January 29, 2008
Urban Outfitters Buys a Garden Center
By Tom Ryan
Urban Outfitters Inc. last week announced plans to buy J. Franklin Styer Nurseries Inc., a well-known operator of garden centers in the Philadelphia metropolitan area. The acquisition will drive the launch of the company’s newest green concept, Terrain.
The goal of Terrain is “to transform the local garden center into an experience that celebrates the beauty and abundance of nature while offering an eclectic mix of garden-inspired products tailored for the contemporary customer,” according to a company press release.
What makes the purchase interesting is not only Urban’s launching of a new concept, but its decision to expand beyond retail into a service business. Besides selling mulch, silk orchids, garden books and tools in a comfortable atmosphere that includes a leather sofa and a coffee bar serving upscale La Colombe coffee, Terrain will offer landscape design and construction.
The Philadelphia Inquirer noted that this puts Urban in the same category as Pep Boys, which sells tires and also mounts them, and Home Depot, which sells countertops and also installs them in kitchens it helps design.
Instead of creating the concept internally like its Urban Outfitters and Anthropologie concepts, John Kinsella, Terrain’s managing director told the Inquirer, “We’re going to create strategic partnerships – by creating partnerships with selected higher-end garden centers, we’re going to learn more about this industry, because it’s a complicated business.”
More bullishly, Mr. Kinsella told the newspaper that Terrain will fill a gap between the 20,000 mom-and-pop garden centers with less than $5 million in sales and Home Depot.
“There’s a lot of opportunity. No one national is doing it on a local level,” said Mr. Kinsella.
Said Richard Hayne, Urban’s chairman and founder, in a statement, “We look forward to growing Styer’s existing business and integrating it into our Terrain brand. We believe Terrain at Styer’s will become one of the premier contemporary garden centers in the country.”
Discussion Question: What do you think of the potential of a contemporary garden center chain such as Terrain? What most impresses you about the Urban Outfitters and Anthropologie concepts and how do you think those skills translate to operating a garden center? What are the risks of Urban moving into the services business?
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The landscape architecture business is booming like never before. Why? Because endless shows on HGTV and other channels constantly show how skilled landscape design creates pleasure and value. The #1 money making preoccupation and hobby in America is real estate, and skilled landscaping is the icing on the homeowner’s cake.
Just like Walt Disney’s Wonderful World of Color provided Disneyland with a weekly long form TV commercial watched by millions for decades, the residential real estate shows are selling professional landscaping to an enormous audience, around the clock. Terrain by Urban Outfitters has a great opportunity to cash in on millions of dollars of free advertising, with no national competition.
Comparing Home Depot’s garden departments to J. Franklin Styer Nurseries is like comparing Wawa to Whole Foods.
One added profit angle: in many states, nurseries are considered farms, so their real estate taxes are negligible. Owning the land, with minimal real estate taxes, can have a great payoff over time. For numerous family-owned nurseries, the business has little value compared to the land’s development value.
In a retail world where edited stocks and minimalist approaches are working best for specialty shops, Urban & Anthropologie and to a lesser extent Free People are thriving by being eclectic and diverse in their approach to merchandising.
Going against conventional wisdom is often the path to retail success because it is also a path away from boredom and sameness. That said, this will be a difficult space in which to create a large branded national player, and will take a lot of time, energy and money that might be spent on their core businesses and in particular making Free People stores perform as good as they look.
“Contemporary” and “garden center” aren’t words you would normally expect to find in the same sentence. This is an interesting idea for a couple of reasons:
1. It brings a lifestyle approach to a category in need of branding. The revenue potential in this business is significant.
2. It potentially brings some national critical mass to a business dominated by local and regional players, or by the big-box home improvement stores.
This ought to be a challenge to Urban: Can they tackle a business with a product mix outside their largely apparel and soft home expertise? Can they manage a very different kind of supply chain environment effectively? If Urban Outfitters puts the right team together and commits to the appropriate level of customer service, this could be one to watch.
