Retail battle creeps onto grower’s doorstep

Posted On 29 Jan 2007
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Iain Thompson is area manager for the Flower Council Holland: “We are surprised every year by the sales figures from out of the UK where the retail chains now have a 68% share of the ornamentals market, mainly cut flowers. Compare this to 45-50% only five years ago. It has been flying up! This is a unique situation; if we look across continental Europe, the market share of the Dutch retail chains at 15% is more typical. Product specialists may argue that the supermarket style is not the way to have your products presented but it works, and from a consumer perspective the supermarkets are starting to acknowledge that flowers are a main category. Their enthusiasm is not only based on margin, volume
and turnover but also because flowers and plants, similar to fruit and vegetables, place the supermarket in a better light; as customers enter the store they are immediately confronted with a welcoming show of natural colour. The benefits, image and financial, are actually making these professional retail chains look into the next steps to create more consumer involvement and present new products, e.g. from amaryllis to mixed bouquets, where even the traditionally more exclusive florist flowers, e.g. protea,
are not excluded. Professional is also a term which should not be underestimated in connection with
this retail sector. While the majority of florists operate independently, the supermarkets are experts in communicating to a broad consumer base, clearly identifying their position. Marks & Spencer, for example, has uniquely managed to create the perception that its plants are of a higher quality
than those in garden centres. Surely garden centres should be the green experts! Another
example is Waitrose, which similar to Marks & Spencer, does a very good job and effectively uses its retail marketing experience to inspire customers with its range of products; both outlets are
particularly keen on peak sales periods linked to special occasions, e.g. Valentine’s Day, Mother’s Day, Christmas.”
The flowers sold in the UK via the retail chain formula are mainly sourced from abroad with 70-75% being imported via the Dutch auctions and  25-30% delivered directly from Africa. There is little reason not to believe, however, that supermarkets across continental Europe, where flower and plants are certainly not newcomers to the product assortment, will be working to import the high market share achieved by their UK counterparts.


Service to sell more
What does this mean for the rest of the supply chain? Considering first the position of the second largest retail outlet for ornamentals in the UK, the florists, with a 20% market share, Thompson says: “In the UK, the craftsmen driven sales, being florists and the wholesale, have been made to wake up. They really have to change, otherwise there is no future, especially for the wholesale. The difference is between being a stock supply unit or a supplier with services to sell more product, e.g. the right pricing, communication, packaging.” This demands a 180 degree turnaround in business mentality, but is something which is known to make a difference. Thompson explains, “The wholesalers should not question what must be sold but rather, what is necessary to help their customers sell more. Certain targets could be set with a customer and once these have been achieved, either a cash bonus or a supply of POS material for the next year could be the reward. The supply chain thus cooperates to build each others business.”
The florist, at the same time, has to be very aware of market developments. Since the UK supermarkets can never be beaten on price because of the volumes, creativity must be seen as the main weapon of florists, analysing carefully their customers wishes and aligning the detail of products to these expectations. The smallest detail can make the difference, e.g. the packaging. Thompson strongly supports this strategy saying, “Supermarkets have their logistical systems, which are organised for high volume throughput and delivery of specific products at a certain price. This automatically introduces its own restrictions, for example, the more delicate flowers cannot be handled in these standard systems.” 


Choice of channel
Growers cannot walk away from the retail battlefield and today, are also confronted with the change stimulated by multi-channel marketing. Whether we talk about supplying supermarkets or florists, awareness of consumer preferences and product positioning is certainly not restricted to the trade, even though it will generally have more knowledge about the market. Thompson emphasises, “Growers should also be looking at retail displays, identifying their responsibilities as the specialists in their own products.” It is important to consider: How do you want your products positioned at retail level? Which products are available in the same price range? How could a product win the consumers’ spending budget? Thompson puts an important reminder here: “Ornamentals are not only competing among themselves but also with many other different products, especially in the supermarkets, e.g. wine, chocolates etc., even money. And no matter whether people are shopping for a gift or their own home, flowers are not generally featured on the shopping list; as an impulse product, the emotional value to the consumer is therefore essential.”
The modern, fast-moving retail environment should therefore be raising several questions among growers: Who is the end-consumer? Do products satisfy their expectations? Could more be sold by adding-value or could more be sold through a different channel? Market awareness in combination with technical knowledge should ease decisions as to which supply chain suits a particular product. Thompson says, “This is very specific since if you want to supply a florist or a Marks & Spencer or a Tesco, as examples, these are very different categories of presentation and kind of product.”


