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State of the Industry
What florists need to focus on in 2012 |
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Written by Amanda Ryder
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The beginning of a new year is the ideal time to reflect back on the performance of your business over the past year and look ahead to what’s next for your shop. To help guide you through this process, we’ve prepared our 2012 State of the Industry (SOI) report, a detailed look at the issues florists across Canada are facing and what lies ahead for the floral industry.
Canadian Florist conducted our first SOI report in January 2010 and now, two years later, we are checking in again to see what’s changed, and which challenges and opportunities remain. To assess this, we spoke with members of the industry as well as consultants and service providers. We asked them to pinpoint what they feel are the big obstacles for the floral industry as well as areas in which florists can expand to gain new customers and revenue streams.
The current state of the industry
Looking at the industry as a whole, all of our experts agreed that the Canadian floral sector is currently in a flat economic state or a slow decline. The outlook is up from the 2008 to 2010 time period but the number of retailers in both Canada and the U.S. hasn’t risen, and in fact continues to decrease, albeit at a slower rate.
“We have lost the bulk of the low-end retailers that were holding on and their respective customers transitioned to other buying outlets,” says Arman Patel, the executive director of Flowers Canada Retail. “The overriding factor is the economy, the lower price point of their average tickets and the lack of margin.” He says these retailers counted on traditional sources such as wire services to send them orders and when the number of orders decreased, flower shops weren’t prepared to get the orders on their own.
As the founder of Floral Strategies, an onsite training program geared specifically to the floral industry, Tim Huckabee, aifse, is a regular in flower shops across North America and spends time with roughly 200 florists each year. During these visits, Huckabee says it’s more common to hear of a flower shop closure rather than an expansion. “It’s the rare, rare exception when I go into any market and there’s a flower shop opening. It’s typically ‘Our competitor has shrunk from three locations to two’ or ‘Somebody went out of business,’ so there’s still just a general shrinking of the industry.”
Through the conversations he sees on his online forum, FlowerChat.com, and in speaking with industry contacts, Ryan Freeman says that some in the industry refer to the closure of shops as a “thinning of the herd” and a process that had to happen in order to get rid of bad florists who reflected poorly on the industry. He says that people who are of this mindset generally predict a rebound in five to 10 years, with healthier shops run by more savvy business owners.
A price crunch
In talking with industry experts for this story, it was clear that one issue stood out for Canadian florists. As a result of the recent recession, the rise in online-only florists and a lack of marketing, one of the biggest challenges retailers are up against is a downward pressure on prices. When consumers go online to buy flowers, they instantly see the low prices advertised by order gatherers or promoted by wire services.
“The pressure is coming from order gatherers who have deep pockets and a lot of money to spend getting customers. Some of them distribute the orders to florists, some of them don’t, but that’s a discounted order that you’re getting,” says Janet Lye, president of Tidy’s Flowers, a shop that’s been operating in Toronto since 1877. She says the florists who decide to fill these orders are left with a very small margin and the nature of the industry – labour-intensive and dependent on perishable product – makes this type of order model a difficult one to survive on. “The incoming orders are increasing but they’re not as profitable because of the downward price pressure. Order gatherers – they don’t care. If customers want something for $25, then that’s what they sell them. But is it profitable for florists to be existing on these sorts of orders?”
Huckabee supports Lye’s position and adds that these prices and outlets do a disservice to the industry as a whole. “We are damaging our industry because of the inequity of low prices on some of these major websites,” he says. “That has devalued what we do and we’re forcing customers to look at what we offer them as more of a commodity.” Huckabee says that by constantly showing the consumer a $29.99 or $34.99 arrangement, the price becomes the main focus, instead of the flowers used or the skill that went into creating the design.
These dropping price tags play right into the mindset of the post-recession consumer. Thanks to the explosion of coupon websites and the consumer’s desire to get those rock-bottom prices, people gravitate to the lowest price tag unless retailers can give them a reason to spend more. The problem is that many florists aren’t providing shoppers with this extra reason.
“We’re great at selling product at a price,” says Stan Pohmer, executive director of the Flower Promotion Organization in the U.S. “Unfortunately, the retail florist can’t compete on price. Their overhead is too high. All they do when they try to compete strictly on price is they cheapen the psychological perceived value of their product.”