This is a smart company, but my gut reaction is that their target market is more apt to prefer to use private professional landscape services for the type of large project which would be most profitable for Terrain–the type of locally focused company that has been in business
awhile, is topped by landscape architects and planners, understands the local climate, and has stood the test of time. Furthermore, unless they can compete price wise which is unlikely, Terrain will still have to duke it out with Wal-Mart and Home Depot and local garden centers for the one season annuals business.
Even if my assumptions are incorrect, the current depressed state of the real estate market and of home values strikes me as really bad timing for Terrain.
The worst mergers or purchases are made by bored executives who buy something with which they have little experience or there is no company synergy.
Garden supply: Welcome to the world of vertical integration, low margins, perishable product, seasonal sales, cross channel competition, a collapsing housing market and undocumented workers.
Sometimes the clueless get lucky twice, most times they do not.
There’s always room for an effective retail concept. The question ought to be is this too much of a stretch for Urban Outfitters? Not so much in terms of merchandise but rather in target market. Do they know these consumers well enough to make the acquired formats work? Don’t know the answer but I suspect we’ll all know soon.
Well, this is interesting to say the least. One must applaud their moxie in taking this on and, strategically, I can see the opportunity with their core demographic. We have a local concept like this in Atlanta and the people that frequent it are very much Urban Outfitter’s target market. But knowing what’s involved in providing these kind of services, I hope they can handle the complexity of what they are biting off and have tested the waters. I’d love to see it work, as approaching Terrain with the unique, refreshing stance that they’ve taken with their other concepts would make for a wonderful new retail destination.
Terrain is a promising concept. And I’ll bet there is an extraordinary overlap between Urban Outfitters customer of the ’80s and ’90s and the target customer for Terrain. Terrain will appeal to young, hip, upward mobile couples starting their first home and starting a family.
Landscaping is very important in holding home value, especially in this housing glut market. Time and again studies show that the value of property increases more with well-done landscaping than any other home improvement. Yet accomplishing the landscaping is difficult and expensive, often out of the reach of new home owners.
The typical garden center doesn’t do well with this kind of customer. They lay out their annuals, their perennials, their bushes, and trees. But they don’t give much advice as a general rule to a new home owner. The home opener is left with few alternatives. Should they hire a landscape architect? Very pricey. Should they go with a landscape contractor and take a pedestrian design? It is not easy.
Terrain has a big opportunity to integrate all of these elements into a fine business where there is an overwhelming need.
I think this is great thinking and a natural extension. They should be applauded for stepping out of their normal product box and into their customer’s mindset…which, btw, Urban has ALWAYS been very good at.
In a heartbeat, I can envision a little “garden” section in every Anthropologie store, if that happened tomorrow, they’d just increase sales–and of course, if you pictured lifestyle merchandising in a garden center, you’d come up with a completely new category.
Hurry and make it happen!
The garden center business is one of the few that has resisted consolidation and branding. It is a highly seasonal business whose revenues come overwhelmingly from highly perishable products, and are heavily dependent on favorable weather. Most garden centers rely on a narrow window of time to generate their profits and cash. By its nature, it’s a local business, due to variations in climate and weather pattern. It’s also a business with significant shipping costs. The economies of scale of multi-store mass marketing don’t appear to be as readily available in this business.
There have been a number of initiatives in the industry over the past couple of decades to develop complementary businesses to smooth out revenues and cash flow throughout the year, as well as attempts to take a more upscale approach to the business. None of these initiatives has been fully able to offset the inherent challenges of the business.
Further, there are indications that the industry faces fresh challenges as demographics evolve. For the last couple of decades the industry has benefited from an economy that spurred home building and the baby boom generation’s inclination for the outdoors and nature, and natural products. Notwithstanding the boom in “green” marketing, the emerging generation has been brought up on a completely different set of consumer touchstones, electronics, computers, and the internet. I had one garden center client tell me he feels that Best Buy is just as much a competitor as Home Depot or any other garden center for the homeowner’s dollar.
