your errors, and apologize, customers may remain angry but they don’t hate you. If you lie to them, they never forget it and they hate you. Nobody wants to do business with people who lie for their own benefit.
How do you build trust? Tell the truth even when it may hurt you. It isn't the easiest thing to do but it's always the right thing to do. Yes, there are rare occasions when telling the truth is cruel and hurtful to someone else; that’s not what I'm talking about here. Telling the truth can be painful in the short-term. Lying destroys your soul long-term.
Got Web? - 2007
The OFA Short Course has come and gone yet again. The highlight of the show for me was Green Profit's Consumer Buzz Live. Bill Calkins led the show with a panel of eight Generation-X consumers. This group was wide ranging in its attitudes about gardening and its approach to it. There was one thing, though, that all of them agreed on: they do everything on the web.
I grew up in the generation before cell phones and personal computers. I still view these things as conveniences: nice to have but not crucial. It isn't so uncommon for me to forget my cell phone at home for a day. The web is not my very first choice for information; although, with good search tools it probably should be. Members of Gen-X on the panel said they turn first (and almost exclusively) to the web to get information about companies and products. Not one person said anything contrary to mark his or herself as anything other than computer-dependent. Not a single dissenting voice. That is statistically powerful.
So why have I not done the right web thing yet with my own company? Our current web page is badly out of date. Well, the reason is that it costs money and takes time, and I know I won’t feel the benefit immediately. That looks pretty bad in writing but it's the truth.
Since Virginia joined our staff, she has been pushing for a web site overhaul (to match our new company name, logo design, and more). Right after getting from OFA, I told Virginia about this panel and how it was time to do something. Virginia said she was glad because she had just signed an expensive contract for a complete web makeover. Okay, okay, boss me around. After all, she is right, as confirmed by all eight panelists at the Short Course.
We all talk about getting the next generation interested in our products or our stores, and they're telling us what the starting point is. We must communicate the way our customers want be communicated to or they won't bother.
The other main message from the panel was about sustainability. They all said they would pay 20% more for stuff that was organic or earth friendly or sustainable. Again, no dissent. We're the original green industry, but even British Petroleum has redesigned their logo to look like a flower.
Read the last line again. What are we doing individually to promote the earth benefits of our products? Ball Horticultural is out in front on this issue. You may be of a generation that really doesn't like the constant stream of eco-babble, but it's here to stay. It gets under my skin that oil companies are promoting themselves as green while we stand around with our hands in our pockets wondering why there isn't enough demand for our flowers.
There have been a number of collective efforts in years past to promote the health benefits of plants. They've failed over time due to lack of support from the grower community. If we don't come together, then we must individually carry the message to the consumer that we are THE green guys. And, of course, we need to be green. This is fundamental to the future success of our industry.
One other session at Ohio got my attention. There was a town hall meeting with a group of growers talking about current topics. The rules of the meeting stated that none of the participants could be directly quoted. So instead, I asked the participant where he got the information he shared, and that's what I'll write up: Kip Creel of the Standpoint Group (www.standpointgroup.com) did a study of affluent Gen-X consumer attitudes about gardening. One interview summed up the groups attitude. A female corporate attorney driving a BMW was asked what gardening meant to her. The response was, “Going to Calloway's and buying a finished arranged container garden, taking it home, putting it on the deck and inviting friends over for cocktails on the deck." She was interested in the outcome or product, not the process of gardening. This is great news for our industry if we take advantage of the new generation of buyers and their attitudes. I learned a lot in Ohio. Did you go?
I grew up in the generation before cell phones and personal computers. I still view these things as conveniences: nice to have but not crucial. It isn't so uncommon for me to forget my cell phone at home for a day. The web is not my very first choice for information; although, with good search tools it probably should be. Members of Gen-X on the panel said they turn first (and almost exclusively) to the web to get information about companies and products. Not one person said anything contrary to mark his or herself as anything other than computer-dependent. Not a single dissenting voice. That is statistically powerful.
So why have I not done the right web thing yet with my own company? Our current web page is badly out of date. Well, the reason is that it costs money and takes time, and I know I won’t feel the benefit immediately. That looks pretty bad in writing but it's the truth.
Since Virginia joined our staff, she has been pushing for a web site overhaul (to match our new company name, logo design, and more). Right after getting from OFA, I told Virginia about this panel and how it was time to do something. Virginia said she was glad because she had just signed an expensive contract for a complete web makeover. Okay, okay, boss me around. After all, she is right, as confirmed by all eight panelists at the Short Course.
We all talk about getting the next generation interested in our products or our stores, and they're telling us what the starting point is. We must communicate the way our customers want be communicated to or they won't bother.
