May 2006 Big Grower

Can Third-Party Merchandising Work? By Meghan Boyer

Being a big box vendor often means undertaking product merchandising in the store or allowing store employees to handle it, but now many stores are requiring merchandising be handled by an outside company. These third-party merchandisers are not direct employees of the stores or vendors, yet they are responsible for handling and placing vendor merchandise. Third-party merchandising is a growing industry; just five years ago such companies barely existed, especially in the green industry.

How It Works

When it comes to hiring and contracting third-party merchandisers, each chain approaches the service differently. This is because program parameters are established after a merchandising company is chosen, with companies and parameters varying regionally. Elements that vary by store and region include which product lines the service company will handle, what services will be included in the program, which vendors will be serviced, what the hour requirements will be in and out of season, and how the merchandising company will be compensated.

Jeff Jones, president and owner of American Nursery Services, a third-party merchandising company that services a big box chain, explained that while box stores are national companies, service vendors are regionally oriented.

Merchandising programs are also affected by climate, competition, the type of programs, store sales volume and the number of service companies in a store at the same time. Third-party merchandisers balance all of these elements to keep everyone involved in the process satisfied. Effective, up-front communication is important to that satisfaction. In an effort to educate everyone involved prior to the season beginning, rollout meetings for vendors and stores are held where the service program is explained in detail. This happens months in advance.

What They Do

Quickly and efficiently merchandising a display is the main task of third-party merchandisers. "If trucks come in on Tuesday morning, we want to have merchandisers there by Tuesday afternoon at the latest," said Jones. "We want to grab the product and get it put away." Depending on the store size and market, merchandisers will work in teams of 2-4 people when a load comes in and 1-2 people for daily maintenance.

To make sure the correct varieties are placed on the right benches, Jones works off a plan-a-gram developed by American Nursery Services and the box store. It details how the components of the section should be arranged and what varieties should go where.

Merchandising teams are also responsible for placing signage. "It's not enough to get [the product] put away," explained Jones. "You really have to take the next step and say, 'Is it on the right table? Is it signed? Does it have a price on it?'"

Crews do not leave after a shipment comes in and the product is put away; they also perform daily maintenance. This includes removing material that is no longer salable, condensing sparse areas to look full, cleaning up debris and replacing signs.

Store Benefits

Jones described situations where one company would deliver product on Tuesday and take all the end-cap space. On Wednesday, another vendor would bring in product, remove the first vendor's displays and set up their own. Then on Thursday, a third vendor would do the same.

"Everybody's fighting for space," said Jones. "Their job isn't necessarily to make the box store look great. It's to capture the best space for their product, even if their product isn't the best for that space."

He feels third-party merchandisers bring parity to big box garden centers. "If we don't do a good job for our client, we won't have a job." Outside merchandisers are impartial; they follow the plan-a-gram and place products in appropriate areas.

Following the plan-a-gram also gives stores within a region the same basic look. The same types of products are placed on and around end caps and the same number and general configuration of tables are used. The idea is to make a familiar and easy shopping experience so customers can walk into any store within a region and know exactly where to look for a product.

Vendor Objections

Some growers have concerns about outside merchandising companies, especially because they often don't have a choice about using one. The additional expense is also particularly troubling to growers. According to Jones, once a service company comes in and growers must share the cost, margins get tighter.

"I think [growers] see the advantages of it, but they don't necessarily jump on board 100 percent because it's difficult for them and they lose some control," Jones said.

Large companies that can afford merchandisers have an advantage over smaller companies that cannot afford merchandisers. This meant the large companies had better-looking displays and the best retail spaces. Such advantages no longer exist with third-party merchandising; everybody gets treated the same. "The smaller player is now on an even footing with the largest players, and it's got to be hard for the largest player," said Jones.

Grower Benefits

As retailers reduce employee hours, many stores are operating with fewer people, which means areas are not always sufficiently maintained: signage may be incorrect, varieties may be sold out or vendor managed inventory may be missing. Unless they are checking frequently, vendors would not know about such problems. In these situations, third-party merchandisers act as impartial eyes and ears for vendors.

With the case of signage, for example, this can be very beneficial to the vendor. "If there is a mistake on a tagÉwe'll take care of it. If they forget to send signs with a load, we make the signs up and get them on the product," said Jones.

He also looks out for vendors' products. If vendor managed inventory shipments arrive, the merchandisers count racks to make sure that what was sent arrives in tact. Additionally, merchandisers watch what stores do with vendor managed inventory: "We can help the vendors under vendor managed inventory by working with the stores to let the merchandising companies manage the product." Jones and his teams will even stop stores from throwing away product.

Communication is another important benefit for vendors. Jones described contacting vendors if a product looked great and sold quickly to tell them to send more or if a product is overstocked and the grower should not ship.

Growers can also contact third-party merchandisers for information: "They can call us anytime and say, 'What are you seeing out there? Can you pop over to this market for us? What's going on?' because they don't always have representatives in the stores anymore."

Consider The Future

The future of third-party merchandising is at once assured and uncertain. Jones feels strongly that big box stores have embraced third-party merchandising and will continue to do so — to the point that it will be in every store. "Most box store offer merchandising nationwide now," said Jones, "It's going to get bigger and not smaller." He pointed out that box stores, supermarkets and other large retailers are utilizing service companies in increasing numbers. It is showing up in all categories of retail goods; the garden center was actually one of the last sections to start using outside merchandisers.

What is less certain is how pay by scan will affect third-party merchandising's future. If vendors own the product, can they use their own merchandisers in stores? Will growers be able to choose who will merchandise their products?

As third-party merchandising continues to grow, Jones sees the possibility of additional care responsibilities such as watering being included: "If the vendor can't come in and water, they're at risk of losing the product." He feels the additional care could help growers overall, especially in vendor managed inventory situations.