Founders: Smith & Hawken Opportunity Squandered
By Tom Ryan
Scotts Miracle-Gro
Co. announced last week that it would close its remaining 56 Smith & Hawken
stores by the end of 2009. But both founders expressed relief because
the chain had long abandoned its original values.
“Scotts couldn’t
have been a worse corporate owner,” Paul Hawken told the Marin
Independent Journal. “Smith & Hawken
had become just a ghost of itself.”
Smith and Hawken
opened their first retail store in Mill Valley in California in 1982
with a goal of providing organic gardeners with handcrafted tools from
England with a lifetime guarantee. It eventually became an early role
model for socially responsible companies.
Smith & Hawken
changed owners a number of times, including a sale to CML in 1993, to
DDJ Capital in 1999, and Scott in 2004. But the founders were particularly
upset by the sale to Scott, best known for its Miracle-Gro plant food
and Ortho weed killer.
“When Scotts
bought it and Smith & Hawken was owned by the largest pesticide seller
in the U.S., I suggested people boycott it,” Mr. Hawkens said. “It had
completely lost its roots.”
Speaking to
the San
Francisco Chronicle,
Mr. Smith said, “It’s a boom time in the gardening business and Smith & Hawken
is going down the tube because it went way off the roots of the company
and became a frou-frou, knick-knack kind of store, instead of a serious
gardening store.”
At the time
of the 2004 acquisition, Scott said it was hoping Smith & Hawken
would expand the company beyond its “grow and kill” products and increase
its appeal to women. Its initial plan was to turn Smith & Hawken
into an outdoor living and gardening product line to sell to stores such
as Home Depot and Lowe’s.
“That proved
to be a strategy we could not execute,” Scott’s spokesman Jim King, told
the Chronicle. “It
left us with a specialty retailer, and that’s not who we are. We never
meant to keep it as a stand-alone retail operation.”
Meanwhile,
the store branched out into outdoor living products such as furniture,
fire pits, lighting and garden décor.
“How could
you possibly have a gardening store in this economy and go wrong?” Mr.
Hawken said. “I’ll tell you why. This wasn’t a gardening store anymore.”
Scott said
it was unable to find a buyer for the struggling chain.
Said Scotts’
CEO Jim Hagendorn, “Unfortunately, the combination of a weak
economy and the lack of scale proved too great to overcome.”
Discussion Questions:
What do you think was at the root of the demise of Smith & Hawken?
What lessons does this offer in how to manage acquisitions and “green” retailers?
A simple explanation might be that Smith & Hawken is the latest brand to fall victim to cusp timing. Scott’s took a high-end brand with an established niche market and pulled a 2007 on it; plopping it into big box stores, diluting it through licensing and line extensions, and lowering prices and quality.
Along comes 2009 and you’ve got problems when the brand can’t out-mass mass retailers during tough times and the very customers who may have remained loyal through thick and thin fled in droves. When the brand was first distributed in Target, I had high hopes since Smith & Hawken stores were a rare but happy sighting. However, instead of well-merchandised shop-in-shop displays, the products were scattered in with everything else and all had lost the wow factor that S&H customers expect (much of which was driven by their carefully curated store environments).
Was the brand too precious to begin with or do the founders have a point?
The root cause of the demise of Smith & Hawken was moving away from the core story of the business. The initial model worked well based on its core story and location (Marin County). As the company grew and got away from its story, it lost its reason for being and eventually lost relevance with consumers.
Smith & Hawken ran into two issues. First, the hard economic times and second a large corporation attempting to run a small business.
Let’s address each. The founder of Smith & Hawken is partially correct that this is a boom time for gardening and people in 2007 and 2008 were getting back to growing their own vegetables and herbs. People were also invest large sums in landscaping. Even with that upturn smaller nurseries and garden shops are feeling the full effects of tighter wallets. I recently spoke with the owner of the garden center I frequent and he said they are absolutely feeling the pinch. Consumers are still coming in to purchase small items including flowers, gifts, vegetables, etc, but they have pulled back from investing in larger shrubs and other more expensive items including lawn and garden furniture, fountains and other outdoor living items. He says the consumers are not moving to other larger outlets like Walmart and Home Depot, he just believes they are spending less and waiting.