The other main message from the panel was about sustainability. They all said they would pay 20% more for stuff that was organic or earth friendly or sustainable. Again, no dissent. We're the original green industry, but even British Petroleum has redesigned their logo to look like a flower.
Read the last line again. What are we doing individually to promote the earth benefits of our products? Ball Horticultural is out in front on this issue. You may be of a generation that really doesn't like the constant stream of eco-babble, but it's here to stay. It gets under my skin that oil companies are promoting themselves as green while we stand around with our hands in our pockets wondering why there isn't enough demand for our flowers.
There have been a number of collective efforts in years past to promote the health benefits of plants. They've failed over time due to lack of support from the grower community. If we don't come together, then we must individually carry the message to the consumer that we are THE green guys. And, of course, we need to be green. This is fundamental to the future success of our industry.
One other session at Ohio got my attention. There was a town hall meeting with a group of growers talking about current topics. The rules of the meeting stated that none of the participants could be directly quoted. So instead, I asked the participant where he got the information he shared, and that's what I'll write up: Kip Creel of the Standpoint Group (www.standpointgroup.com) did a study of affluent Gen-X consumer attitudes about gardening. One interview summed up the groups attitude. A female corporate attorney driving a BMW was asked what gardening meant to her. The response was, “Going to Calloway's and buying a finished arranged container garden, taking it home, putting it on the deck and inviting friends over for cocktails on the deck." She was interested in the outcome or product, not the process of gardening. This is great news for our industry if we take advantage of the new generation of buyers and their attitudes. I learned a lot in Ohio. Did you go?
Flip the Switch - 2007
I am in the Sydney airport waiting for a flight to Cairns. I was supposed to be there last night but the flight from Honolulu on Quantas was delayed. To be honest, I could have made the connection but the flight to Cairns was over-booked anyway so the Sydney ground staff took the decision that everyone with that connection would stay the night in Sydney. They gave me a taxi voucher and a hotel for the night and booked me on the first flight in the morning. Unfortunately, because of the way I planned the trip, I'll now have three hours in Cairns instead of a full day. I must take responsibility for such tight scheduling even though if it'd worked it would've been very efficient. Quantas took responsibility for their late arrival and did all they could to make the situation less painful.
Prior to arriving in Australia, I was in Hawaii for a few days visiting orchid nurseries. About three blocks from the hotel was a strip of different fast food places. The one that caught my eye was the take-out sushi place, and I walked in to place an order. It was about 7:15 p.m. As I walked in, the man behind the counter said, "We’re closing early."
I looked at the sign stating hours of operation from 12 p.m. to 8 p.m. I pointed to it and said, "Then you need to change your sign.”
He replied, “No, I can do anything I want.” I told him he was absolutely right and thanked him for correcting me. It was of those moments in business when you find bottom.
Leaving the store and perusing the other offerings, I saw the same man turn away two other would-be customers. It was surreal. In my younger days, I would have had sharp words for the operator; with age, I have learned that adding a negative to a negative situation does nothing good. The sushi shop operator chose to act the way he did and there was really nothing I could do about it. This is not an uncommon attitude in what I like to call “the Hawaiian islands of entitlement.”
The week before this trip, I was coming home from Super Floral and sat next to a remarkable woman named Suzanne. She was reading a book called Flipping the Switch. We had a good conversation and I learned that this high-powered executive is married to a pastor, Chris, and on some of their vacations they went to extremely poor places to work with and help the very poorest of the poor. They chose to spend their personal time in this way. Over the past weekend I wrote a column for Floriculture International just about Suzanne and Chris and “cause marketing.” I did not remember the name of Suzanne’s husband or the name of the book so I e-mailed Suzanne Sunday morning to ask for these details and permission to use them. Suzanne e-mailed me a few minutes later with the details and, in the e-mail, copied the author of the book. A couple hours later, I got an e-mail from the book’s author, John Miller.
I was more than impressed that these strangers were so responsive on a Sunday. I bought a copy of Flipping the Switch on my way to the airport and read it on the way here, to Australia. The sub-title is "Unleash the Power of Personal Accountability." The concept is quite simple: You cannot change others but you can change yourself. By acting in a manner that takes personal responsibility for making the world, your organization, and your family better, the world gets better for you and those around you. People who already take personal responsibility want to get better at it. They in turn contribute more and are more successful in their own lives. Miller chooses to help other people succeed in their lives. He's also aware that most people read the book and say, “my boss or my coworkers should read this book.” They miss the point.
