You regular readers would know that Kubota Man and I operate a small family greenhouse. We have been building our clientele over 20 years, by providing excellent plants, and wonderful customer service. We are in a rural area, with a limited number of households, so even if we did it better or cheaper we can now no longer increase the scale of our business. Our clients come from an area about a 40-mile circle around our home. There is another small business just like ours, we co-operate with one another in an effort to keep the costs down for our consumers, and to learn from one another. This greenhouse is a younger family just trying to get started. The third business is larger, also a family business, who have expanded into the nearby small city.
Most of our income stays in the communities in our radius. Our greenhouses help fund raise for the schools, we donate gifts for silent auctions, support the local dance groups, are generous to the Hospital complex, donate to the seniors' gardening program at the Nursing home and long term care, keep our own parish church gardens supplied with flowers. The flowers at the school? Ours--donated. The list goes on. This is not to brag, but is background information for what is to come.
As a small greenhouse operator, you get no breaks in terms of your input costs. No volume discounts. We often have to buy started plants 100 of a color, which means if we can't sell 100 we either dump plants, increasing the costs of the ones used, or we can't offer that variety of plant. We are not allowed to propagate extra plants to cut costs (there are very few plants that are not patented). Advertising costs a fortune, if you don't advertise, your business declines. Large scale businesses get significant discounts. I saw one invoice on the office desk of a major greenhouse that I bought plants from--50% discount on the cost of seeds.
But we have found our balance, we are happy with our cost/return stats, we don't expect to get rich on this business--it keeps us healthy and productive and allows us to be active and generous in our community.
So what am I scared about?
A couple of years ago a neighboring greenhouse closed its doors, the property reverted to the bank, and it stood empty for a couple of years. That makes us sad, since families were involved. We don't know why they had to stop operating--only gossip and assumptions from that gossip.
Here is the issue. A huge conglomerate greenhouse operation from another province has bought the place. Having had previous contact with one of the owners and her sister (I don't think she is directly involved in the business) through blogging, I contacted them and welcomed them to the community, and inquired about future plans for the greenhouse, as that might require some changes on my planning. I was reassured that there was no intention to run a retail business there. This company does wholesale business to three big retailers in the nearby cities. They grow their plants and finished pots in the other province (where heating costs are likely less than here), and needed a distribution center from which they would deliver plants to these big businesses in the cities. I had just visibly relaxed, and felt we could co-exist.
Then, through word-of-mouth from our customers, I heard that there
is retail business going on there. They just started last week, so I wouldn't see any decline in my business yet. The next testimonial that I got was that baskets are being sold there for $10 (It costs me around $10 in pot, dirt, and plants to make similar baskets, as I get no volume discount on anything), so add to that the heating costs, freight, and our modest personal income, I can't compete by price. Upon further contact, I was told that there were, indeed plans for a future retail component on that site.
Before I go on, I am proud to live in a country where Free Enterprise is allowed. I was allowed to start my business 20 years ago. I believe that competing business have to have a niche or some quality that makes each one unique, so that's what brings clients to their business. If all this is in place, a balance evolves, and all the little businesses can survive. I would not feel any threat if a new family greenhouse business similar to ours were opening. That would be a level playing field. But this is not a level playing field with this new-to-the-community business. The balance is entirely in their favor.
The clincher: today I saw a newspaper story about this business,
advertising that they are selling to the public at
wholesale prices! I don't know if it was a paid story, or a feature article--will look into that tomorrow (Do I really want to know? Do I really need to know?). But when we small greenhouses wanted our story in the paper, we had to commit to a series of 5 weekly ads, to the tune of over $500 to have our story printed.
So if theirs was a feature story, how come we had to pay for ours? But to advertise the sales at
wholesale prices--in a small community (no problem in the city where there is plenty of customer base)--while perfectly legal, and probably reasonable business practice is IMHO rather tacky (and according to my values, a tad immoral, since we had no warning that this is coming, and couldn't make contingency plans.(
But Kubota Mom--you just said you believe in free enterprise--tsk tsk tsk. Kubota mom's response to self--but does Free Enterprise preclude fair play?).
Other things to consider: If our business declines significantly (and I don't know if it will--I am consulting with an industry economic specialist in the next few days), I will possibly not be able to continue to support my community service clubs. Say, theoretically, my income is reduced , that's money that is absent from my community. It is not only my profit that is not available to be spent here, but my business does business here--many of my production costs are spent here or near here. My limited view of economic matters, would say that the profits realized from this new business' local retail venture, will all end up in the other province. And I cannot see how they will support local businesses in their operations here (probably some labor costs). Our community Dance groups, the Playschool, the local school will likely not look for fundraising help in that other province. My relationship with the hospital is a long-standing one that involves plant-related volunteer work as well as cost-reduced business dealings. Will that be in jeopardy?