This is the environment that Urban Outfitters seeks to enter with Terrain. It’s not that it can’t be done, it’s that the challenges are very real. Urban’s existing business is very different, and their skill set is very different. That all said, I am eager to see if Terrain can become a viable, profitable format.
I am intrigued by Urban going after this business. My first reaction is cautionary: Is this part of the company’s core competencies? If so, terrific–I believe the core customer is certainly complementary to their Urban, Anthropologie, and Free People customer base. If not, I am concerned about a drain of mind share and resources from their core business at a time when apparel in general has been difficult and their concepts are, in general, thriving due to their unique vibe and eclectic mix of cool environments and great product. I want to see them continue to strengthen their core businesses.
My second reaction is excitement. The garden center business is an incredible opportunity for an organization that wants, as they claim, to fill the void between the small local players and Home Depot. Just having finished an extensive landscaping project, my wife and I would have loved the opportunity to go to a “contemporary garden center.” Maybe we’ll have the chance in the near future!
Any resident of New York, Chicago, San Francisco and certain other cities can tell you that there is a definite lack of “urban” sized, contemporary style outdoor furniture and garden accessories suitable for balconies, rooftop terraces and small backyards.
I have a 32 foot long balcony that is just under 5 feet deep facing a Lake Michigan beach. Outfitting it with furniture and planters that complement the mid-century modern architecture of the building, yet don’t consume too much of the limited floor space (or my wallet) so far has proven futile.
Yes, the timing with the burst housing bubble is not the best, but the underlying market potential is definitely there with the right products in the right markets.
The Coffee Bar at Styer’s is cool, period. My first blush was J. Crew marries Smith & Hawken, a much better fit if you look at the fashion and style they both have. This is a mismatch that will have much difficulty gaining any traction outside of Pennsylvania.
I believe Richard A. Hayne had a great vision with Urban Outfitters. My opinion: focus on building their 200 locations into a 400 plus chain and continue to grow Anthropologie.
Managing service people is far different than managing inventory. Adding a perishable product to the mix exacerbates the situation. This will be very difficult for Urban Outfitters to execute profitably.
National companies often look at highly fragmented industries and believe they can make an impact–“consolidation is the natural order.” Home Depot and Lowe’s at been installing flooring and kitchen cabinets for over a decade. Yet, the categories, as with most service businesses, remain highly fragmented and dominated by local businesspeople.
Having seen the pictures of Terrain now that it’s launched, it’s clear where they got the idea–Petersham Nurseries in Richmond, London (UK). Petersham, too, combines upmarket garden accessories with plants and a cafe, all done with a unique, country-chic style. Terrain’s look is very, very similar, right down to the large circular tables and the reused Indian doors in the middle of the glasshouse. So similar, in fact, that I would be surprised if someone from UO hadn’t been to Petersham.
In the UK, places like this are still rare–most of our garden centres are either small, not very innovative independents or much bigger chains that attempt to cater to everyone.
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The landscape architecture business is booming like never before. Why? Because endless shows on HGTV and other channels constantly show how skilled landscape design creates pleasure and value. The #1 money making preoccupation and hobby in America is real estate, and skilled landscaping is the icing on the homeowner’s cake.
Just like Walt Disney’s Wonderful World of Color provided Disneyland with a weekly long form TV commercial watched by millions for decades, the residential real estate shows are selling professional landscaping to an enormous audience, around the clock. Terrain by Urban Outfitters has a great opportunity to cash in on millions of dollars of free advertising, with no national competition.
Comparing Home Depot’s garden departments to J. Franklin Styer Nurseries is like comparing Wawa to Whole Foods.
One added profit angle: in many states, nurseries are considered farms, so their real estate taxes are negligible. Owning the land, with minimal real estate taxes, can have a great payoff over time. For numerous family-owned nurseries, the business has little value compared to the land’s development value.