I saw people making so many very different choices on this trip—the airline deciding how to handle the over-booking, the sushi restaurant operator deciding to turn away business—and I see the power of Miller’s message. He’s right that I cannot change those other people, but I will make the choice to take personal responsibility. What’s your choice?
Prior to arriving in Australia, I was in Hawaii for a few days visiting orchid nurseries. About three blocks from the hotel was a strip of different fast food places. The one that caught my eye was the take-out sushi place, and I walked in to place an order. It was about 7:15 p.m. As I walked in, the man behind the counter said, "We’re closing early."
I looked at the sign stating hours of operation from 12 p.m. to 8 p.m. I pointed to it and said, "Then you need to change your sign.”
He replied, “No, I can do anything I want.” I told him he was absolutely right and thanked him for correcting me. It was of those moments in business when you find bottom.
Leaving the store and perusing the other offerings, I saw the same man turn away two other would-be customers. It was surreal. In my younger days, I would have had sharp words for the operator; with age, I have learned that adding a negative to a negative situation does nothing good. The sushi shop operator chose to act the way he did and there was really nothing I could do about it. This is not an uncommon attitude in what I like to call “the Hawaiian islands of entitlement.”
The week before this trip, I was coming home from Super Floral and sat next to a remarkable woman named Suzanne. She was reading a book called Flipping the Switch. We had a good conversation and I learned that this high-powered executive is married to a pastor, Chris, and on some of their vacations they went to extremely poor places to work with and help the very poorest of the poor. They chose to spend their personal time in this way. Over the past weekend I wrote a column for Floriculture International just about Suzanne and Chris and “cause marketing.” I did not remember the name of Suzanne’s husband or the name of the book so I e-mailed Suzanne Sunday morning to ask for these details and permission to use them. Suzanne e-mailed me a few minutes later with the details and, in the e-mail, copied the author of the book. A couple hours later, I got an e-mail from the book’s author, John Miller.
I was more than impressed that these strangers were so responsive on a Sunday. I bought a copy of Flipping the Switch on my way to the airport and read it on the way here, to Australia. The sub-title is "Unleash the Power of Personal Accountability." The concept is quite simple: You cannot change others but you can change yourself. By acting in a manner that takes personal responsibility for making the world, your organization, and your family better, the world gets better for you and those around you. People who already take personal responsibility want to get better at it. They in turn contribute more and are more successful in their own lives. Miller chooses to help other people succeed in their lives. He's also aware that most people read the book and say, “my boss or my coworkers should read this book.” They miss the point.
I saw people making so many very different choices on this trip—the airline deciding how to handle the over-booking, the sushi restaurant operator deciding to turn away business—and I see the power of Miller’s message. He’s right that I cannot change those other people, but I will make the choice to take personal responsibility. What’s your choice?
Markets and Madness - 2007
July means that it's time for the OFA Short Course. I was planning to go as a visitor when I got a call from someone at OFA inviting me to be on a panel for a town hall session.
The topic was “Are We Cultivating Our Own Extinction?” and the description goes on at some length to bemoan the fact that we're a very competitive industry and that competition is hurting us. The description ends with the statement “Stop the insanity!!!!” Wow, lots of exclamation points. Somebody feels very strongly about this topic.
Since I have what will probably be the exact opposite opinion of the creator of the panel topic, I thought it'd be good to put my two cents in print before the program. My fellow panelists will have ample time to prepare their positions and skewer my main arguments.
This is a topic I’ve written about before, specifically when I was taking economics a couple of years ago. I was introduced to some unpleasant rules that govern our economy. The first states that competition is the basic regulatory force in pure capitalism. Sounds simple and not at all unpleasant. The bad part comes in microeconomics. The rule here is that in a perfectly competitive market, prices for goods fall to the marginal cost of production or the actual total cost of production. Selling for the actual total cost of production is better than the marginal cost of production because you get some return on capital. Are we a perfectly competitively market? Well, a perfectly competitive market is defined as a large number of producers in a market with a large number of buyers. It also requires that the producers sell products generic enough that one supplier’s product can be substituted with another. Does any of this sound familiar? It sounds very familiar to me. I am in a niche market that has now become close to perfectly competitive.
Based on these rules, most companies are breaking even. I really don't see any alternative to this fundamental reality. The market is an invisible force that doesn't care if you're sick or have a hurricane destroy your business. The market adjusts to supply and demand quickly and efficiently without individuals being able to control its course. This isn't necessarily fun for the people who have to compete inside the market space, especially when things go a bit wrong.
Retailers and suppliers live under the same tyranny of a freely competitive market. There are many things that businesses can do to make profits. They can differentiate their product offering to make it more attractive to consumers. They can increase the utility of a product to the consumer without greatly increasing costs of production. Consumers will always buy what they believe gives the best value for the money spent. Sometimes the plant sitting on the bench for an extra week is enough to make the value greater without incurring substantial additional costs.
