As the industry grapples with inflation and supply chain issues, 2022 could be the toughest year for retailers sourcing containers. As the domino effects of COVID-19 continue to impact the economy two years later, garden centers and grower-retailers are feeling the pinch.
According to the US Bureau of Labor Statistics, the consumer price index jumped 7.9% in the past 12 months, the highest in 40 years, according to economic experts. On March 16, the Federal Reserve approved a 0.25 percentage point hike – the first interest rate increase since 2018 – to fight inflation, with six more increases in the pipeline.
Now, with the Russian invasion of Ukraine, fuel and oil prices are steadily rising due to trade disruptions. Coupled with a shortage of truck drivers and more COVID-19 related lockdowns in China, it all leads to a question for garden centers: what now? We spoke to three garden centers across the United States to find out how they navigate the tangled web of inflation and supply chain issues.
Jump on surcharges
Elizabeth Russell-Skehan, president of Russell’s Garden Center in Wayland, Mass., said shipping was free last year. This year, it has climbed to 23%. The kicker? The container was supposed to arrive at the end of January.
“As far as we know, it’s not on land. And the 23% ocean surcharge? We did not know [it] at the time of purchase. It happens everywhere. And we signed contracts with people that we wouldn’t cancel orders with,” says Russell-Skehan.
Recalling a recent order, she says she expected an additional $800 freight, which she was billed. However, a surprise fuel surcharge of $300 was added, along with an additional $900 surcharge for ocean freight.
Erin Kinsey, production manager at Landon’s Greenhouse, a grower-retailer in Sheridan, Wyoming, also faced increased freight costs when acquiring pottery and growing containers, reporting increases ranging from 80 to 100%. Since the surcharges aren’t detailed, she speculates it could be due to a number of reasons, such as a shortage of truck drivers or difficulty getting to the garden center’s remote northern Wyoming location.
“A lot of places ask me to fill an entire truck with plants or goods and I don’t have that ability,” Kinsey says. “I have nowhere to store this material. We just have to wait to see if the surrounding areas can throw anything else at the truck. So it’s just a lot of expectation and hope.
Now Russell’s Garden Center also buys based on what is available and quickly. Before the pandemic, Russell-Skehan used to meet with suppliers, attend trade shows and order catalogs. However, since the catalogs are also produced in China, they arrive late. She recounts a case in which a catalog arrived five days before the order was due and rushed to complete it on time.
“Normally we don’t like to buy by container,” says Russell-Skehan. “Last year we bought two half containers and got free shipping. But this year, the only way to get reasonable prices was to narrow our selection and buy in much larger quantities to get discounts on pallets or half-trucks,”
Kinsey says Landon’s Greenhouse is having difficulty securing both growing pots and finished containers due to transportation issues. As a result, she thinks the variety of the IGC has diminished. She also says they have the option of palletizing the material if it’s a smaller order, but the freight cost is even higher.
“When I order, there are a few other florists in town and we split the freight over them and then drop it off somewhere so the driver doesn’t have to make multiple stops,” she says.
Perry Kim, statuary manager at Chicago’s Gethsemane Garden Center, says their suppliers have also shared transportation with garden centers in the surrounding suburbs of Chicago and the Milwaukee area to cut costs.
Typically, the average 40ft semi can hold 24 pallets of cargo, so each slot accommodates eight pallets. That way everyone has inventory instead of waiting months for the whole order to be complete, he says.
Kim says one of the strategies suggested by her sellers was to buy early and focus on items that would really sell out during the season if restocked.
However, even when materials finally arrive in the United States, shipments are often stuck in ports, waiting to be unloaded and transported. Russell-Skehan and Kim both ran into trouble with this, noting additional frustrations with delays and even more shipping costs.
“There is a shortage of truckers. So even if it’s 10 minutes away from you, you can’t get it,” says Russell-Skehan. “When our container finally arrives in Boston, how long will it be in Boston before they can get a truck? We’re only 17 miles away, but we don’t have a truck that’s carrying a container .
Reduction of storage spaces
While buying in bulk is a viable strategy, it comes with a storage issue. Russell-Skehan says her garden center has been storing excess containers in its greenhouses, which hasn’t been an option since the start of the growing season.
“It’s kind of a nightmare situation because we had a farmers market and we had so many pallets in the yard. We didn’t have enough parking spaces,” she said.
Another difficulty in stacking containers is reporting damaged or broken jars. As a general rule, companies must report damaged goods within a week or two, which garden centers cannot do, given that the containers are tightly packed in storage. Russell-Skehan hopes they’ll be credited for any potential damage, but isn’t sure if they will.
Kim has encountered similar storage issues over the past year, pointing out that he also competes for space with nine other departments in Gethsemane, all of which receive goods simultaneously.
“We’re always maneuvering things and when the next truck pulls up, we roll our eyes like, ‘Oh my God, where are we going to put this now?'” he says.
However, with the spring season about to begin, Kim says the blitz of eager spring buyers should help reduce the backlog of goods.
Sell old stock
All three garden centers note that they have had to raise their prices due to the fallout from the current market. Russell-Skehan says they’ve had to reprice a lot of their items — some of which haven’t even been unpacked yet — requiring more time and more work. And because they write their prices at the bottom of the pots with Sharpies, they can’t reprice without attracting attention. Russell’s has therefore decided to leave the prices as they are, selling them alongside the more expensive 2022 pots. Some customers have inquired about cost variances, but most understand the situation when explained to them.
Kim says the spring season is just getting started, so it’s too early to assess customer feedback, but so far there’s been no outcry over 2022 pricing. Currently, they’re selling a lot of year’s shares at a reduced price.
“So you have this offer for customers like, ‘Here, get something at a good sale price or pay current 2022 prices,'” he says.
Only time will tell, but Russell-Skehan, Kinsey and Perry think it will be a few years before the market starts to recover. “Some of my sales reps and suppliers tell me that the way things are going, they’re not going to correct themselves for two or three years,” Kim says.
Kinsey is hopeful and thinks demand will hold steady and then pick up a bit, helping the company sell its current container inventory. “I think because of the pandemic, a lot of people have become interested in gardening and plants, and I think that trend will continue,” she says. “They will find a love for it. And so, they’re just going to keep needing the containers.
Head to part two of this story for the colors, designs and styles dominating 2022 container trends.