If you’ve ever used a rental car in the U.K., you’ve probably been surprised by the popularity of ‘stick shift’ cars, and probably even more surprised by the price of a gallon of fuel. Always much higher in the U.K. than in the U.S., the cost of diesel here currently equates to $7.03 for a U.S. gallon, and this fluctuates frequently — depending upon geopolitics and the price of a barrel of oil. The exact cost of transporting a product such as nursery stock around the U.K. is therefore hard to predict, especially as prices also vary from one gas station to another once trucks are on the road.
Danish trolley transport system
Typically, a high-volume but low-value product, nursery stock in the U.K. is transported to retail customers using a standard Europe-wide system known as ‘Danish trolleys.’ This efficient system is a type of wheeled cart containing multiple shelves. Trolleys are dispatched to a garden retailer who receives the delivery and replaces full trolleys with empty ones that they have at their retail location. Some retailers also use this system for displaying the plants for sale. So, in addition to the fuel and labor costs involved in dispatch, plant growers also must pay an annual rent for using these trolleys. Understandably nursery owners are always looking at ways to reduce all these costs, while still making and expanding sales.
Comparing delivery vs cash and carry models
The easiest way to do this in the U.K. is to change your business model. Switching from providing a delivery service to a ‘cash and carry’ type outlet is one option. This really works best in locations with a high concentration of customers within an easy reach radius, but customers collecting will obviously expect the price of the plants to reflect that fact. Cash and carry can also help cement customer loyalty by providing some face-to-face contact and has opportunities for businesses to showcase product and upsell.
For many however, this is a too radical departure from the classic nursery business model. An easier and less disruptive approach is to offer plants for sale on a ‘ex nursery’ basis, which essentially means that prices are quoted excluding delivery, with the cost of the delivery then being charged to the customer unless they collect. The alternative pricing model of course is to include the cost of delivery in the price of the plants, but as delivery costs are so dynamic, plant prices would need to change frequently to ensure costs are covered. This means additional administration time and can confuse the retailer.
Many nurseries in the U.K. have also outsourced transport to specialist haulers who have experience in distributing plants. This approach enables the nursery to pass on the exact cost of delivery at any point in time to the retailer, who will then factor this cost into their mark up to achieve a selling price that includes the transport cost. Typically, these distributors use unrefrigerated trucks as the journey time from nursery to retailer is much shorter than in the U.S. Outsourcing a key function like transport to a third party can however be risky as the nursery has reduced control over the process, which is not great when the product is live and perishable. Many growers, to avoid a fluctuation in delivery costs, negotiate a fixed price per trolley for a year which takes away some of the risks associated with delivery costs.
Some nurseries opt to run their own fleet of vehicles but face costs for maintenance and depreciation.
Many nurseries still therefore operate their own fleet of delivery vehicles, which when branded also serve as mobile advertising or ‘on the road billboards.’ Transport costs can then be charged in several ways, either as a rate per hour (increasingly relevant with U.K. road congestion), per mile, or perhaps as a rate per value of order. The key with the rate charged is to keep it dynamic — it needs to change as fuel prices change, but also to reflect the additional costs in running a fleet of vehicles such as maintenance, depreciation, and manpower.
As with all costs, the crucial thing is to measure them — after all you cannot manage what you don’t measure. Knowing the cost for transporting plants around the country is vital if you want to ensure that transport costs are competitively priced and recovered from the retailer.
Neville Stein has been working in the U.K. horticultural sector for 46 years, 30 of which have been spent as an independent business consultant. His clients include the Royal Botanic Gardens, Kew, The Royal Horticultural Society, The Horticultural Trades Association, Longwood Gardens and many privately owned nursery businesses. He is also a speaker, author and lecturer. www.nevillestein.com
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