Analysis of the impact and importance of re-wholesalers in the ornamental market

Abstract

Sales by ornamental nurseries in the United States have grown, recently, at an impressive rate. For example, sales of the greenhouse and nursery crops component increased about 18% from 2000 to 2006 (USDA, 2007). The evolution of a diverse set of market channel alternatives, including the garden center, landscaper, home center, mass merchandiser and re-wholesaler channels, has been one of the reasons for this growth. Knowledge about growers’ use of the individual marketing channels is indispensable for the development of appropriate sales strategies for better income and profits. Periodic survey data indicates that the re-wholesaler channel is a frequently used alternative, and in recent years, there has been the perception that this is one of the fastest-growing channels in the industry. Utilizing a survey conducted in 2004, this study aims to estimate the impacts of growers’ business characteristics on (i) market channel choice, and on (ii) proportion of producers’ sales through each market channel, by firm size and by region. These objectives are achieved by using the multinomial logit model and the two-limit tobit models. The producer’s choices about marketing channels and the proportion of sales through each of these channels are a function of business characteristics including firm age, categories of plants sold, trade shows attendance, contracts with specific kinds of buyers, and advertising expenditures. The estimated coefficients and marginal effects calculated for each model suggest that producers with a more diversified marketing strategy were associated with higher use of the mass merchandiser and garden center channel. Furthermore, producers selling specific categories of plants chose different marketing channels. Trade shows advertising had a strong positive impact on choice and sales to the re-wholesaler and mass merchandiser channels. The results demonstrate that sales to specific channel are affected by the location of the nurseries. Producers in the West used the re-wholesaler channel more than did producers in the South. Large firms in the Northeast behaved differently than large firms in the South when they used any marketing channel except for re-wholesaler. This study’s results support the thesis that nurseries characteristics affect marketing channel choice and sales addressed toward specific middleman.