Exactly how can a smaller business compete against a corporate giant like Bunnings? We asked one business that is achieving strong growth by doing just that.
“Particularly when Masters [Home Improvement] came into the game, we sat down and we looked at the scenario. How we could differentiate ourselves as much as we possibly can from the likes of Bunnings – which is our main competitor – and Masters?” says John Sammut, CEO of Sydney garden centre chain Flower Power.
As John outlines, his strategy comprises several key factors, which other business owners could do well to follow:
Become a specialist
In most cases, big businesses aim to be Jacks of all trades. As such, as a smaller business, you can make great inroads into any given market by positioning yourself as the go-to specialist in a particular field.
“What we’re looking to do is to be the specialist garden retailer, where we have the largest range of plants available. It’s the main part of our business and the main reason why people come shopping at our business,” John says.
“Then we have all these other parts of the business which kind of complement [the plant range].
“At [our store in] Enfield, we have the garden centre, the landscape centre, we have a café, we have a pet shop. We also have a farm shop or fresh produce shop as well. That works very well for us. What we thought we’d do also is include things like power gardens – mowers and whipper-snippers [etc]. Also, in some of our stores we have a spa/pool shop, which works very well with us.”
By becoming a garden specialist, rather than simply a plant specialist, John says the business has been able to add more value for customers – providing inspiration for what can be achieved in their own gardens and how the business' core product, potted plants, can be accentuated or maintained with other product lines.
“What we’re going to be doing is changing our stores into the new models, which incorporate all those things,” adds John.
Own your product vertical
Competing on value alone usually won’t cut the mustard – price competition is inevitably a part of doing business. And when your main competitors are large corporates with bigger budgets and bigger buying power, price competition can quickly erode your margins to nothing.
Flower Power’s approach has been take ownership of the product vertical, affording the business much more scope to compete on price than if it was solely reliant on purchasing from suppliers.
“We have a large growing operation of 75 acres … we grow about 70 per cent of our own plant requirements,” says John.
“We have about 5 million plants on the ground at any one time. That gives us the opportunity to be price competitive: we can be competitive with Bunnings and also make a good margin on the product.
Take charge of importing goods
In an effort to boost buying power from overseas suppliers, John explains that Flower Power established its own importing business to run alongside, rather than directly within, the garden centres.
“Most of the outdoor furniture, tools, wheelbarrows, any type of homewares-type product, we import directly ourselves, so we can sell that at a competitive price and still make a reasonable margin on the product as well,” he says.
“It's taken us a long time to grow that business and get that right, because it's a completely different business to retailing. But we have mastered that and we are doing an extremely good job in that area there. We have to be price competitive in those areas there.
“Particularly with [the] type of hard goods where Bunnings is very strong, with potting mixes and fertilisers and things like that, we have to be very price [conscious]. We cannot be 50 per cent dearer on a premium-quality, popular potting mix; people just won't come and buy it off us.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
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