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State of the Industry
What florists need to focus on now to thrive |
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Written by Amanda Ryder
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The year 2010 marks a new year for the floral industry full of new trends, new challenges and new opportunities. The last 10 years have brought on many changes to the industry – an increase in online shopping, a changing consumer and new competitors for the retail florist – and the coming decade is sure to do the same.
To assess the current state of the floral industry, we talked with members of industry associations and groups in Canada and the United States about what the big issues are in the industry, what challenges florists face and what opportunities lie ahead in the new year.
A shrinking industry
When the economic recession hit last year, the floral industry wasn’t spared its effects. In both Canada and the United States, associations have seen membership size decrease as florists close up their shops. Flowers Canada Retail executive director Arman Patel says the Canadian industry started off 2009 with roughly 5,000 florists and believes that by the end of the year, this number will most certainly be down. At the Society of American Florists, CEO Peter Moran reports that they’ve lost roughly 1,000 retail florists, or six per cent of their membership, since January and he suspects that a little over half of those florists are out of business. Stan Pohmer, CEO of the Pohmer Consulting Group based in Minnesota and executive director of the Flower Promotion Organization, also confirms this decrease. He says the most recent U.S. retail florist statistics (from 2007) reported around 19,000 retail florists. “It’s been said that by the end of 2009 with the economy and all of the other challenges, there could be as few as 15,000 to 16,000 florists left. So there has been significant contraction in the retail florist community,” says Pohmer.
While it is disheartening to learn that florists were forced out of business, Patel says there is an upside for the industry as a whole. “The only good thing is at least you weed out a lot of people that shouldn’t be in the industry. That will get more volume to the shops that are going to be there in the next 10 years.” Moran agrees and says “we are going to still see some contraction on the retail side and then I think we are going to be stable. I think the bigger florists are getting strong and the weaker ones are gone away.”
Ryan Freeman, founder of Flower Chat, an online message board focused on flower shop operations in Canada, the United States and the United Kingdom, also sees the shrinking industry as an opportunity to make the floral industry more stable. Freeman says many of the closures are the result of too many entrepreneurs trying to get into the business without a proper plan in place. “We have so many flower shops that started as a hobby or were started by someone who thinks it would be great to work with flowers but they’re severely underfunded,” says Freeman. “Now, with the credit crunch, these people don’t have access to capital. The ones who are unable to build a successful business are shutting down.”
Pricing pressures
The floral industry is suffering from a pricing disconnect between what consumers see flowers priced at in supermarkets and what prices they see at a florist. Patel says that when shoppers buy flowers from a grocery store or when they shop online from wire services, they will often see a beautiful bouquet priced for a very affordable $19.99. These outlets have the ability to use this pricing due to bigger standing orders and the ability to operate on a lower margin. But for many independent florists, dipping to such a price can have a serious impact on their bottom line. “They’ve got a dozen roses for $19.95, how are you; the florist, going to compete with that unless you market your shop and your design work differently and start educating your customer?” says Patel. “If you don’t have the proper margins and the proper price points then you’re not going to generate the sales volume or the profit needed to stay in business long term.”
Both a lack of consumer confidence and an urge to save money in the last year has had consumers looking twice at a price tag before they pay. Pohmer reports that in the past year, the number of floral transactions made in the U.S. floral industry is actually in tune with, or slightly below, last year. The difference lies in the amount of money spent on each transaction. For retail florists, transaction values are down, while values remain flat at supermarkets and mass market outlets. “If the consumer is really challenging what they spend and where they’re spending it, the retail florist is taking it a little bit on the chin,” says Pohmer. “They’re not as quick to react to customer spending habits and they like to sell that $69, $79 arrangement. They don’t like $19.99. Some of them will say we can’t afford to fill that and in some cases it’s true. But the mass market, they’ve seen the change in consumer spending habits and they’ve been very quick to react.”
The good news is that from a floral consumption standpoint, flowers are still making their way into consumer homes. Patel reports that in Canada, flower consumption has gone up, something that’s a bright light for the industry. “At the end of the day, people are buying more flowers and that’s good. They’re just not buying them all from florists so we’ve got to figure out how to change this.”
Added competition
Consumers now have the opportunity to buy flowers from a host of outlets. To pull customers into their stores, florists need to appeal to their local market and give consumers a reason to shop there. Pohmer says the florists that are doing well right now are focusing on their local market. “They’ve got to be the heart and soul of the community,” he says.
