Nurseries share the benefits of integrating wholesale and retail in one operation

It was 38 years ago and Grace Dinsdale had just launched Blooming Nursery, a wholesale nursery in Cornelius, Oregon; just west of Hillsboro. Her goal from the get-go had been to operate as a wholesale nursery that could supply the industry with a full spectrum of plant material, from perennials and ground covers to ornamental grasses, shrubs and vines.

But as with a lot of startup entrepreneurs, Dinsdale found herself early on in need of some extra cash to get the business up off the ground.

Her solution? Retail.

“When you start a business, it’s very tough,” she said. “We needed some cash, so we opened to retail almost right away.”

But Dinsdale’s approach wasn’t necessarily your standard retail strategy. Instead, she found a big piece of plywood, painted it gray and then added big red letters that said “Huge Garden Plant Sale.” She put it at the end of her driveway to draw in customers, essentially kicking off her version of being a vertically integrated nursery business.

“I think I just saw that old sign around here somewhere not too long ago,” she said.

The nursery industry has traditionally found itself split largely into two categories: wholesale and retail. For many, that sector-focused approach works just fine. But others in the business, like Dinsdale, have gone the way of vertical integration, growing their own plants that can be sold either on a wholesale basis or through a retail channel. It’s a model that’s often much more complicated than a straight-forward retail or wholesale one, but it’s also a model that can flourish when it’s done just right.

“It’s a constant balancing act,” Dinsdale said.

A popular business model

According to Sid Raisch, president of Horticultural Advantage, an Ohio-based garden and retail consultancy, vertical integration was a popular business model in the nursery industry for decades.

Prior to the 1960s, it was typical for nursery businesses to have greenhouses that they’d fire up in February to start growing. They’d begin selling as a retailer in April, May and June, and then be ready to close up shop for the season in July. Another popular model would have been a landscaping service that had its own nursery as a way to grow material to use for customers’ landscaping projects.

“The wholesale side of it was more the liner business that would grow starters and sell them to other nurseries,” Raisch said.

Consolidation in the nursery business, as well as the rise of the big box store and other changes in the market, eventually led to shifts across the industry. The result was that many nurseries ended up focusing on either the retail side of the business or the wholesale side.

But as it is with most businesses, one size does not fit all for nurseries, and while some do still find the most success sticking with a wholesale or retail focus, others have made their way through vertical integration.

In 1989, Linda Hockersmith-Eshraghi started her namesake nursery, Eshraghi Nursery, with a single greenhouse in Hillsboro for selling plants wholesale. According to Eric Prescott, current manager of Eshraghi’s retail arm, Farmington Gardens, the retail side of the business literally started when passersby would see Eshraghi and her husband working at the nursery, then stop and ask if their plants were available for purchase.

A few years later, Eshraghi launched Farmington Gardens, first as a small retail booth and then as a full-fledged retail garden center to handle retail sales for the nursery. Prescott said that today, about 85 percent of Farmington’s inventory comes directly from Eshraghi, which is renowned for its Japanese maples, conifers and other shrubs. The balance, in the form of bedding plants, annuals and perennials, comes from other nurseries.

Prescott said even though Farmington and Eshraghi are different businesses, the fact that most of Farmington’s inventory comes from Eshraghi — and is branded as such — resonates with customers.

“I think we are noted for carrying the Eshraghi brand,” he said. “Eshraghi has a very well-known brand. We’re affiliated with that, and I think customers like that and they see that they are our main supplier.”

Similar to what happened at Eshraghi Nursery, Maurice Horn said people kept driving up the driveway of Joy Creek Nursery in Scappoose, Oregon soon after he and his business partners opened it in 1992 as a nursery focused on mail-order business.

“We had no desire to do retail,” he said, “but by year two, people just kept driving up our driveway.”

Joy Creek grew its gardens across four acres and did a fair amount of cutting and seed gathering to be able to offer plants that not many others in the Northwest could. And because there was interest from customers to come out and shop retail, the nursery ended up with a retail yard in addition to its mail-order business. In addition, it also launched a landscaping business, which is supplied by the nursery, and a maintenance business.

“It’s all very integrated,” Horn said. “I think this is more vertical than we ever thought we’d go.”

In and out of retail

After her initial go at having a retail side to her business — the one advertised by the big sign — Dinsdale decided to shut it down after about eight years. She said that the retail and wholesale businesses don’t mix well on the same property. Retail customers like to come and shop leisurely, while the wholesale business can be hectic and busy.

But shutting down the retail business didn’t sit well with her customers. She shifted to a model where she’d have two big retail sales each year. That proved to be too hard on her staff, so she ended that after three or four years and went full wholesale for the next decade or so.

When the liner market shifted toward unrooted cuttings and tissue culturing, Blooming Nursery shut down its liner branch; around the same time, the company also switched to a new software system that made it less conducive for landscapers to browse the nursery’s inventory on-site.

Those two factors led Dinsdale on a hunt for a second location where she could have a landscaper sales yard. She found it in 2007, about 15 minutes north of the wholesale location, but the Great Recession kept her from doing anything with the property until about 2012.

In 2013, she opened the new site as Blooming Junction, which has grown into a retail outlet and garden center that sells plants and produce. Dinsdale has expanded Blooming Junction’s food offerings and has been developing a grocery called “Natural Grocery and Farm Store” that also has an educational component, as well.

She said that even though having both a wholesale and retail business is much more work, the benefits of being vertically integrated have been many. For starters, nurseries that are vertically integrated are able to share resources in some instances. For example, Dinsdale said her locations are occasionally able to share equipment and labor, though she tries not to move people back and forth too often.

In her early days, Dinsdale used to work the farmers’ market circuit on weekends. That interaction with customers was incredibly helpful to her in her wholesale business.

“I really valued that interface with the end-users and the information I got back from them,” she said. “When I quit doing that, I was concerned about losing that connection with the end-user. Now I have that with our retail operation.”

On the flip side, because Blooming Junction receives plants from Blooming Nursery, Dinsdale is also able to glean some insight on what it’s like to be a customer of the wholesale business.

“We understand the experience of what it’s like to receive plants from Blooming Nursery,” she said. “It really helps us in understanding the pain of being on the retail garden center side and what we can do to make it easier.”

A dependable supply

Another benefit to integration, according to Raisch, is having access to a steady and dedicated supply of wholesale material. Growers have been shutting down, consolidating and even converting to new crops such as hemp, tightening the supply chain.

“It is very challenging to get supply if you are a retailer,” he said. “The retailer has an increasingly difficult time getting the product they want, and that’s not just now but those are the projections for the future, too.”

On top of that consideration, Raisch said the way the nursery industry is evolving could open up some opportunities for nurseries who have been toying with the idea of vertically integrating. Specifically, he said that a lot of wholesale growers who don’t have a second or third generation interested in taking over the business are looking for an exit; likewise, small independent retailers who’ve had a hard go of it may also be searching for a way out.

Nurseries who have been looking to vertically integrate by adding a wholesale or retail branch would be wise, Raisch said, to reach out to those operators.

“I think they’d be surprised how many might be interested in selling,” he said. “Don’t be afraid to ask if that’s what you are interested in doing. Don’t wait for them to put a sign up.”

Jon Bell is a freelance journalist who writes about everything from craft beer and real estate to the great outdoors. His website is www.jbellink.com. He can be reached at [email protected].