Business - Effects of the Economic Downturn on Horticultural Businesses and How to React

The economic downturn starting with the housing bust has had a large impact on horticultural businesses. The following are some of the effects and how to react from a business standpoint.

• Situation: Sod farms and turf companies that install sod have seen a large drop in business as there has been a large slowdown in new construction projects. Initially there was business to be had in completing existing projects. As existing projects are completed, there are few new project to take their place.
• Reaction: downsizing makes the most economic sense in this situation. Sod farms will carry inventory much longer and will have land rent, irrigation, and turf maintenance costs that are associated with this carry over so new plantings should be delayed. Installation firms will have to cut back employees. Search for sales in those areas that are not depressed as much such as sports field installations. Switch part of production areas to different species for specialty installations such as Bermudagrass.
• Situation: Nurseries and landscape installation companies have also seen the same effect in slower business due to reduced construction and limited demand for new installations.
• Reaction: Landscape installation companies should alter business models to focus more on customers that are renovating landscapes or adding to landscapes. Nurseries should focus more on newer plant introductions for these renovations as customers are often looking for the new and unique. Consider where work is continuing and the plant needs for those uses. Required restoration projects might be an example. Consider producing more for consumer sales where there may be less of a drop off in sales (more people doing their own landscaping). Nursery inventories will have to be maintained for longer periods with associated costs such as potting up to a larger size for container nurseries. Reduced planting of new inventory may be necessary or reducing prices on existing inventory may be necessary to eliminate the maintenance costs. Landscape firms may have to sell more design services and less installation services, especially to lower end customers that may move toward doing self-installations.
• Situation: Greenhouses are experiencing higher production costs and therefore have to pass those costs along to customers. As a result, we have seen reduced demand for the first time in many decades. In the past, we have thought that greenhousew sales are recession-proof because sales will be boosted by consumers staying more at home and gardening more. We may have reached a breaking point where this no longer is the case.
• Reaction: Downsizing production may be necessary to better match demand. Unsold inventory can eat dramatically into profits. Pay close attention to customer service to keep existing customers buying. Offer later season discounts to loyal customers to keep inventory moving.
• Situation: Lawn care and landscape maintenance companies will be affected less by the bad economy. However, some clients may switch to doing their own maintenance or lawn care as they belt-tighten.
• Reaction: Do everything you can to retain current customers, especially good ones. Intensify customer service activities. Communicate with clients more often and ask about needs. Offer lower cost maintenance packages as an alternative to keep good clients. You may have to drop some clients that are marginal and reduce work forces. Pay special attention to the needs of business and corporate clients and larger accounts.

Gordon Johnson, Extension Horticultural Agent, UD, Kent County