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Overcoming Supply and Demand Pressures in the Horticulture Industry

Posted on May 25, 2018 by Cassandra Smallman

Overcoming Supply and Demand Pressures in the Horticulture Industry

 

Every year, the horticulture and landscaping industries are faced with an all too familiar issue, finding labor. From the businesses who grow the plants to the landscaping companies that plant them, labor shortages are an all too common problem. There are many articles that talk about the labor shortage - how it is stunting the industry and how to attract new people to pursue a career in horticulture or landscaping. - but how do labor shortages impact supply and demand, and the resulting price of goods and services?

Supply and Demand

In the horticulture sector, there is increasing demand and a reduction in supply because of labor shortages. Reduced supply and increased demand combine to drive prices upward, so together the market equilibrium shifts and so should your prices.

For example, Warren Patterson CEO of OrderEase and Landscape Ontario President recalls a recent case of the impact of increased demand on prices for a landscaping job. “I recently had a new customer say we were $17 more per hour than what she was used to paying. But she accepted our quote because she couldn’t find anyone else to do the work. This also holds true as I know of three well-established, successful businesses who ceased operations this year. They folded because they found the business to difficult to operate trying to find people to do the work.”

So through this example, the shift in the market equilibrium is apparent there is more demand than supply, thus impacting how much the work was worth in the current market. Understanding how much your product of service is worth to your customers is vital to sustaining a profitable business.

Responding to Labor Shortages in the Horticultural Industry

Increasing Prices in the Landscape and Horticultural Industry

Labour is challenging to find, making great staff difficult and costly for business owners. A sustainable business shouldn’t absorb the additional cost but account for it in their pricing. While it can feel uncomfortable to raise prices, these adjustments needs to be made in order to maintain a sustainable profit margin and accurately reflect the value of your products. The fair market value you charge should be a reflection all of your costs, from materials, to marketing, and yes, including the labour costs associated with your production. Difficult as it may be to raise your prices, if your prices remain to be  fair and the products and services you offer meets the expectations of the customer, then business will continue as usual.

So as you review the prices of your product or when you draft your next job quote, you should not only consider how much it is costing, but account for what that product or service is worth to the customer.

   
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