Pond Industry Inventory Buying Strategies

Published on November 1, 2012

1_inventory_stock_on_shelves Ordering new inventory can be a daunting task, especially in the current economic climate. Order too much and you could end up with excessive product sitting in your store and tying up your asset dollars. Order too little and you could run out of stock and be forced to backorder, creating an unhappy customer.

Inventory management and forecasting are strategic issues. Pond and backyard retailers that recognize this fact can typically provide higher levels of service to their customers and post higher profits.

“In the past year or two, I would say we are seeing a lot more ‘just in time’ buying trends where they are placing smaller weekly orders, rather than overloading in the spring and trying to guess,” said Joel Kammeraad, general manager of Complete Aquatics, Plain City, Ohio. “That makes the supplier’s job a little bit harder because we are the ones guessing the trends at that point. By working with the manufacturers closely, we understand what they are gearing up for and thinking [what] the trends are and we relay those same ideas back to the retailers. That’s what ultimately creates a demand.”

Before buying any products for a store, a savvy retailer will come up with an inventory buying philosophy that reflects the needs of the store, taking into consideration the current economic environment and the multitude of items currently available.

Jim Price, owner of Pondtastic Water Gardens in Orlando, Florida, understands that he must have enough inventory to keep people from going somewhere else, but his strategy is to buy as close to enough as possible.

“I believe that everything you have for sale needs to be in front of your customer, so we’re going to keep the shelves as full as possible at all times,” Price said. “At the same time, I don’t want to be a warehouse for my suppliers so we stock based on turnover.”

Sometimes that catches the store off guard, as something may be more popular than expected, but for the most part they stay ahead of it.

“We are constantly moving everything and changing locations for products and every year we evaluate how much space a given item is given based on sales, and that helps me with knowing how much to stock as well,” Price said. “Over the years, we have seen inventory levels grow and this year they are probably the highest they have been.”

Many retailers have followed this lead and are going with less inventory than they have before.

“As a distributor, we are seeing dealers carrying less inventory and relying on us to fill in the gaps and ship to customers directly whenever they need it,” said Randy Stewart, Division Manager of Pondliner of Shawnee, Oklahoma, which distributes to both Online and brick and mortar customers. “We are seeing retailers carrying a little less than normal and stocking less at the beginning of the season.”

Meanwhile, Kenneth Shayne, owner of Shayne’s Water Gardens & Ponds in Bermuda Dunes, California, has made somewhat drastic cutbacks to inventory.

“I have a nursery also, so in years past, I would carry a full line of plants and turtles and ducks and frogs and anything for a pond,” he said. “But now, the way things are, I don’t carry that inventory.”

Hank V. Campbell, manager of Across the Pond, Florence, Alabama, takes the opposite approach with his inventory strategy. “When the economy started to go down, I felt the last thing consumers needed to see was a lack of inventory,” he said. “It makes it that much more threatening, so we have increased inventory. In our business, we’ve not been hurt much; sales haven’t been skyrocketing but we have seen sales increases.”
**Early-Buy Programs**

When Oase North America Inc. of Hermosa Beach, California (parent company Oase Holding GmbH of Hoerstel, Germany), returned to the pond and water garden market earlier this year, they plan to end its early-buy programs.

According to Andreas Szabados, managing director of Oase North America, its new distribution plan is designed to introduce new products to the U.S. market whenever they become available rather than to coincide with early-buy programs and other seasonal deadlines.

Industry experts, however, don’t believe that the demise of these programs is imminent.

“I do not believe they are a thing of the past. I just feel retailers and pond contractors need to be reminded that to make well in the pond business, buying right is critical, especially for those who operate seasonally,” said Aaron Scarlata
, Business Development Manager PondBuilder, Inc. & Blue Thumb Distributing, Inc. “If a business owner or the company buyer cannot invest one day into the business to learn for free, then they are missing the boat. Most early- buy programs are accompanied with training, special incentives and end-less opportunities to add 5-30% to their bottom line, not the top line.”

In Price’s region, the products are put to use almost 12 months out of the year, so he is a big fan of early- buy programs.

“For us, it’s a beautiful thing in the southern market. While the rest of the country is sitting under snow, we are actually selling the stuff and I don’t have to pay for it until May,” he said. “In my market, I might do four or five early- buy orders to manufacturers based on the deals they offer.”

The one thing that bugs him is that in recent years, many of these “special” offers have remained in effect all year long, despite the fact that they were supposed to reward early-buy customers.

One manufacturer is currently offering a promotion of 20% off, which is better than the offer he received with his early- buy purchase.