In a retail world where edited stocks and minimalist approaches are working best for specialty shops, Urban & Anthropologie and to a lesser extent Free People are thriving by being eclectic and diverse in their approach to merchandising.
Going against conventional wisdom is often the path to retail success because it is also a path away from boredom and sameness. That said, this will be a difficult space in which to create a large branded national player, and will take a lot of time, energy and money that might be spent on their core businesses and in particular making Free People stores perform as good as they look.
“Contemporary” and “garden center” aren’t words you would normally expect to find in the same sentence. This is an interesting idea for a couple of reasons:
1. It brings a lifestyle approach to a category in need of branding. The revenue potential in this business is significant.
2. It potentially brings some national critical mass to a business dominated by local and regional players, or by the big-box home improvement stores.
This ought to be a challenge to Urban: Can they tackle a business with a product mix outside their largely apparel and soft home expertise? Can they manage a very different kind of supply chain environment effectively? If Urban Outfitters puts the right team together and commits to the appropriate level of customer service, this could be one to watch.
This is a smart company, but my gut reaction is that their target market is more apt to prefer to use private professional landscape services for the type of large project which would be most profitable for Terrain–the type of locally focused company that has been in business
awhile, is topped by landscape architects and planners, understands the local climate, and has stood the test of time. Furthermore, unless they can compete price wise which is unlikely, Terrain will still have to duke it out with Wal-Mart and Home Depot and local garden centers for the one season annuals business.
Even if my assumptions are incorrect, the current depressed state of the real estate market and of home values strikes me as really bad timing for Terrain.
The worst mergers or purchases are made by bored executives who buy something with which they have little experience or there is no company synergy.
Garden supply: Welcome to the world of vertical integration, low margins, perishable product, seasonal sales, cross channel competition, a collapsing housing market and undocumented workers.
Sometimes the clueless get lucky twice, most times they do not.
There’s always room for an effective retail concept. The question ought to be is this too much of a stretch for Urban Outfitters? Not so much in terms of merchandise but rather in target market. Do they know these consumers well enough to make the acquired formats work? Don’t know the answer but I suspect we’ll all know soon.
Well, this is interesting to say the least. One must applaud their moxie in taking this on and, strategically, I can see the opportunity with their core demographic. We have a local concept like this in Atlanta and the people that frequent it are very much Urban Outfitter’s target market. But knowing what’s involved in providing these kind of services, I hope they can handle the complexity of what they are biting off and have tested the waters. I’d love to see it work, as approaching Terrain with the unique, refreshing stance that they’ve taken with their other concepts would make for a wonderful new retail destination.
Terrain is a promising concept. And I’ll bet there is an extraordinary overlap between Urban Outfitters customer of the ’80s and ’90s and the target customer for Terrain. Terrain will appeal to young, hip, upward mobile couples starting their first home and starting a family.
Landscaping is very important in holding home value, especially in this housing glut market. Time and again studies show that the value of property increases more with well-done landscaping than any other home improvement. Yet accomplishing the landscaping is difficult and expensive, often out of the reach of new home owners.
The typical garden center doesn’t do well with this kind of customer. They lay out their annuals, their perennials, their bushes, and trees. But they don’t give much advice as a general rule to a new home owner. The home opener is left with few alternatives. Should they hire a landscape architect? Very pricey. Should they go with a landscape contractor and take a pedestrian design? It is not easy.
Terrain has a big opportunity to integrate all of these elements into a fine business where there is an overwhelming need.
I think this is great thinking and a natural extension. They should be applauded for stepping out of their normal product box and into their customer’s mindset…which, btw, Urban has ALWAYS been very good at.
In a heartbeat, I can envision a little “garden” section in every Anthropologie store, if that happened tomorrow, they’d just increase sales–and of course, if you pictured lifestyle merchandising in a garden center, you’d come up with a completely new category.
Hurry and make it happen!
