CNGA Looseleaf Oct/Nov 2018

colorad o nga.org LooseLeaf October/November 2018 11 National Economic Outlook for the Green Industry T he forecast for 2019 sales looks good, according to Dr. Marco Palma of Texas A&M University’s Agricultural Economics Department. Based on indicators from June this year, Palma shared a positive picture of future nationwide green industry sales. But, he added, the picture may be slightly different when he presents the Industry Forecast at CNGA’s Owners & Managers Leadership Retreat on November 2. “Typically, I check economic indicators the week of the meeting, even the day before, just in case something comes out that I may need to consider. Something may happen between now and November,” Palma explained. He uses the housing industry and related industries as main indicators of how sales will be in the green industry. The Architecture Billing Index (ABI) indicates what the housing supply is going to be for the next nine to 12 months, by measuring the amount of future home construction. The current index number is 52.8, which indicates there should be more housing construction, because index numbers above 50 typically mean the industry is expanding. Palma believes this building activity will probably continue, but added that the total index has decreased this year, though it stayed above 50. Housing sales have been trending down in recent months, a slight decrease of 0.4 percent in June compared to April. Because houses are not selling as fast as they were previously, the housing inventory has increased. But, looking at the changing inventory year over year, the overall number of houses sales is increasing. There are more existing homes this year compared to last year, but as the housing supply is up, so is the demand. There is currently about a 4.1-month supply of houses, compared to the most recent peak of more than a 12-month supply in June 2011. (The supply is based on the rates of building and selling houses.) In a related trend, housing prices have increased and continue to increase, due to supply not keeping up with demand. Looking at remodeling activity as another indicator, it was slightly up from the first to second quarters of 2018. Plus, remodels are projected to increase for the last two quarters of 2018. So, based on new housing construction, sales and remodeling trends, Palma expects gardening and landscaping sales for the near future to continue to be strong, barring any economic external factors like a trade situation that might affect markets or anything that would create another economic contraction and some sort of a slowdown of the market in general. on how to differentiate their products by adding value. Increasing their value to customers by being conveniently located, having a good selection, or providing services of any kind can increase sales through raising the perceived benefits to the consumer. High quality products can’t be the differentiating point, because every grower or garden center believes it has high quality products. While touring many producers over the years, Palma has yet to meet one who says, ‘My quality is low but I try to sell cheap plants.’ Value has to be added through other means of pleasing customers such as the personality of the staff or technological aids. While each company will base its differentiated added values on its own mission and culture, research into customer behaviors can assist with marketing. Palma and the researchers at the Human Behavior Lab use technologically advanced neurophysiological equipment to directly measure consumer responses to marketing stimuli. “There is usually a big gap between what people say they are going to do and what they do,” he observed. “Anyone can tell me, ‘I prefer sustainable plants. I will pay $20 extra for them.’ In a survey, they can say those things but there is no guarantee that in reality they will follow through.” Having found discrepancies between consumer answers and actual behavior, researchers set up studies where they can identify behaviors that show when a person is likely to deviate from what they say they will do. Using various measurements from eye tracking devices, facial expression analysis, brain activity continues »