Trends towards higher density urban living have reduced garden sizes, which is constraining industry revenue.
Nursery Production (PRWEB) June 03, 2014
The Nursery Production industry is showing signs of recovery after several years of difficult conditions. Industry revenue is forecast to increase by 4.1% to $758.9 million in 2013-14. This contrasts with the projected annualised decline rate of 1.7% in the five years through 2013-14. Industry revenue declined considerably in the two years through 2011-12, partly due to less than favourable consumer sentiment and low dwelling commencements that dampened demand. IBISWorld industry analyst Nick Flores states, “Dry conditions reduced demand for industry products, as the drought forced consumers to curb plant and garden expenditure, which was exacerbated by stringent water restrictions.” The installation of rainwater tanks lessened the water shortages that had been constraining industry performance. Despite this, the dry conditions forced industry players to improve operational efficiency in order to remain viable.
According to Flores, “The trend towards higher density living and falling average garden sizes has negatively affected industry performance. This has been partially offset by the increased demand for indoor and patio plants in the move towards urban living.” Demand has also been boosted by increases in dwelling commencements over much of the past five years. The rise of major hardware retailers such as Bunnings has attracted consumers away from traditional nurseries, which struggle to compete against big-box stores' strong retail presence and extensive supply chain networks. Although hardware retailers represent a downstream market for the industry, the emergence of these retailers as a key sales channel has eroded industry profit margins. This has been intensified by volatile consumer sentiment and weak growth in household discretionary income over the past five years, as consumers attempt to reduce expenditure. Future growth is likely to be driven by greater water availability and the more favourable levels of rainfall projected for the next five years. An expected increase in dwelling commencements over the same period will benefit the industry, as new homes often incorporate landscaped gardens. Fragile consumer sentiment is forecast over the period, which is expected to detrimentally affect industry performance. Minimal growth in household discretionary income forecast for this period indicates that industry players will need to curb costs and increase operational efficiency.
The Nursery Production industry exhibits low levels of market share concentration. Non-employing businesses are estimated to account for more than half of total industry operators. Fragmentation within the industry can be attributed to low barriers to entry and the nature of predominantly family-run businesses. The low capital requirements for establishing a nursery mean that new operators can enter the industry freely. The number of businesses operating in the industry has fallen considerably over the five years through 2013-14. Competition increased as garden centres were incorporated into downstream hardware retailers such as Bunnings, while the long-running drought created financial pressures. For more information, visit IBISWorld’s Nursery Production report in Australia industry page.
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IBISWorld Industry Report Key Topics
The industry includes businesses that are primarily involved in growing trees and shrubs, ornamental plants and bulbs. Businesses sell to retail or wholesale establishments, as well as landscapers, local government and councils, and orchardists. This industry excludes turf growing and flower growing.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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