The second issue related to a large organization like Scott’s trying to run a small entrepreneurial business is a story that seems to repeat itself over and over. Generally the ones that keep the corporate culture and feel in place are the ones that have the best chance of surviving. It is hard for a large company to truly understand, run and focus on a business that makes up such a small part of their overall revenue. Think about Ben & Jerry’s and how tough that integration was. The best thing Scott’s could have done was keep the business separate and create an entrepreneurial spirit that would have left intact the image and feel of Smith & Hawken that worked so well for so long.
The Smith & Hawken catalog of the past was always a treat to savor. Frankly, I had not realized the company had gone through several ownership changes–which usually does tend to dilute to some degree the vision of the founders. That said, I’m not sure that moving beyond their original core gardening business is really to “blame” for their demise. What happened, I think, is that many of the specialty products that used to be unique to Smith & Hawken, and difficult for serious gardeners to find anywhere else, gradually became more readily available (and cheaper) for their customers to acquire elsewhere.
You’ve got to stand for something; or you stand for, and are, nothing at all. Reputation, quality, and beliefs still have substantial value, and I believe they do make a difference in business.
I still have my Smith & Hawken tools, most of which were purchased by me, a female, in the 1970s when we really did not have that kind of money to spend on other than essentials. I trusted and respected the company and its stated values. Now that I can afford whatever tool I wish, I do not want to find them among the sea of mediocrity or worse. I would pay a premium for items which gave good value for my investment and I would choose a company that held firm to its roots when I share those values. It would seem that a business such as the old Smith & Hawken could flourish in today’s online commerce mode.
In my opinion, it was always bad management with no real vision of what it could have become–and still could!
With its roots in the Californian soils and an original concept that is most relevant today, the company could have been developed tastefully way beyond California–most people everywhere have gardens don’t they? It should have been a leader and an anchor in the green evolution and revolution, as should the late lamented “Nature Company.”
I was President of “The Nature Company” in the mid 90s when “Smith & Hawken” was a new sister company. What dreams we had for both–all dashed by corporate machinations.
If someone wants to fund it, I have plans aplenty for a New OLD Smith & Hawken….
If the women’s market angle had been more strenuously researched/committed to by Scott’s, that might well have saved the S&H brand. By really getting to know what women liked about the brand, what made it resonate/worth paying a bit more for etc, S&H could have gained an early edge on the high expectations of all garden consumers today (men and women).
Gardening is big business now, and sure the behavior of consumers has adjusted for these harder times–but the founder’s story, the social responsibility aspects and the uniqueness of the S&H brand, as it was, ALL could have wrapped together to keep it healthy. Having a women’s advisory board along the way would have helped guide Scott’s to better decisions.
The Christmas before last, Smith & Hawken had adorable potted Christmas Trees made of rosemary for sale for $24. I admired them, but couldn’t justify the price tag. Days later I saw the identical product at Whole Foods for $8. Enough said.
The answers to these questions lie in Paul Hawken’s book “Growing a Business.” Read it. It’s timeless.
I agree with Paul’s comments and tone. I’ve always been incredulous about this matter. How can an accomplished consumer products marketer own a highly regarded retail brand and squander it?
Those of us who have worked with large complex organizations know all too well how this can happen.
While it is easy to see the current local/organic/self reliance movement as the fertile ground in which Scott’s should have succeeded with this, it is important to recognize that it has not been 2009 for the last 10 years.
Yes there is a marketplace opportunity at the intersection of organic gardening and the current consumer zeitgeist. The challenge will be developing a deep understanding of the consumer segments as they are today and crafting the right mix of authority, information and products to build an offer. Oh and there’s that little matter of retail operations, too.
Max is right. Smith & Hawken was best as a specialty business with its national distribution supported by catalog (online) and with small specialty retail outlets in well-matched communities. Smith & Hawken was developed as a niche brand and once the idea of “taking it national” popped into Messrs. Smith & Hawken’s heads, it was on the road to failure.