Pohmer says that instead the industry needs to start talking about the benefits of their product. Retailers can tap into the wellness market by showing consumers how flowers can create a relaxing and soothing environment and by playing up the emotional and psychological benefits. “We’ve got a product that can fill the need of the consumer today; we’re just not telling them about it,” he says.
During his consultations with flower shops, Huckabee pushes florists to show the customer what a higher-priced floral design looks like. “When I go to a flower shop, it’s like clockwork. I look in the cooler and it’s this sea of safe prices,” he says. “I challenge them and ask, ‘Why isn’t there one for $125?’ And it leads to the conversation where they tell me that no one will ever buy at that price point. And I say, ‘Well, they’re never going to buy it because they are never going to see it.’ I force them to put one on the floor and they end up selling it right away.”
The competition advances
In the last five years, the North American gift market has exploded as online shopping and greater product availability has given consumers more options than ever when it comes to purchasing that special something for a loved one. “We’re not just competing against candy and jewelry anymore,” says Freeman. “We are seeing more and more U.S. chains moving into Canada thanks to the strength of our dollar and economy.” Shoppers are also bombarded with a vast selection of electronic gifts and services and there’s a push to always have the latest and greatest. “One needs only to look at the rise in popularity of smartphones, tablet computers and e-book readers to see that tech is no longer for just the geeks. Simpler device interfaces are making them an appealing option for gifting even to older generations that might have received flowers in the past,” he says.
With all these options, flowers aren’t necessarily top of mind for consumers. “I think the lack of centralized marketing by the industry as a whole in a downturn has a huge effect,” says Lye. “It’s not the fact that flowers are now available everywhere; it’s just that there’s a real lack of marketing in general in terms of flowers as a gift.” It’s up to individual stores to market and promote their own products and this can be a daunting task for small retailers pitted against the mass-marketing power of a large company with a much bigger budget and greater access to resources.
The industry must also pay attention to other flower outlets – grocery stores and mass marketers aren’t new competitors for the floral industry but they continue to gain market share. These retailers have started to offer customers more service and quality and florists need to take notice. “What I see across North America – I see it in Loblaws, I see this here in the U.S. – is that grocery store flower shops are getting better and better. They’re offering better design and they are improving their service so they really are becoming a viable contender,” says Huckabee.
A changing consumer
The retail customer of today is filled with a cautious optimism – consumer pockets are starting to loosen a little bit and Huckabee says most of the shops he visits are witnessing increases in sales volumes and sales averages. The problem is that while people are willing to spend again, they expect to get a lot more bang for their buck than they did just a few years ago.
Lye says she sees two types of customers – those who are price conscious and those who are much more service oriented and have high expectations. Online shopping and instant e-mail access means that consumers want answers now, not tomorrow. They’ve grown accustomed to shopping with such retailers as Amazon, whose focus is on delivering a customer experience that requires next to no effort from the consumer. Florists need to capitalize on this by simplifying the online order process and saving customer data so ordering flowers can be done quickly and efficiently, without inconveniencing the customer.
With the rise of new gadgets such as tablets and smartphones, consumers have greater access to the Internet and it’s become part of our shopping culture to use the web as a reference. These new devices have made it possible not only to scout out prices and information at home, but also to do it in front of the cash register on their mobile phone. “Consumers are more technologically proficient and able to find the best value, product and price within their segment,” says Patel.
Technology has also made the exchange of information – and pictures – quick and easy and this is forcing the florist to become more accountable. “It used to be that we could say, ‘oh, we’ll just do something nice,’’ and the customer was happy. As long as Grandma thinks the flowers are beautiful, that’s the end of story,” says Huckabee. He says the problem is that now Grandma has a smartphone and when she sends a picture to thank her family for the flowers, the sender will see that the florist used orange lilies instead of yellow and realize that no one called or e-mailed to see if that type of substitution would be OK. “What would have been a non-issue a few years ago now becomes a customer service situation,” he says.
Change is good
Retailers who remain stagnant and refuse to accept the fact that the industry isn’t the same as it was five, 10 or 15 years ago won’t succeed in today’s environment. Continual training, self-reflection and a solid marketing strategy are all key for business owners who want to maintain a footing in the ever-evolving flower industry. Pohmer believes that retailers can build sales by becoming more involved with their surroundings. “They should be the heart and soul of their own community,” he says. “Whether it’s the main street merchants association, whether it’s the Lions Club, whatever it is, you’ve got to be involved with the community.”