It's also possible to take the path of being more efficient than the average producer. Under the Dutch auction model, where all plants are sold on the clock for more or less the same price, the producer with the lowest average cost of production earns the profit. I am seeing more and more Dutch producers following the American model of product differentiation and direct marketing to retailers as a path to greater profits. I think this is happening because anyone can invest in more efficient production over time while product differentiation requires a higher order of skill to achieve.
The above strategies describe how to be a more effective competitor. Being a less effective competitor equals lower profit or even real money losses. I don't think the market is insane; the market is completely unemotional. The market, like gravity, never sleeps. Unlike gravity, the market does change as consumers change their view of utility. Effective competitors identify and respond to consumers quickly and adjust their product offering accordingly. Someone once told me the definition of insanity was doing the same thing over and over again and expecting a different result. So really, what is the insanity that needs to be stopped (!!!!)? Well, I can tell you it’s not the competition in our industry.
The topic was “Are We Cultivating Our Own Extinction?” and the description goes on at some length to bemoan the fact that we're a very competitive industry and that competition is hurting us. The description ends with the statement “Stop the insanity!!!!” Wow, lots of exclamation points. Somebody feels very strongly about this topic.
Since I have what will probably be the exact opposite opinion of the creator of the panel topic, I thought it'd be good to put my two cents in print before the program. My fellow panelists will have ample time to prepare their positions and skewer my main arguments.
This is a topic I’ve written about before, specifically when I was taking economics a couple of years ago. I was introduced to some unpleasant rules that govern our economy. The first states that competition is the basic regulatory force in pure capitalism. Sounds simple and not at all unpleasant. The bad part comes in microeconomics. The rule here is that in a perfectly competitive market, prices for goods fall to the marginal cost of production or the actual total cost of production. Selling for the actual total cost of production is better than the marginal cost of production because you get some return on capital. Are we a perfectly competitively market? Well, a perfectly competitive market is defined as a large number of producers in a market with a large number of buyers. It also requires that the producers sell products generic enough that one supplier’s product can be substituted with another. Does any of this sound familiar? It sounds very familiar to me. I am in a niche market that has now become close to perfectly competitive.
Based on these rules, most companies are breaking even. I really don't see any alternative to this fundamental reality. The market is an invisible force that doesn't care if you're sick or have a hurricane destroy your business. The market adjusts to supply and demand quickly and efficiently without individuals being able to control its course. This isn't necessarily fun for the people who have to compete inside the market space, especially when things go a bit wrong.
Retailers and suppliers live under the same tyranny of a freely competitive market. There are many things that businesses can do to make profits. They can differentiate their product offering to make it more attractive to consumers. They can increase the utility of a product to the consumer without greatly increasing costs of production. Consumers will always buy what they believe gives the best value for the money spent. Sometimes the plant sitting on the bench for an extra week is enough to make the value greater without incurring substantial additional costs.
It's also possible to take the path of being more efficient than the average producer. Under the Dutch auction model, where all plants are sold on the clock for more or less the same price, the producer with the lowest average cost of production earns the profit. I am seeing more and more Dutch producers following the American model of product differentiation and direct marketing to retailers as a path to greater profits. I think this is happening because anyone can invest in more efficient production over time while product differentiation requires a higher order of skill to achieve.
The above strategies describe how to be a more effective competitor. Being a less effective competitor equals lower profit or even real money losses. I don't think the market is insane; the market is completely unemotional. The market, like gravity, never sleeps. Unlike gravity, the market does change as consumers change their view of utility. Effective competitors identify and respond to consumers quickly and adjust their product offering accordingly. Someone once told me the definition of insanity was doing the same thing over and over again and expecting a different result. So really, what is the insanity that needs to be stopped (!!!!)? Well, I can tell you it’s not the competition in our industry.
International Travel Times Two - 2007
I am in my hotel room in Bangkok waiting for my friend and supplier to pick me up for the day’s activity. We will be visiting a number of different orchid and foliage nurseries during my four days in Thailand. This is the middle stop after eleven days in China and Hong Kong and before three days in Holland. Add in the four travel days and I’m away from home for 22 days during a very busy shipping season. This is about the average amount of time it takes to go around the world and be effective. How does it make sense to spend so much time traveling when there’s so much productive work to be done at home?
