I can’t help but notice the number of florists that have gone out of business over the past few years. The economy has been tough on almost everyone and especially on florists. I believe this is a result of many factors, including in particular, a significant decline in consumer purchasing power and the ever shrinking margin.
Over the last two years, permanent price declines have decimated industry margins. Many florists I know had been forced to reduce their prices by more than 50% during the recession. Since consumers’ expectations were reset, florists have been unable to raise their prices back to prerecession levels.
With supermarkets and online retailers offering discounted prices, florists have been pressured to maintain low markups, resulting in reduced profitability. IBISWorld estimates that profit margins have fallen from 2.1% in 2005 to 1.6% in 2010. Slim margins have forced many under-performing stores to exit the industry during the five-year period. The number of stores has decreased at an average annual rate of 3.3%, from 45,633 in 2005 to 38,683 in 2010. Following these closures, the number of employees also declined by 2.7% per year, as fewer workers were needed to operate stores.
Floral wire-services have also put increasing pressure on the local florist’s bottom line. With their monthly fees on top of their roughly 30% commission, most florists cannot make a profit on fulfilling these orders. The lack of transparency also hinders the more profitable repeat business. Customer and florist information is not available so the customer cannot make a repeat purchase from the local florist giving the florist no incentive to do a good job.
Online flower delivery of quality floral design is only becoming more competitive. A florist market cannot compete with supermarkets and discounted online retailers on price. They must separate themselves through quality unique bouquets and customer service. It is time for local florists to shed the corporate veil of wire services and order gatherers. Gain customer loyalty to your brand and reverse the trend that has to easily become the norm.