I purchase many thousands of $$ of started plants from family-operated wholesale greenhouses, some fairly local, all of them in Alberta. I purchase my soil mix from Northern Alberta producers. If I have to close or severely reduce my operation, that $$ is out of those local communities. This new business will not be replacing my business to these suppliers--their production is done in the other province.
I have been told (but have no way of confirming this--but if true, adds to the imbalance--yet is part of the free enterprise system) that this company has eliminated some of their middle men: for example, they own the plant that supplies their pots. My pots are manufactured, sold to a distributor, then to me--2 mark-ups and no volume discount. But since this fact is unconfirmed, I'll try not to let it affect my sense that the balance is just tipping further against me.
And all this being said, what has me very concerned because it came without warning. I was quite complacently doing what I was doing best--growing good plants, balancing my desire to make some money with fair prices for my customers. (Interestingly, when we started our business, the permit process included publishing our plans so residents and other business at least had information, and an appeal process before we could go ahead). I saw nothing like this about this new business--not that I would have appealed, but I'd have had some warning for planning purposes. But then, the process would likely not have included retail trade, since the original objective was the distribution center (if I was told the truth in our first encounter).
And yet, I still believe in Free enterprise. It's just that the very thing that causes us to enjoy our rural lifestyle (which is, in many respects more expensive than that in a more population-dense environment), makes us very vulnerable when it comes to small business vs. big business which have lower input costs for the finished product.
I have a good business, we have a good reputation, we are prepared to scale down rather than go out of business if that is the practical thing to do (can the young family with the new greenhouse afford to say this?), but (conservatively estimating) 1/3 of our clients travel 30-40 miles to our business, and have to pass through that town (about halfway on their journey). Will they continue on for the other 20 miles? When plants are available at wholesale prices, how loyal will our customers be?
And of course, the wounded me, wants to know whether they even need this out-of-scope income, in my mind it's a drop in their bucket, but is very significant to us little growers and our communities. I keep talking about our communities, like I'm trying to appear über-altruistic--but that's not the gist of it. In a small community you cannot separate yourself from that community. You aren't just a faceless body in that community, you are a member, you are part of its fabric.
I am a person of faith, so while my weak side is nervous (that's an understatement), my faith-filled side will pray for guidance, and listen with open heart for a message from above. I know I cannot, should not, and will not, bad-mouth the new business. The lady I spoke to, one of the owners, seems very nice--she has said she'd like to visit us and get to know me--I am still open to this.
What's Kubota Man's take on this? He's not attached to things, he's not a worrier, he's not quite as involved in community activites like I am (mostly basks in my shadow, but fully agrees with what I do in the community). But if retirement is on my horizon, I want it to be on my terms, not being kicked out by circumstances beyond my control. Like Frank Sinatra sang, I want to say " I did it my way!"
I will consult with the greenhouse economics specialist for guidance. And simultaneously, will look above for guidance (repeating this for myself). And with the strength of that faith, I have to convince myself that I'm sure everything will work out just fine.
And grit my teeth and bear it with dignity, when another "I have to rub it in" customer comes looking for a deal on tomato plants while bragging about the $10 pots they just picked up, and asking with a saccharine smile, why I have been
gouging the customers by not charging the same lower price. Then reply with courtesy and grace: "You are free to shop at the establishment of your choice."
Some years ago, when our greenhouse business was up and running, I thought that selling trees and shrubs would be a perfect fit for the greenhouse. But--there was a family with such a business 20 miles away, making a living from that business. So we discussed the situation and decided it wouldn't be fair to split that income between two families, especially since we had the greenhouse. So later when that family retired from that business, we filled the niche. This is a very small part of the business--it will be the first thing to go when we are unable to carry the workload. I felt our gain wasn't worth the loss of income for that other family. But I guess that's not a businesslike attitude. Since the recent decline in greenhouse traffic, the sales of trees and shrubs has also declined.
Another fact. When we began the venture, we attended industry seminars, and one of the first rules of economics we were given is
never to undercut the competition--offer something better: better plants, better service, a niche product--since undercutting hurts the whole industry. It almost seems like their intent is to monopolize the industry--but I don't know that for sure. They were small operators at one time, too--is the memory that short?
One of my loyal blog followers was quite touched by this and felt she should put it on her Facebook page. Good thing she told me of her intentions--I asked her to take it down, and she respected my wishes. This blog, while public, is still more anonymous, since location and names are not revealed.
If any of my readers are believers, your prayers for a the right outcome (whatever that may be) are welcome.
If you are not a believer, please send positive energy.
June 9 addition: I just read this blog post about local yarn shops versus online or box store yarn purchases. Its principles are a perfect fit. She is addressing the consumers in this article.
http://sallymelvilleknits.blogspot.ca/2013/05/saving-world-one-yarn-shop-at-time.html