In the past, florists have been able to rely on being the only flower vendor in town, but now they need to let the community know they are there. “When people think of a wedding, when people think of a funeral, when people think of an anniversary, when people think of sending flowers to someone else, to a friend or an acquaintance, the florist needs to be top of mind. The only way you’re going to generate that is to let people know who you are, where you are and what you do,” says Pohmer. There are several ways florists can do this and he gives examples like local advertising, direct mail or networking, to name a few.
Florists can also attract customers by differentiating themselves from other vendors and offering something unique and fresh. “Customers are willing to spend but they need a good reason. The majority of florists ultimately fail by not giving consumers a good reason to choose them over any other entity, whether it’s another local florist, an online vendor, a wire service or a grocery store,” says Freeman.
Shifting customer base
A lot has happened in the retail world in the past year and shoppers are growing accustomed to dramatic discounts and salespeople that will take care of their every want and need. Your shop has to reflect who your customer is right now and work to nurture shoppers so they keep coming back.
“You need to do more than the minimum to keep that customer happy. You have to spend more time, more money and more effort to keep that customer. Why every florist can do that is because you have excess capacity. No florist is running at optimal levels right now, with a few exceptions,” says Patel.
Florists have to review their customer and evaluate how their shop caters to that customer. Are there aspects they can change to attract new customers or appeal to a new demopgraphic? Pohmer gives the example of florists who have shop hours that cater to the owner and employees, and not necessarily their community. This needs to change because, as Pohmer puts it, florists “are in the business to satisfy the needs and the whims of the customer and not themselves.”
Freeman says florists can’t be content to rely only on what’s worked in the past and should look at ways to broaden their market. “They need to evaluate who their target audience is. Who in their particular geographical area can they target that would open up a new market? Whether it’s different product or a different style, don’t be a slave to your own tastes or your own existing customers. With attrition, any florist is going to see 10 to 20 per cent attrition on their customer base every year. If you keep catering to the same tastes, you’re going to have a declining market.”
The move to online
There’s no doubt that the Internet has brought on a new slew of competitors and changed the floral landscape over the last 15 years. “I think the Internet has had a huge impact on florists,” says Moran. “Now they have floral marketers that really never touch a flower that are generating sales and some of that takes business away from the retail florists.”
While the Internet may bring more competitors to the market, it also represents a huge opportunity for florists. “It gives the retail florist a platform to compete. Those that have aggressive Internet strategies are making the most of it and, in fact, some florists are getting the business they wouldn’t normally have got without the Internet,” says Moran. Freeman echoes the need for florists to get online and says the Internet is a great way for florists to let their customers know what their shop is about in a more personalized way. “At the end of 2009, we shouldn’t have to be repeating the mantra that florists need unique websites. We were saying that 10 years ago and we are saying that now.” Freeman says it’s important that florists put together their own “about us” section, include pictures of the shop and take an active role in their website. “We are supposed to be in a creative field with people who are employed to think outside of the box and be creative and inventive. You finally have a marketing medium that allows you to start expressing that.” He advises that florists also look into free marketing services like Twitter or Facebook to reach out to their community. “Get online and talk with people in your area about regional things and you will become a trusted member of that community. People will then turn to you. You’ll be building your brand strength, your building recognition and staying top of mind.”
A business mindset
While there’s no question that design talent and skill both play a big role at a floral shop, the industry members we spoke to all stressed the importance of focusing on the paperwork first and foremost. “They’ve got to get back to basics and remember that they’re not artists, they’re in business,” says Patel. Pohmer warned that while the economy is starting to improve, it will take time. “It’s going to be a very slow recovery, so unless the retail florist has good business acumen, good business savvy, watches their cash flow, works their inventory and responds to consumer trends, they’re going to be really challenged.”
Freeman is optimistic that the stronger florists will persevere and will do so with better business practices in place. “I think it’s an exciting time. With growth there will always be a little bit of pain for some. I think it’s going to be healthy for the industry overall to have stronger, well-run shops coming out on the far side.”
Moran says it best: “I don’t think it’s gloom and doom for the retail florist at all. I think they have a niche and the ones that are able to really watch their costs and get aggressive, there’s business out there to be had.”
Throughout the rest of 2010, Canadian Florist will help you chase that business.
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