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feature
story  To
survive and thrive in 2006, florists will have to change directions and
point toward creating experiences, value and strong customer
relationships. by O. STANLEY POHMER JR. TO SAY THAT 2005 WAS A CHALLENGING YEAR for traditional retail florists and floral wholesalers is an understatement. Consumer confidence was challenged by an on-again/off-again economy, with many consumers worried about job security. And many of those who felt confident about their employment status found their disposable spending capabilities hamstrung. Wage increases barely kept pace with inflation, but real spending power was reduced due to higher energy costs, higher health care costs, rising interest rates and the like. People were worried about the basic necessities and essentials such as keeping food on the table, putting gas in the car and paying the rising costs of college for the kids, more often deferring “affordable luxury” purchases like flowers. sales drop while costs rise Retailers of all types—florists, warehouse clubs and supermarkets—tried to entice elusive consumers with lower retail price points, but that didn’t work. For instance, in the third quarter of 2005 (from when we have the latest available consumer purchase behavior data), supermarket cut flower sales were down 9.6 percent, and purchase transactions were off 3.9 percent. During the same period, florists’ cut flower sales deteriorated by 28.5 percent, and the number of transactions decreased 15 percent. While there are other mitigating circumstances, what we saw in 2005 clearly demonstrated that lower retail prices don’t necessarily increase the perceived value of flowers in consumers’ minds. In addition, the insanity of reducing retail prices in an attempt to capture sales came at the same time that florists’ operating costs were increasing. Fuel surcharges on inbound product, higher heating costs, higher benefits costs and higher delivery costs all compounded to put the bite on what little profit dollars were available. For many florists, the formula of lower retail prices and higher costs proved to be extremely costly to their bottom lines. recognizing value Today’s consumers are increasingly price conscious due to their economic situations and the invasive “Wal-Martization” mindset that has taken over their psyche. But small businesspeople like florists don’t have the size or clout to leverage against their suppliers to obtain the lower costs that larger retailers have. Yet for florists in survival mode who have little control over their indirect expenses, lowering prices to increase transactions could have been a reasonable idea—if they were able either to get consumers to trade up in price or to develop relationships with those consumers and generate more frequent, repeat incremental business. The key to success in this equation is that consumers must recognize the value of what they purchase, and this didn’t happen consistently enough. More on this subject later. the wire-service factor Many florists have built their business models on fulfillment of wire-service orders to the point where some of them get up to 70 percent of their sales from those orders rather than from customers walking through their doors. This model served some of them well for many years, and the wire services were very protective of their florist partners and consciously made every effort to protect this relationship. But times and the competitive environment change and force new strategic directions. Some wire services now compete with their partner florists by promoting nonfloral items they can fulfill themselves from their own distribution facilities, keeping 100 percent of the sales and the profits, and bypassing their retail customers. I’ve heard a lot of dissension in the florists’ ranks over this, and I’m beginning to see some pushback on the wire services. Will it force a change back to the old comfortable relationships? Probably not, but many florists are looking for every opportunity to bypass the wire services, much like the wire services have done to them. a need for florists? So with all the retail competition that florists face everyday from supermarkets, convenience stores, warehouse clubs, Internet sites, street vendors and farmers markets, and with more professional and deep-pocketed competition at the traditional floral holidays from the fragrance, candy, jewelry, hotel and spa industries, is there still a place for retail florists in tomorrow’s marketplace? The answer is, unequivocally, yes, but it won’t be with the same mindset and approach that brought florists success in the past. You might not like the changes that are needed, but if everyone else is changing, it’s impossible to stand still or go backwards and succeed. In the last four years, florists’ share of dollar sales has gone from 53 percent in 2002 to 46 percent through the third quarter of 2005, and their share of purchase occasions has gone from 25 percent to less than 20 percent. The problem is exacerbated because the total market has been relatively stagnant, with only minimal increases. As a category, we’re just trading customers and dollars amongst ourselves, and that’s not a fun place to be. opportunities for growth In my opinion, there are three key areas where traditional retail florists can focus that can make a positive difference in their ability to grow and prosper: relevancy, value and relationship. Relevancy. My interpretation of relevancy, as it relates to florists, is