Arran Pearson, National Accounts Manager for Handy, looks at the pros and cons of developing own brand garden machinery and offers retailers advice on how to achieve the sweet spot of price, quality and performance.
When it comes to meeting customer price points and product expectations, there’s a large range of branded garden machinery available to retailers, from budget-friendly machinery without any bells and whistles through to equipment designed and built to last with various innovative features. But at the lower end of the market, where price is absolutely the determining factor in consumer purchasing, retailers have to take a different approach if they are to compete in the market place whilst still turning a profit.
In these instances, retailers turn to own-brand product, which aren’t laden with a minimum margin expectation from the brand owners. However, this rarely means the retailer goes it alone; far from it. In most instances, retailers work closely with a chosen garden machinery specialist to develop and manufacture its low cost, own-brand product range. Where the garden machinery specialist bows out and the retailer takes over is at the point where the product has been manufactured and is ready to be shipped. With virtually all garden machinery produced in China, the retailer buys freight on board (FoB), with the product then becoming their responsibility; this includes payments, shipping, logistics in the UK, taxes etc. With retailers frequently benefitting from very good currency exchange rates and excellent deals with shipping companies, savings can be made, enabling the products to be sold at OPP.
This practice is almost exclusively done by national retailers due to the minimum order requirements – which can be anywhere between 500 or 1000 units – and, because of their buying power, are more likely to have the shipping deals etc. in place that will make this a cost-effective, workable option. Independent buying groups could, in theory, go down this route but to my knowledge haven’t. At Handy, we work with six or seven national retailers, on their own-branded product.
Striking the right balance
Clearly, the key benefit of FoB own-brand product is cost savings and the ability to produce OPP products, but a super cheap product isn’t enough in itself as the product still needs to perform the task it was designed to do, and reflect the retailer’s brand values. This is where the partnership between the garden machinery specialist and the retailer is vital.
Buyers’ rarely stay in one category these days, so cannot be expected to have in-depth knowledge of garden machinery. Understanding what works, what customers are drawn to, what product spec. or quality is required for a specific price point, comes from many years of direct experience. Good, well established garden machinery companies such as Handy have that experience. Just as importantly, they will know what Chinese factories produce good products, and those that don’t or that aren’t reliable. At Handy, for example, we have our own sourcing office in China, employed to deal with the factories on a daily basis. This relieves the buyer of a mountain of work and uncertainty.
We have seen some buyers undertake this entire task themselves, including product specification, but in all honesty it rarely ends well. The temptation to go straight for the lowest price is a strong draw, but this frequently ends with product that isn’t up to the task, resulting in one star reviews, lots of returns (which are resource intensive) and an ever slowing sale rate. And then there’s the impact to the retailer’s reputation. Striking a balance between price and quality isn’t easy.
But it’s not all a bed of roses for the retailer, even when working alongside an experienced garden machinery specialist . There are challenges when it comes to FoB own brand products rather than buying drop ship that need to be taken into consideration, not least of all changes in exchange rates which may eat into profit margins.
Payment of stock is usually on quite short terms, yet the opportunity to sell that stock is far from immediate. The stock is on the water for 30 days, and then it may sit in the warehouse for quite a long time before the season starts and those products can be sold. If the weather is bad, those products may end up staying in that warehouse for longer than expected. All of which impacts cash flow, as well as requiring considerable warehouse capacity.
Choosing a garden machinery company to work with
When selecting a garden machinery company specialist to work with on own branded product, experience is everything. You want to determine just how knowledgeable they are when it comes to understanding the market; what makes for a good product and gets good customer reviews; and plenty of direct experience of dealing directly with Chinese factories. They need to demonstrate that they can find that sweet spot of price, quality and performance.
A good garden machinery specialist will not only be able to demonstrate this experience but they should also be able to work in partnership with you. Are they really listening to what you want and building a proposition that works for where you want to be in the market, or are they trotting out the same pitch they’ve delivered to your competitors? If you’ve given them feedback, have they genuinely taken it on board?
Even when you do find a company you are satisfied with, be sure to regularly review that supplier for price, specification and quality. It’s tempting to stick with the same company year on year, but you could be missing out.
Setting your garden machinery product apart
One of the great things about working with an experienced garden machinery specialist
Some retailers really want to get into the design process and have a clear vision. Others, less so; they may simply say they want a product to look youthful or classic and we will interpret this in the look and functionality of the product. As part of this process, at Handy we look at what is currently in the market from other brands at certain prices. We then develop the product to compete with these, maybe improving the build quality, making it slightly more powerful, or using a higher spec wheel, but coming in at a lower price point for example.
With the exchange rate and weather on your side, a successful own-brand Fob garden machinery product – whether a lawnmower, blower, hedge trimmer etc. – can deliver margins of up to 45%; that’s around twice the margin of most drop ship orders, but there is also an element of risk, due to fluctuating freight and currency costs. So, own-brand FoB products are worth the effort, but choose your partner wisely; a well experienced garden machinery company specialist will have gone through all the trials and errors previously, meaning you don’t have to!
Since the company’s creation in 1938, Handy has become one of the UK’s largest independent garden machinery wholesale distributors and manufacturers, supplying specialist dealers, large national retailers, garden centres and mail order companies.