Tying into what Pohmer advocates, Lye says florists need to take a good look at their customer base and community in order to decide what kind of florist they want to be. “You have to establish your own niche. You have to brand yourself in your own market. All parts of your business need to be a profit centre so you need to look at them individually and make them profitable,” she says. In meeting with her floral peers over the years, Lye has noticed that one thing always stands out: while each of the shops sells flowers, the similarities end there. They all have their own specialties specific to their customer base and location. “I think everybody’s market is different and you really have to find out who you want to be. Do you want to be the lowest price person or the highest service person? You have to decide who you are and market the heck out of yourself.”
Looking ahead to the coming year, Freeman believes it will be important for florists to continue to build on their knowledge and experience. Although flower shop owners certainly possess great design talent, they often lack the knowledge required to run the business side of things. “We are past the days when a great product or service can overcome serious deficiencies in marketing and operational efficiency.
Florists need to learn about offline and online marketing, purchasing strategies for lowering cost, sales tactics for improved sales and product throughput, and they need to really invest in their websites as true secondary storefronts, not just an item on a checklist,” says Freeman. “For each area they need to either be the expert or partner with an expert who can assist in developing and implementing strategies for their business.”
Opportunities for 2012 and beyond
In talking with the experts, it’s clear that it’s not all doom and gloom. There are a number of opportunities that retailers can take advantage of to attract new customers, increase the average sale and encourage repeat business.
Pohmer says that florists can’t lose sight of who holds the most disposable income right now. He agrees that it’s important retailers learn how to reach the gen Y customer through such methods as social media, but they can’t spend an inordinate amount of time on this group. Right now, he says gen Y is dealing with college debt and they’re trying to get into the housing market. “We’re focusing all of our attention on the gen Y customer and we’re forgetting about the group that’s paying the bills, which is the boomer, or the older generation X. When was the last time you heard someone talk about a marketing program that can address that group?”
Patel supports this focus and says florists need to cater to those local customers with the biggest income. He says there’s also the potential for shop owners to take advantage of the buy-local trend to help establish a unique place of business in the community.
Huckabee believes that proper and consistent training is the key to growing sales and simplifying the flower buying experience. “Whether it’s bringing somebody on site, buying DVDs, attending a business workshop or finding an online course, consistency is critical,” he says. Training and regular meetings can’t be a reactive measure to deal with a problem that comes up. Instead, Huckabee says that establishing a routine will keep the lines of communication open. “Talk about what the sales figures are month over month and year over year. Talk about what holidays are coming up. Talk about what customers are asking for and talk about collectively what staff is hearing or seeing,” he says. “That in itself becomes an education process because people are sharing experiences, they’re getting a better understanding of customers’ needs and wants and helping to achieve and focus the direction of the store.”
Freeman says it best: “2012 will continue to reward the florists who treat their shop like a business, not a hobby. Some of the best advice I’ve heard recently was to invest resources equally into your sales team and your design team. I love great design, but if no one knows about it, it’s wasted,” he says.
“Give excellent personalized customer service on every order, make the whole purchase a memorable experience from the initial call or e-mail right through to the follow-up marketing. Stop thinking about customers as transactions and start viewing them as a 10-year investment to be cultivated.”
Take-away tips for 2012
Review your pricing strategy. What price points are you promoting to your customers in store, online and through your advertising materials? Talk with your salespeople and designers to encourage them to sell and create designs with a higher price tag.
Try new technology. Invest in at least one piece of technology for 2012 – this could mean a new point-of-sale system or a resolution to actually use the features included in the one you have, a website redesign or a vow to update your current site more regularly, a social media campaign, a new computer, etc.
Set a training schedule. Come up with a plan so that your employees receive regular training in your shop. Meetings are a great opportunity to review your shop goals for 2012 and improve communication between employees. They also provide a chance to address any issues or problems and time to educate staff on new selling or design techniques.
Reach out to your community. Get involved with local businesses and
associations. If you show your town or city that you support them, they’ll be more likely to return the favour next time they need flowers.
Find your niche. Ask yourself, your customers and your staff what you do best. Do you have a solid corporate strategy or are weddings your forte? Play on your strengths and promote a specialty to set your shop apart from the rest.
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