STATE OF THE INDUSTRY

State of the IndustrySTATE OF THE INDUSTRY

The world of retailing is continuously changing, including the channels through which flowers and plants are sold. To survive, florists have to stay relevant to consumers and communicate the value of their products.

by Stan Pohmer
Photos by Sarah Collier

One word keeps coming to mind as we’ve reviewed the state of the florist industry segment over the years: challenging. And 2016 is no different.

Yet as challenging as it’s been, there’s also great opportunity for retail florists, but only if we change the way we do business and engage the marketplace. Let’s do a quick review of three major changes affecting your businesses.

1. attrition
In 1993, there were 25,000 traditional florists; in 2001, there were 14,000; and in 2016, it is estimated that there are less than 10,000. The Society of American Florists (SAF) predicts that one or two traditional retail florists are going out of business per week. Some are simply closing their doors, either having no planned succession, losing money or not being able to find a buyer. Some are selling their customer lists to competitors and then shutting the doors. And a few others are selling their businesses to competitors or new owners and continuing on.

This decrease in the number of shops is one of the drivers of wire services bypassing florists for fulfillment of orders and then shipping direct to the consumer. The decreasing geographic reach and coverage of florists is forcing the wire services to look for alternative fulfillment methods. This trend doesn’t bode well for shops that built their core business model on wire-service-order fulfillment.

2. The competitive playing field and shifting market shares
The supermarket florist channel has about 23,000 storefronts that carry floral departments. While they traditionally have been highly impulse, holiday driven and self-service, a recent study by the Produce Marketing Association (PMA) and the Food Marketing Institute (FMI) identified that more than 50 percent of these floral departments now have full-time staff.

As supermarkets continue to differentiate based on high-touch/high-service departments throughout their stores, floral will follow suit. Additional design training is being implemented in floral, and they are actively getting more involved in wedding, sympathy and gifts.

State of the Industry Image 2Add to this trend the implementation of BOPIS (Buy Online and Pickup In Store) and home-delivery programs, and supermarkets further explore responses to evolving consumer expectations and demands, and you can see that they are beginning to compete more directly with the services that have historically been exclusive to traditional retail florists.

Here’s an example of the shifting market shares by channel for cut flowers, the largest category in florist shops, mass market and online.

TRANSACTIONS 2010 2016(Est.)
Traditional retail florist channel 32% 12%
Mass-market channel 50% 68%
Online channel %
Other channels 18% 8%
Retail Sales Dollars 2000 2016 (Est.) 2000 2016(Est.)
Traditional retail florist channel 61% 30%
Mass-market channel 22% 49%
Online channel 23%
Other channels 17% 7%

State of the Industry Image 33. Technology
The widespread use of technology and new innovative software applications has changed the playing field in so many ways. It wasn’t too many years ago that we were talking about the negative impact of order gatherers — web-page marketers that made it appear to consumers that they were local retailers but didn’t have physical storefronts. They skimmed the orders and put them into wire-service systems for fulfillment.

We don’t hear too much about these programs anymore, especially since technology has provided the means for start-up companies to market directly to consumers online, take the orders and then fulfill them directly from a farm, delivered by one of the global shipping services (e.g., FedEx or UPS). These “companies” never physically see or touch the flowers they sell. And because they disintermediate the distribution process, they are able to sell at highly competitive prices and have even developed the packaging to market “wedding flowers in a box.” including bridal and attendant bouquets, boutonnieres, and table arrangements. While baby boomers may not prefer this method of purchasing, it has definite appeal to the millennials.

where is our industry in its life cycle?

One challenge that we all recognize but rarely talk about has to do with “maturing.” The floriculture industry, and the retail florist channel in particular, has reached the “mature” life-cycle stage. Some of the indicators of the “mature” stage are:

• Slowed sales growth
• Reduced profitability
• Commoditization exists (meaning the products are available in many  locations/ venues)
• A laserlike focus on managing costs and gaining efficiencies
• Excess production and/or shrinking demand, leading to inventory imbalances
• Blurring of traditional distribution channels, producers selling into multiple channels
• Consolidation at all levels — producer, importer, distributor/wholesaler, retailer

Most industries/companies/channels spend the majority of their “lives” in the “mature” stage. While there are some that may say that the retail florist channel is getting closer to the “decline” stage, I’d say that those who have survived the recent economic challenges are strong and tough enough to sustain themselves although they will have to keep changing in response to the continually changing environment and getting more in sync with the innate needs of consumers and the way they want to do business (AKA, staying relevant!).

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