Valentine's Bloom: Sweet Smell of Profits and PR
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A mashup of classic romantic symbolism and a recovering economy, flower sales this Valentine will total $1.8 billion, up from $1.7 billion in 2011 and $1.6 billion in 2010, reports the National Retail Federation. New forms of competition such as Edible Arrangements International, which provides candy-covered fruits, haven’t yet undermined this conventional expression of love. What to watch in the floral industry are the emerging business models, especially the possible "Amazoning" (courtesy of Amazon.com (NASDAQ: AMZN) of this business, whose annual sales Smart Money puts at $35 billion.
The model of ordering flowers by phone or online via a wire service like 1-800-Flowers (NASDAQ: FLWS) dominates. It's increasingly difficult to be an independent local florist with no ties to the major flower players -- as well as other industries such as credit cards -- and little tech savvy. The name of the game is partnerships. For example, 1-800-Flowers has joined with Discover (NYSE: DFS) to provide a 20 percent cash back incentive.
To survive, many full-service florists continue to sign up with wire services to fill local orders and pony up the 20 percent commission. However, thanks to technology, others can opt out. In the Washington D.C. Metro area, Allan Woods leverages an online presence for business and bypasses participating with 1-800-Flowers. Among its tactics is linking to promotional platforms such as SuperPages.com.
Another floral sales model catching on is the store-within-the-store concept which has been adopted by Wal-Mart (NYSE: WMT). This is not only a good business proposition for the big box in that it can add flowers to its products. In addition, retailing expert Barton Weitz points out in Florida Today it’s smart public relations. For floral vendors, Wal-Mart chooses small local businesses. That undercuts the perception that it crushes the little guy.
This model grew out of the now standard practice for supermarkets like Kroger (NYSE: KR) to provide one-stop shopping for busy women. The flowers, priced at a few bucks, were right there. As time passed, the Kroger offerings became broader and seasonal, as with special Valentine’s arrangements. They also are now available online.
The downside with both this original supermarket model and its new wrinkles such as a store within a store has been the stigma attached to giving flowers which don’t come from proper florists. The recipient was likely to be insulted by this cheap gesture. Smart stores have overcome that by designating personnel to wrap the merchandise, along with having sentiment cards available, just the way florists do.
A third model catching on is the subscription plan as practiced by florist H. Bloom. At first it was only virtual. This is space H. Bloom created between full-service florists, which still account for 40 percent of sales, according to Market Watch, and low-end ranging from big boxes to supermarkets which takes in about 30 percent. The benefits are two-fold. Customers who join only pay about $35 for a professionally designed arrangement and delivery. Owners have the subscription money for working capital. This approach, observes Smart Money, has been categorized as the "Amazoning" of how products and services are purchased. Like Wal-Mart had experienced, Amazoning has been encountering push-back from those who resent this power to use low prices to gain market share. However, in the now-Darwinian floral industry, it could be a shrewd way for a player to not only hold on but actually grow. H. Bloom has added a brick and mortar location in New York City to its virtual presence.
Another interesting threat to the flower industry is from cause activists. They could create the mindset that the more meaningful expression of caring would be a donation to their mssion.
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