2010 was more challenging for our industry than 2009, and struggles are likely to continue throughout 2011; however, we have the products, people and message to overcome and thrive.
  by Stan Pohmer

     Consumer spending was lackluster for the vast majority of the year, with some increases becoming evident only late in the third quarter, but then only for products that were price bargains and that were heavily promoted. One positive insight gained when analyzing the purchase data was that it was the higher-end consumers who were driving a lot of the spending increases—the same customers who have been the traditional backbone of florists’ sales. Whether increased spending can be maintained into 2011 or whether it was an anomaly of a euphoric “fill the pent-up demand” pipeline remains to be seen (financial analysts are prone to calling a trend based on very short-term performance, something that didn’t pan out in 2010).

2010 highs and lows

So what were some of the hits and misses we saw in 2010?

  • Continuing decline in the number of florists in the industry. The Society of American Florists (SAF) recently reported U.S. Census Bureau data that showed a 6.3 percent decline in the number of florists from 2007 to 2008 (the most current data available), which is a continuation of the negative trend we’ve experienced for the past 12 years. And if you recall, 2008 was only the beginning of the Great Recession; there’s every reason to believe, based on anecdotal feedback, that this rate of decline accelerated in 2009 and 2010; many florists simply couldn’t generate enough cash flow to sustain their operations, and small companies had extreme difficulty obtaining lines of credit and loans.

  • Domino effects for wholesalers. The declining number of florists puts additional scale-of-operation pressure on wholesalers and importers, who derive their sales volumes from the florist channel. This has led not only to consolidation and closing of wholesale operations but also to searches for other outlets to which they can provide flowers. The Wholesale Florist & Florist Supplier Association (WF&FSA) is actively helping wholesalers develop the event-planner and independent grocer markets.

  • Florists’ 2010 sales were lower than they were in 2009. In the post-holiday surveys conducted of florists by SAF in 2010, the majority of floral retailers reported sales below 2009 levels. And even those that have had sales increases are still short of pre-Recession levels. It’s concerning to see that many florist operations are showing compounded sales losses, with 2010 sales being below 2009 levels and 2009 sales being below 2008 levels. And with Valentine’s Day falling on a Sunday in 2010, many florists lost the office delivery business that drove substantial sales in past years.

  • Mass-market and direct-ship sales eat away at florists’ sales. Share of market and share of stems continue to grow for the mass-market and direct-ship retailers at the expense of the traditional retail florist channel. While supermarket floral sales in 2010 ranged from -5 percent to +5 percent compared to 2009, this performance was substantially higher than that earned by the traditional retail florist segment, so the mass market gained market share. And the number-of-stems share for the mass market was higher; even when the sales were flat, they were driven by more units sold at lower retail price points, so their stem count was up.

  • Social-media marketing provides an advantage. Traditional retail florists and independent garden centers started using social media to their advantage to a far greater degree than the mass-market retailers. The free social-media training webinars sponsored by Florists’ Review and FlowerChat.com in 2010, as well as the social-media sessions at the 2010 SAF convention and various state florists’ association meetings, were well attended. Florists who have aggressively pursued social-media strategies on a consistent basis are well on their way to creating personalized experiential relationships with their customers and moving away from the transactional experiences that are more focused on price, creating a real competitive advantage for florists compared to the mass marketers.

  • Flower PR. In late April 2010, SAF launched “The Flower Factor” campaign featuring three celebrity experts (Jeanne Benedict, Kelli Ellis and Christine Arylo) with expertise in entertaining, decorating and building loving relationships. In addition to their individual comments on how to incorporate flowers into lifestyles, these women incorporated many of the positive research findings from studies conducted by SAF and the SAF/Flower Promotion Organization (FPO) alliance that helped validate the importance of flowers and plants in people’s lives. SAF put together a media event, inviting consumer media to learn firsthand about the power of flowers, and FPO funded a webinar that got the message out on social media. In my opinion, the points raised in this campaign are some of the most powerful and relevant ever communicated by our industry.

  • South America’s woes. Colombia and Ecuador, who supply more than 80 percent of all cut flowers sold in the U.S., have been experiencing rainier-than-normal conditions that have negatively impacted production. And because the economic downturn is global in nature, Colombia and Ecuador, who, in the past, have had the ability to shift sales to other world markets during a U.S. slowdown, have not been able to do so, keeping prices per stem low.

     At the same time, the costs of supplies, equipment and labor have risen, as has inflation, putting even more pressure on costs and production. Some flower farms have significantly reduced production or have closed down, further reducing supply availability. As in the United States, farms are having difficulty obtaining bank capital due to their poor cash-flow projections. Add to this the devaluation of the U.S. dollar and the appreciation of the Colombian peso, meaning that the Colombian growers receive less money for the flowers they sell to the United States and other world markets where the U.S. dollar is the pre-eminent trading vehicle. Any one of these problems is critical, but manageable; in combination, they become truly challenging.

.. To read more, look to the January 2011 issue of Florists' Review.

 


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