For a change, I’m not making the trip alone. There’s a bright young woman right out of university who has joined the company and in her first seven months this will be her second trip around the world. It’s quite nice to have her along as I easily get confused about which direction to go in the enormous trade fair halls. More importantly, she does the hard work of follow up: ordering products, tracking containers and communicating with loads of suppliers. I am quite good at getting on and off airplanes but not so good at doing all of the detail work that makes the travel more effective. Thankfully, it won’t be long before I do not have to go on these trips at all, as she can do it herself.
What always seems to happen is that I learn more about things that I did not intend to learn about than things that I set out to learn. On the first part of this trip, I was in the bar of the Kowloon Hotel for happy hour and struck up a conversation with someone from Great Britain who manages celebrity garden products. Over the next several days in Hong Kong and China, we were able to meet and trade valuable information on suppliers from different countries. Each of us has spent years doing something similar but with different results. Sharing our knowledge helped both of us a great deal. And all it took was one of us reaching out to say hello to a stranger and engaging in conversation.
Upon my arrival in Bangkok, I was pleasantly surprised to find that accompanying my long-time supplier (who was picking us up from the airport) was a new grower friend of mine from Australia. As it turns out, Barry came to Bangkok at the same time I did. The last time I saw Barry was in Taiwan for the Taiwan Orchid Show last month. I may see him in Australia next month. We spent the day visiting nurseries and comparing information from our experiences. I am quite interested in understanding how the cash-and-carry wholesale system works in Australia and he is interested in learning anything about orchids.
In two days we are off to Holland. I cannot predict what will come of it. We have a full schedule and I hope it’s as productive as the rest of the trip.
When we plan this sort of trip we’re targeting new information about certain products and suppliers and trying to find new and interesting items to offer our customers. The most valuable thing we end up finding though, is interesting people with whom we can share knowledge and mutually multiply our efforts. It’s impossible for one person to do what several people can. People from different parts of the world offer a completely different perception of the shared experience.
Not all of the people I meet are about the business. Last night, coming back late, I ran into Jim in the hotel lobby. The last time I saw Jim was three years ago in the same hotel. This was our third meeting. Jim is a fine man who has lived full his last 70 years. Having migrated from Scotland to Australia as a young man, he has seen quite a bit of the world. I was tired and wanted to go to bed when we ran into one another, but Jim was going to be leaving the next day—I could not miss another conversation, maybe my last, with Jim.
For a change, I’m not making the trip alone. There’s a bright young woman right out of university who has joined the company and in her first seven months this will be her second trip around the world. It’s quite nice to have her along as I easily get confused about which direction to go in the enormous trade fair halls. More importantly, she does the hard work of follow up: ordering products, tracking containers and communicating with loads of suppliers. I am quite good at getting on and off airplanes but not so good at doing all of the detail work that makes the travel more effective. Thankfully, it won’t be long before I do not have to go on these trips at all, as she can do it herself.
What always seems to happen is that I learn more about things that I did not intend to learn about than things that I set out to learn. On the first part of this trip, I was in the bar of the Kowloon Hotel for happy hour and struck up a conversation with someone from Great Britain who manages celebrity garden products. Over the next several days in Hong Kong and China, we were able to meet and trade valuable information on suppliers from different countries. Each of us has spent years doing something similar but with different results. Sharing our knowledge helped both of us a great deal. And all it took was one of us reaching out to say hello to a stranger and engaging in conversation.
Upon my arrival in Bangkok, I was pleasantly surprised to find that accompanying my long-time supplier (who was picking us up from the airport) was a new grower friend of mine from Australia. As it turns out, Barry came to Bangkok at the same time I did. The last time I saw Barry was in Taiwan for the Taiwan Orchid Show last month. I may see him in Australia next month. We spent the day visiting nurseries and comparing information from our experiences. I am quite interested in understanding how the cash-and-carry wholesale system works in Australia and he is interested in learning anything about orchids.
In two days we are off to Holland. I cannot predict what will come of it. We have a full schedule and I hope it’s as productive as the rest of the trip.
When we plan this sort of trip we’re targeting new information about certain products and suppliers and trying to find new and interesting items to offer our customers. The most valuable thing we end up finding though, is interesting people with whom we can share knowledge and mutually multiply our efforts. It’s impossible for one person to do what several people can. People from different parts of the world offer a completely different perception of the shared experience.
Not all of the people I meet are about the business. Last night, coming back late, I ran into Jim in the hotel lobby. The last time I saw Jim was three years ago in the same hotel. This was our third meeting. Jim is a fine man who has lived full his last 70 years. Having migrated from Scotland to Australia as a young man, he has seen quite a bit of the world. I was tired and wanted to go to bed when we ran into one another, but Jim was going to be leaving the next day—I could not miss another conversation, maybe my last, with Jim.
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