“We see the early- buy programs still as a viable tool, especially for distributors, with retailers not buying as much up front as they used to,” Sorg says. “We need these early- buy programs to build up our inventory to ensure we have product on hand. With the early spring this year we were ready for those earlier than normal in- season orders.”

Trevor Gibby, owner of fish and pond product supplier Aquatic Elements Inc., Royston, Georgia, offers a deal a little different than the early- buy program for his customers. When a retailer explains their strategy for purchasing, Gibby works with them on a market-buying plan where they will agree to spend a set amount for the season.

“Let’s say they promise to buy $5,000 worth of fish for the season. I give them the discount, but they don’t need to get them all at one time,” he said.

“I deliver them throughout the season which saves them 20-30% on fish and they don’t have to handle the fish at the stores.”

**Trending Today**

Working with retailers to develop the best inventory for their needs is an important component to a successful working relationship on the manufacturer or distributor side.

“Being a distributor we can help the retailer get the most turns out of their inventory,” said Tammy Sorg, marketing manager of Commerce Corp., a wholesale distributor of lawn and garden products based out of Grand Rapids, Michigan. “We deliver weekly, which enables them to keep their inventory lower and rely on us to fill their needs when they need the inventory. Our sales team is very well versed in this category and several of our retailers rely on their expertise to assist in the assortment.”

Campbell and others are finding that customers are looking for smaller and more value-oriented products, and are focusing their buying strategy around these items.

“Low maintenance features are hot right now,” he said. “With most family members busier than ever working, they need things more maintenance free. Manufacturers have followed along by making smaller items that are more economical.”

Even with shipping and gas prices going up, retailers are being conservative. Kammeraad said that he is shipping smaller units and plenty of space remains on the palate, and since one is paying by the palate anyway, they should order more to save money.

“But they want to keep their inventory extremely flexible and responsive to the market,” he said. “For them, it’s worth the risk not to buy as much.

A careful examination of the industry reveals that manufacturers and distributors are aggressively bringing a host of new and refined items to the market, so retailers need to do their homework to figure out what products work best—and will sell best—in their stores.

Of course, one needs to keep their eye on all products to see what people are buying.

“I watch trends of fountains because that’s a high enough price point that you don’t just buy it on a whim but it’s not so high that you have to get financing,” Price said. “If someone buys a $600 or $700 fountain, that’s my barometer of the economy.”

One trend taking shape involves pond owners becoming more involved with caring and maintaining their water gardens on their own, leading to more demand for these products.

“In 2012, we have seen a nice increase in our water gardening business as we are seeing more product being sold to those customers that are maintaining their water gardens,” Sorg said. “The new installations part of the business remains slow due to the housing market, but we are seeing those customers that are maintaining their water gardens adding on to their features.”

Hydroponics is a big buzz word in the pond business today, as water garden pumps, filtration, and air pumps take on a more significant role for the consumer.

“We are definitely targeting products towards the hydroponic category,” Sorg said. “We are also seeing many more consumers that are starting to maintain large ponds on their properties so seeing a large increase in pond maintenance.”

Another uptick this year that many retailers are seeing comes from aquatic plants, with Price seeing sales double in this category from last year.

Whatever buying strategy one utilizes, it’s important to change with the times and be aware of all trends and happenings in the industry.

**Side Bar – Keeping Track**

When it comes to inventory, it’s essential to keep good records of everything you stock (variety and size) as well as what sells, what bites the dust while in inventory, and what customers return.

“What isn’t measured can’t be improved,” Price said. “To come up with a buying strategy that works best, I need to know how things have done in the past and see the items that sell or don’t sell well.”

Things to be aware of include:
• top-line and bottom-line growth
• comparable year-to-year sales
• age of inventory
• maintained gross margin
• turnover
• weeks of supply
• markdowns/margin loss from write-downs
• sell-through percent
• stock-to-sales ratios.

These metrics can help retailer’s measure what is truly needed in the store.

“I think the game is different now,” Kammeraad said. “It’s not the same where you buy huge quantities and throw them in the back of your warehouse or be 50 units deep if it’s a new item. What they are doing is buying the known so they are not out of their normal products and not buying as deep on the new trend of specialty items.”

By examining the data that can be collected through these reports, a retailer can ensure a more successful selling season ahead.

**About the Author Keith Loria**
Keith Loria is a full-time freelance writer who focuses on business, entertainment and sports. When not writing he enjoys spending time with his daughters, Jordan and Cassidy. He can be reached at: freelancekeith@gmail.com.

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