The call that reshaped the industry

Look behind the scenes at how the nation's largest independent garden center company came to be.

The genesis of the nation’s largest chain of garden centers can be traced to, of all people, Alexander Graham Bell—or, at least, to his most significant technological contribution.

In 2008, Mike Kunce, CEO of Armstong Garden Centers, had his hands full overseeing the operation of 31 stores throughout California. Like most people in the industry, he was watching from afar as near-catastrophe unfolded in the Southeastern U.S.

Atlanta, like much of Georgia, was in the grips of a record drought. Draconian water restrictions had been implemented, and green-industry businesses were failing left and right—including the iconic chain, Pike Nurseries.

None of that concerned Kunce. At least, not until he received a phone call from Pete Pike, founder and former owner of Pike Family Nurseries.

“We had all been following it when the publicity hit that Pike’s had filed for Chapter 11,” Kunce recalled. “I didn’t pursue it. But shortly after that I got a call from Pete…he calls me up—I had know him for 20-something years through the industry—and he says, ‘Mike, you’ve got to come out and buy Pike Nurseries. I’m too old, and all my friends work there.’

“My response to Pete was I’ve never even BEEN to Atlanta. I have no plans for going to Atlanta.”

Here’s where you insert the part about “best laid plans ...”

Due diligence
After some urging from Pete Pike,  Kunce decided to learn more about the stores that stood on the auction block. “I went out and I saw Pike had one of the ten-top recognized names in the city of Atlanta,” he said. “And I saw the company was—from a merchandising/marketing standpoint—many years behind the times.”

Something else immediately struck Kunce—the lack of competition from other independent garden centers. The pack was surprisingly small. Years ago, Atlanta was served by three major independent chains. Of these players, only Pike Nurseries remained. Mass merchants dominated the area.

“Home Depot and Lowe’s were extremely strong,” Kunce said. “Home Depot, of course, has its corporate headquarters in Atlanta. They had just closed down all their HD Landscape Supply stores. Now Lowe’s was coming in to the market to compete with Depot in their own backyard. So I knew there would be a lot of competition with mass merchandisers.”

Undeterred by that discovery, Kunce pursued his investigation. Meanwhile, more than 250 solicitations had been sent about the Pike chain to prospective buyers. Approximately 80 interested parties signed confidentiality agreements to receive more information on the stores. The field narrowed to six very interested bidders—some of whom hired consultants to delve deeper into Pike’s operations and business model. Kunce and three others put down hard money for the opportunity to bid on the stores. On auction day, Kunce was the only one who showed up.

“Well, I’ve got to tell you I was sitting there thinking to myself, ‘What do they know that I don’t know?’” Kunce quipped.

He didn’t have much time to ponder that notion. A few moments and $5.4 million later, Pike Nurseries  became part of his family of garden centers, the largest in the country after the transaction.

Given the retail (and weather) climate at the time the deal was struck, Kunce knew he was taking a risk. He also knew managing the new acquisition would be a challenge.

“When you get into it, the drought was not really the reason why Pike went into bankruptcy,” Kunce said. “It’s just one of those things that exacerbated the situation or accelerated the demise.”

Still, Kunce felt confident in his purchase. He had pinpointed what he believed was the true reason Pike Nurseries was in trouble: The private-equity fund that owned the business since Pete Pike’s exit decided to go toe-to-toe with Home Depot in the price arena.

“They had gone through seven CEOs—six of them in eight years,” Kunce said. “The last one to hold the job was from Home Depot. Trying to compete against Home Depot on price and similar products was a no-win situation. So I thought this was a great opportunity to turn around and take Pike Nurseries to more of a true upscale, independent nursery company.”

Transformation begins
The first step in transforming Pike Nurseries was straightforward: Ditch the big-box, cut-rate, self-service mentality that had taken root. Employee training was at the top of the to-do list.

“Naturally, Pike greeted the customers when they came in,” Kunce said. “But there was very little selling being done. So we hired a trainer and got more involved in bringing vendors and consultants in to do training for us—both product knowledge and sales/customer service.”

Alan Holcombe, Pike’s executive vice president, added that they began separating operations—restocking, watering, etc.—from sales.

“One thing we have now is a night and morning crew taking care of our operational issues,” Holcombe said. “During the daytime peak hours from 10 to 4, we’re honed in and focused on customer service. I think that’s the biggest improvement we’ve made in that arena.”

A new look for the Pike chain was also in store. Kunce turned to his colleagues at ECGC—a networking and purchasing group comprising 11 of the nation’s largest independent garden-retail companies. “I called all the ECGC members and asked them to have a meeting here in Atlanta,” Kunce said. “They went through and critiqued our stores. I got a lot of good feedback and ideas from them.”

Next, Kunce and Holcombe assembled a team of visual merchandisers and hired a visual-merchandise manager to give the store a new look. They also solicited advice from a consultant firm in Chicago that helped reinvigorate an Armstrong Garden Centers location in Thousand Oaks, Calf. The Pike team opted for a similar design strategy—emphasizing colors and styles that would appeal to a younger generation of consumers.

The Pike Nurseries store in Toco Hills, Ga., just northeast of downtown Atlanta, was designated the prototype location for this redesign initiative. Floors, ceilings, walls and display fixtures were all upgraded. Signage was completely transformed using newly purchased, state-of-the-art printing equipment.

Over the next six months, similar improvements were rolled out in the other Pike locations. Behind the scenes, Kunce and his team were hard at work improving internal systems.

“All the accounting went to California,” Kunce said. “We also brought in the Activant point-of-sale system. We were the beta-testing site for their garden center system, and that has done very well for us.” Gradually, a new Pike Nurseries offered a completely different look and feel for both customers and employees. “[Industry consultant] Ian Baldwin spent some time with us a few months ago, and he said that the only thing that’s the same is the company name and the logo on the shirt,” Kunce said. “I’m going to quote him on that one.”


Signs of success
Has the transformation been a success? Kunce thinks so. And he offers up a trusty retail tool—the old-fashioned comment box—as evidence. “We get probably 70 to 80 cards a week,” Kunce said, “and when we started collecting cards right after we took over, positive comments were at about 40 percent. Now the positive comments are running about 85 to 90 percent—and negatives are 10 to 15 percent. We also have an 800 number customers can call in to talk with me, or Alan, or a district manager. And, again, the positive comments have improved greatly.”

In part two of this series, learn more about the future plans Kunce and his team have for Pike Family Nurseries and Armstrong Garden Centers. Look for it in the July issue of Garden Center.

June 2011
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