on two levels: product related and customer related. People genuinely like flowers, but I’ve heard some consumers say that flowers aren’t as relevant to them today as they were in the past. Despite the fact that flowers are far more available in so many places today, they are actually less “top of mind” than ever before. Think for a minute about how flowers are positioned around Valentine’s Day. Too often, we’re focused on price points while our competition, say the hotel industry, is communicating experiences—the mystery and mystique of an enchanting evening with a significant other, enjoying a quiet and exciting romantic interlude with warm baths, candlelight and soft music. What are they really selling? Rooms! But they’re marketing the experience rather than the product itself, and price is never mentioned. And I’ll bet they sell out the hotels on Valentine’s Day. Flowers have a tremendous, almost unmatched, ability to convey emotion and provide serenity, a sense of well being and beauty. If we really want to be relevant, we need to start communicating these innate traits rather than focusing on price. By identifying with the benefits that flowers provide, we have a far better chance of making flowers a part of people’s everyday lives and lifestyles—in addition to special occasions. A group of visionary florists from the Connecticut Florists’ Association came up with a phrase that truly describes the relationship florists should, and can, have with their communities. They see themselves as the “heart and soul of their communities,” and I see this as an excellent opportunity to create relevancy and build their customer franchise. These florists attach themselves to all the key community events, like proms, homecomings, historical celebrations and civic organization events. They’re involved in fund-raisers and charity events. (Yes, such events need to be controlled, or they can get totally out of hand.) They also make themselves available for school classroom training, such as science projects. They’re involved with activities with their 4-H clubs and Girl Scouts troops. They sponsor open houses and tea socials to engage their customers. And they volunteer their shop spaces as meeting rooms for organizations. By becoming relevant to their communities (and those communities are made up of consumers), these florists are marketing not only flowers but also their shops as integral parts of the fabric of their communities. Value. Most people equate value with low prices, but in my mind, price can be positioned to be just a small part of consumers’ value proposition. I view value as an equation: Comparative value = perceived price + quality + assortment + service + ambience + shopping experience + presentation + + +. I purposely use the term “comparative value” because consumers continually and continuously compare the relative value of one possible purchase to another before they make any buying decisions. Whatever offers them the most compelling comparative value gets the purchase nod. When I shop a local high-end (and very successful) independent garden center, I know I’ll pay top price. But price, though a factor in my buying decision, isn’t the value creator that drives my purchase decision; rather, it’s the incredible service and expertise I receive and the confidence I gain from buying there. There also are times when I purchase from my local big-box retailer, and price value is high in my decision criteria. Though both retailers have to deal with all the elements in the value equation, each chooses to place a different emphasis on the various elements, creating different value propositions, and I make my value decisions accordingly. To remain successful, florists will have to focus on their comparative value propositions in communicating with their customers. Relationship. Supermarkets, by their very nature, are self-service environments that have a transactional focus, meaning that they are selling more on the merits of price than anything else, one sale at a time. Florists, on the other hand, have the unique competitive opportunity to develop experiential relationships with their customers that can build loyalty and lifetime value benefit. You shouldn’t focus on the single transactions with your new customers but rather on how you can become the supplier-of-choice for all of their floral needs today and for years to come. Use all of the available touch points to nurture the relationships—your experience, services and expertise; your product quality; your Web site; your e-mail newsletters; your follow-up “thank you” phone calls and notes; calling customers by name when they enter your store; and treating them with the respect they deserve. optimism for tomorrow There’s definitely a place in tomorrow’s marketplace for retail florists, and there’s a tremendous opportunity for future success. But to achieve that success, tomorrow’s retail florists will have to think and act differently than yesterday’s florists. You need to start the change process quickly because the trend has been working against you. And the sooner you start, the sooner you can reverse the trend.  O.
Stanley (Stan) Pohmer Jr. is CEO of Pohmer Consulting Group,Minnetonka, Minn., and executive director of the Flower Promotion Organization, www.flowerpossibilities.com. You may reach him at (952) 545-7943 or by e-mail at spohmer@pohmer-consulting.com. • To read and see more, Click here to purchase the current issue of Florist's Review. |
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