Garden Centers and Farm Supply Stores
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Industry Overview
The garden center and farm supply store industry includes about 13,000 stores with combined annual revenue of $30 billion. Major companies include Tractor Supply Company and Southern States Cooperative. The industry is highly fragmented: the top 50 companies hold about 25 percent of industry sales.
The industry generally excludes nurseries, outdoor power equipment stores, farm equipment distributors, and farm cooperatives.
Competitive Landscape
Consumer income, home sales, and leisure activity trends drive demand in garden centers; the general health of the farming sector, which is tied to crop and livestock prices and consumer consumption patterns, drives demand in farm supply stores. The profitability of individual companies depends on effective merchandising and marketing, competitive pricing, and the ability to secure convenient locations. Large companies have advantages in purchasing, distribution, finance, and marketing and can better serve large customers. Small companies can compete effectively by offering specialty products, providing superior customer service, or serving a local market. Average annual revenue per worker is about $180,000.
Competition includes home centers, hardware stores, mass merchandisers, and Internet and catalog retailers. Farm supply stores also compete with farm cooperatives, which allow small farms to combine purchasing power and enjoy volume discounts.
Products, Operations & Technology
Major products sold include farm supplies (30 percent of industry sales); soil treatments (25 percent); and outdoor nursery stock (15 percent). Farm supplies include grain and animal feed. Soil treatments include fertilizers, lime, and other chemicals. Outdoor nursery stock includes trees, shrubs, bedding plants, bulbs, sod, and seeds. Companies may also sell hardware, automotive fuel, pet food and supplies, and lawn and garden equipment and parts. Services include equipment repair, maintenance, or rental. Some garden centers offer landscaping design and installation services.
The industry consists primarily of independent retailers and regional chains, although Tractor Supply, a major farm supply company, has retail outlets in almost all states. Most stores have both indoor and outdoor retail space. Some garden centers have greenhouses or nurseries. Garden centers participating in a Lawn and Garden Retailer survey averaged 45,000 square feet with about 15,000 square feet of indoor and 30,000 square feet of outdoor retail space. Annual sales for garden centers averaged about $2 million with almost one-quarter of centers surveyed generating less than $100,000 annually. Locations include strip malls, stand-alone buildings, and indoor shopping malls (for stores specializing in garden accessories).
Average size for farm supply stores varies: large stores can exceed 50,000 square feet, while smaller stores can be just 1,500; Tractor Supply stores range from 15,500 to 18,500. Most farm supply stores are, or were, located in rural areas. Suburban developments have replaced vast amounts of farmland, forcing many farm supply stores to either move or alter merchandising strategy to include more nonfarm goods. Common equipment includes trucks, skid loaders, and forklifts.
Companies buy merchandise from a variety of sources, including manufacturers, distributors, nurseries, feed suppliers, and equipment dealers. Buying cooperatives allow independent garden centers to enjoy volume discounts, centralized billing, and delayed invoicing. Many companies attend trade shows to review new products and make buying decisions.
Merchandise selection varies by season and geographic region. Popular garden center products include annuals, perennials, trees, shrubs, cut flowers, and ground coverings (soil, mulch, and rocks). Live plants, also known as "green goods," are perishable inventory and require adequate water, sunlight, and air circulation. Unsalable plants contribute to inventory "shrink." Important farm supply categories include animal care (feeds and supplements); seeds; fertilizers; tractors and parts; hardware; tools; and fuel. Changing customer demographics have caused many farm supply stores to stock a broader variety of merchandise, including lawn and garden care, pet care, and clothing items.
Some companies use computerized information systems to manage point-of-sale (POS); inventory; sales; accounting; purchasing; and distribution. While most of the top gardening centers have POS, about 40 percent don't, according to Today's Garden Center. Large companies may use electronic data interchange (EDI) to transmit purchase orders. Tractor Supply uses web-based transportation management systems and radio frequency identification (RFID) to monitor merchandise movement through the supply chain.