As a luxury brand, in this economy and at the prices they were marketing goods, both the execution and the financial structure had to be pristine. Clearly Scott’s was looking for a better return than they were getting. Yes, S&H got away from the original concept, but that alone doesn’t fully account for their demise.
This would seem to be a textbook case of both a misreading of the market and a culture clash, one group seeing brand equity, line extension and economies of scale and the other, apparently, envisioning an extended version of a Beatrix Potter book come to life; and as with many failed efforts to expand a niche player, it flounders around in retail purgatory for several years until someone finally puts it out of its misery. So in a sense, no one–and everyone–is at fault, because the scheme is impossible.
That having been said, I find Mr. Hawken’s behavior both naive and troublesome: if he wasn’t willing to keep steering the ship, he really has no business complaining where it landed.
When a founder’s vision grows beyond the founder’s control, things go awry. This is why family-owned businesses in any industry should remain in the family, which can be extended to include associates who helped build it, understand the concept, and are dedicated to protecting it as it grows. It is certainly easier said than done.
Organics has only been embraced by mainstream consumers to a small degree in the past two years. Prior to that it is doubtful that the S&H concept had financial feasibility legs to stand on beyond a small number of stores in very particular locations. Many of the serious and organic gardeners are not professionals and won’t pay a premium for an expensive brand. The catalog and Internet had the ability to transcend the locations to reach the serious and organic gardeners who were willing to pay more wherever they were.
The former owners of S&H had developed a store within the store concept that was growing in popularity among independent garden centers, but when the Scott’s purchase was announced the writing was on the wall and many of them bailed immediately with the rest doing so as soon as the Target deal was announced. I’m not sure the financial model of distributing through independent garden centers worked for S&H either but it seemed a valid concept to test out.
Gardening is proving to not only withstand, but thrive through another economic downturn but on the lower end of the price ranges. The consumers who can afford to do so are just not buying higher price point items.
It is always a shame when a great brand is sold to a larger company who seeks to leverage the equity into new categories without understanding the key brand equity. But the greatest failure here, that the article does not address, is the failure of customer-centricity.
You see, S&H did not fail because their products changed; rather they failed because they did not engage closely enough with their Best Customers, the core of the franchise, to understand their wants and needs, and how S&H related to those needs. Remember, the top 20% of a retailer’s customers usually represent more than 50% of their sales and a greater percentage of their profit. Damage your relationship with those customers and you will surely be held accountable.
Scott’s had an opportunity–develop a relationship with the core gardening customers of S&H, those who have a passion for flowers and vegetables, and are willing to invest to make their experience distinct and meaningful. But when those customers began to see the hidden agenda in the brand transition–to SELL them something, rather than to fill their needs, they abandoned in droves and the result is plain to see.
Ignore your best customers at your peril.
It seems that with the evaporation of the aspirational shopper, stores like Smith & Hawken are not going to fare well in our new economy. I suspect the same fate is in store for the likes of Restoration Hardware, Sur La Table, and quite a few others. What once seemed like a well-deserved purchase now seems rather frivolous and not in the best of taste. While this market will not completely go away, it will be much smaller for the foreseeable future. The same is true in the luxury market for hotels and restaurants. It was a fun ride while it lasted, but get used to a true luxury market serving a very small percentage of US consumers for years to come.
I think the big issue was that Scott’s core competency was not in owning a retail box. They got away from their core and didn’t have the focus to make it successful as they had their interests elsewhere. It’s too bad because the Smith & Hawken brand was strong and they did have a good in-store experience.
Smith & Hawken didn’t keep the main thing, the main thing. The Scott,s Miracle-Gro Company was also not the brand fit for the core. At the end of the day, Smith & Hawken, like many in the last 24 months have lost their way by poor execution. The economy is a side bar.
This thread offers many thoughtful observations–thanks to all.
Real estate often makes or breaks a retail chain. Smith & Hawken occupied very prime spots, in the best neighborhoods and malls. But these spaces were not only expensive, they were indoors. Without earth, what garden store could survive?