The garden center business is one of the few that has resisted consolidation and branding. It is a highly seasonal business whose revenues come overwhelmingly from highly perishable products, and are heavily dependent on favorable weather. Most garden centers rely on a narrow window of time to generate their profits and cash. By its nature, it’s a local business, due to variations in climate and weather pattern. It’s also a business with significant shipping costs. The economies of scale of multi-store mass marketing don’t appear to be as readily available in this business.
There have been a number of initiatives in the industry over the past couple of decades to develop complementary businesses to smooth out revenues and cash flow throughout the year, as well as attempts to take a more upscale approach to the business. None of these initiatives has been fully able to offset the inherent challenges of the business.
Further, there are indications that the industry faces fresh challenges as demographics evolve. For the last couple of decades the industry has benefited from an economy that spurred home building and the baby boom generation’s inclination for the outdoors and nature, and natural products. Notwithstanding the boom in “green” marketing, the emerging generation has been brought up on a completely different set of consumer touchstones, electronics, computers, and the internet. I had one garden center client tell me he feels that Best Buy is just as much a competitor as Home Depot or any other garden center for the homeowner’s dollar.
This is the environment that Urban Outfitters seeks to enter with Terrain. It’s not that it can’t be done, it’s that the challenges are very real. Urban’s existing business is very different, and their skill set is very different. That all said, I am eager to see if Terrain can become a viable, profitable format.
I am intrigued by Urban going after this business. My first reaction is cautionary: Is this part of the company’s core competencies? If so, terrific–I believe the core customer is certainly complementary to their Urban, Anthropologie, and Free People customer base. If not, I am concerned about a drain of mind share and resources from their core business at a time when apparel in general has been difficult and their concepts are, in general, thriving due to their unique vibe and eclectic mix of cool environments and great product. I want to see them continue to strengthen their core businesses.
My second reaction is excitement. The garden center business is an incredible opportunity for an organization that wants, as they claim, to fill the void between the small local players and Home Depot. Just having finished an extensive landscaping project, my wife and I would have loved the opportunity to go to a “contemporary garden center.” Maybe we’ll have the chance in the near future!
Any resident of New York, Chicago, San Francisco and certain other cities can tell you that there is a definite lack of “urban” sized, contemporary style outdoor furniture and garden accessories suitable for balconies, rooftop terraces and small backyards.
I have a 32 foot long balcony that is just under 5 feet deep facing a Lake Michigan beach. Outfitting it with furniture and planters that complement the mid-century modern architecture of the building, yet don’t consume too much of the limited floor space (or my wallet) so far has proven futile.
Yes, the timing with the burst housing bubble is not the best, but the underlying market potential is definitely there with the right products in the right markets.
The Coffee Bar at Styer’s is cool, period. My first blush was J. Crew marries Smith & Hawken, a much better fit if you look at the fashion and style they both have. This is a mismatch that will have much difficulty gaining any traction outside of Pennsylvania.
I believe Richard A. Hayne had a great vision with Urban Outfitters. My opinion: focus on building their 200 locations into a 400 plus chain and continue to grow Anthropologie.
Managing service people is far different than managing inventory. Adding a perishable product to the mix exacerbates the situation. This will be very difficult for Urban Outfitters to execute profitably.
National companies often look at highly fragmented industries and believe they can make an impact–“consolidation is the natural order.” Home Depot and Lowe’s at been installing flooring and kitchen cabinets for over a decade. Yet, the categories, as with most service businesses, remain highly fragmented and dominated by local businesspeople.
Having seen the pictures of Terrain now that it’s launched, it’s clear where they got the idea–Petersham Nurseries in Richmond, London (UK). Petersham, too, combines upmarket garden accessories with plants and a cafe, all done with a unique, country-chic style. Terrain’s look is very, very similar, right down to the large circular tables and the reused Indian doors in the middle of the glasshouse. So similar, in fact, that I would be surprised if someone from UO hadn’t been to Petersham.
In the UK, places like this are still rare–most of our garden centres are either small, not very innovative independents or much bigger chains that attempt to cater to everyone.