As the industry grapples with inflation and supply chain issues, 2022 might the most challenging year for retailers sourcing container supplies. As COVID-19’s domino effects continue to influence the economy two years on, garden centers and grower-retailers are feeling the toll.
According to the U.S. Bureau of Labor Statistics, the Consumer Price Index jumped 7.9% over the last 12 months, the highest in 40 years, according to economic experts. On March 16, the Federal Reserve approved a 0.25 percentage point increase — the first interest rate increase since 2018 — to combat inflation, with six more raises reportedly on the way.
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 lockdowns in China, all of this culminates in one question for garden centers: Now what? We spoke to three garden centers across the U.S. to find out how they’re navigating the tangled web of inflation and supply chain issues.
Springing on the surcharges
Elizabeth Russell-Skehan, president of Russell’s Garden Center in Wayland, Massachusetts, says ocean freight was free last year. This year, it soared 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 didn’t know about [it] at the time of purchase. This is happening everywhere. And we signed contracts with people that we wouldn’t cancel orders with,” Russell-Skehan says.
Recalling a recent order, she says she fully expected an $800 freight surcharge, which she was billed. However, a surprise $300 fuel surcharge was tacked on, along with an additional $900 ocean freight surcharge.
Erin Kinsey, production manager at Landon’s Greenhouse, a grower-retailer in Sheridan, Wyoming, has also run into accrued freight costs in acquiring pottery and growing containers, reporting increases as high as 80% to 100%. Since surcharges aren’t itemized, she speculates it could be due to several reasons, such as the truck driver shortage or difficulty in traveling to the garden center’s remote Northern Wyoming location.
“A lot of the places are asking me to fill an entire truck with plants or merchandise and I don’t have that ability,” Kinsey says. “I don’t have anywhere to store that material. We just kind of have to wait to see if any surrounding areas can throw something else on the truck. So, it’s just a lot of waiting and hoping.”
Now, Russell’s Garden Center is also buying based on what’s available, and fast. Before the pandemic, Russell-Skehan used to meet with vendors, attend trade shows and order off the catalogs. However, as the catalogs are also produced in China, they arrive late. She recounts one instance in which a catalog came five days before the order was due and scrambled to complete it on time.
“Normally we don’t like to buy by the container,” Russell-Skehan says. “Last year, we bought two half-containers and got free shipping. But this year, the only way we could get reasonable prices was to cut our selection and buy in much larger quantity to get pallet discounts or half-truck discounts.”
Sharing the load
Kinsey says Landon’s Greenhouse has difficulties securing both growing pots and finished containers due to the issues of transporting them. As a result, she believes the IGC’s variety has diminished. She also says they have the option to palletize material if it’s a smaller order, but the cost of freight is even higher.
“When I order, there’s a couple other floral shops in town and we’ll kind of split the freight on that and then drop it off at one location so the driver doesn’t have to make several stops,” she says.
Perry Kim, statuary manager at Gethsemane Garden Center in Chicago, says their vendors have also split transportation with gardens centers in the surrounding Chicago suburbs and Milwaukee area to save costs.
Typically, the average 40-foot tractor-trailer fits 24 pallets of merchandise, so each location receives eight pallets. That way, everyone has some inventory instead of waiting months for the whole order to be complete, he says.
Kim says one of the strategies suggested by his vendors was to buy early and focus on items that would really sell during the season in case of restocking roadblocks.
However, even when materials finally make it to the U.S., shipments are often stuck in ports, waiting to be unloaded transported. Russell-Skehan and Kim have both experienced issues with this, noting additional frustrations with delays and even more transport fees.
“There’s a shortage of truck drivers. So even if it’s sitting 10 minutes from you, you can’t get it,”Russell-Skehan says. “When our container finally hits Boston, how long is it going sit in Boston before they can get a truck? We’re only 17 miles away, but we don’t have a truck that hauls a container.”
Shrinking storage spaces
While buying in bulk is a viable strategy, it comes with the issue of storage. Russell-Skehan says her garden center stored excess containers in its greenhouses, which is no longer an option since the growing season started.
“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,” she says.
Another difficulty in the container pile-up is reporting damaged or broken pots. Typically, companies have to report damaged goods within a week or two — something garden centers can’t do, considering that the containers are securely wrapped in storage. Russell-Skehan hopes they’ll get credited for any potential damages but is unsure if they will.
Kim has run into similar storage issues over the past year, pointing out that he’s also competing for space with nine other departments at Gethsemane, all of which receive merchandise simultaneously.
“We’re always kind of jockeying things around and when the next truck pulls up, we’re rolling our eyes like, ‘Oh my God, where are we going to put this now?,’” he says.
However, with the spring season about to start, Kim says the blitz of eager spring shoppers should help move the backlog of merchandise.
Selling old stock
All three garden centers note they’ve had to increase prices due to the trickle-down effects of the current market. Russell-Skehan says they’ve had to reprice a lot of their items — some of which they haven’t even unpacked yet — requiring more time and more labor. And because they write their prices on the bottoms of the pots with Sharpies, they can’t reprice without drawing attention. So Russell’s has decided to leave the prices as they are, selling them alongside the pricier 2022 pots. Some customers have inquired about the cost discrepancies, but most understand the situation when it’s explained to them.
Kim says the spring season is just beginning, so it’s too early to gauge customers’ feedback, but there haven’t been any outcries about 2022 prices so far. Currently, they are selling a lot of last year’s stock at a discounted price.
“So, you have that offer for the customers like, ‘Here, get something at good sale price or pay the current 2022 prices,’” he says.
Only time will tell, but Russell-Skehan, Kinsey and Perry believe it will be a few years until the market starts to course-correct. “Some of my sales reps and vendors are telling me that the way things are going, they’re not going to correct themselves for another two, three years,” Kim says.
Kinsey is hopeful and believes the demand will remain steady, and then increase a little, helping the company sell its current stock of containers. “I think because of the pandemic, a lot of people got interested in gardening and interested in plants, and I think that trend’s just going to continue,” she says. “They’re going to find a love for it. And so, they’re just going to continue to need the containers.”