Broaden product range
Grower knowledge could also positively impact on the real opportunity to sell more flowers. Thompson explains that looking specifically at cut flower sales, Figure 1 clearly indicates the peak at around Mother’s Day, Valentines Day and the spring season which consistently returns every year. While the volumes increase, however, it is also very apparent that the prices are at their lowest for the whole year (Figure 2). A pack represents a unit bought, which can be a bouquet or a single stem. The fact that prices are generally lower during the period of higher volumes is a concern. Particularly Valentine’s Day is felt not to be very good for the consumers’ perception of flowers or flower sales in the long term. A lot of flowers are stored to supply this one huge moment, meaning that some flowers are not as fresh as others. A consumer can buy a rose for their loved one, which may last only a couple of days; the person will probably not buy flowers again quickly. This is a big problem.
A similar situation arises on Mother’s Day but the storage related quality issue is lessened because the assortment of products accepted by the consumer is somewhat broader. Thompson says, “The Flower Council Holland is trying to promote the idea that not only the red rose is suitable for Valentine’s Day. There are more red coloured ornamentals that can potentially emit a particular romantic emotion; a marketing story is necessary to attract attention. On Mother’s Day we see, for example, many plants becoming popular – orchid is a huge product at the moment – it is something that is a very good gift since it is visually appealing and flowers easily for more than a month.”


Capacity to cope
Even with stronger partnerships along the retail supply chain, to transfer more information about the suitability of existing or even novel products, the peak period and huge sales days will always be dramatic in terms of ‘Can the suppliers obtain the right amount at the right price with the right quality in that period?’. Large stores find it difficult to manage their stock at these busy periods – this is not going to change! In these weeks, therefore, the normal day-to-day greenhouse planning has to be particularly accurate. Thompson says, “It is the time of year where the high turnover can make a difference to a business but, it is cut-throat. Flowers in supermarkets, for example, are offered as an incentive to their customers to come into the store with roses discounted to 12 for GBP 4.99.” There are always opportunities to be creative and solve how you can manage your particular business within this situation, which does not change from year to year. It should not be a surprise anymore that supermarkets offer these discount prices.
At the same time, linked to the growing recognition of flowers as a main category, Thompson adds, “The chain stores have realised that they cannot keep driving down the price and a level of stability has been reached where the focus is more on price awareness and building a product that is worth a certain price.” 


Creativity in your own hands
Multi-channel marketing is perhaps modern but is no longer a mystery to the ornamentals sector. While the retail outlets and florists continue to specialise in their own areas of marketing expertise, growers must be keyed into market developments, particularly peak periods, and continue pursuing concepts whereby ornamental products remain in demand. Thompson says, “Our sector is distribution driven; a product must be available to be bought. It is possible to pull more interest; plants can play with pots and packaging and, even if it is less obvious at the moment, there is also the potential to do the same with flowers and make more of their packaging to distinguish individual products from the rest.”
The expectation is that the interest in flowers and plants will continue in the UK but, the green sector will have to fight for its market share as there are many competing products. The last Valentine’s Day had record sales while over the year it is accepted that higher prices have subdued the total volume of ornamentals sold. Thompson ends, “This is linked to price but is also effected by the industry’s character – supply driven  – if desirable products are not available the consumer will choose something else.”


Mother’s Day dates
Mother’s Day is celebrated in many countries around the world and while most countries celebrate Mother’s Day on the second Sunday in the month of May, the date does vary and here we mention just some of the exceptions:United Kingdom – 18 March 2007 (fourth Sunday in Lent)Switzerland, Spain– 6 May 2007 (first Sunday in May)Many South American, Southeast Asian and Middle East countries – 10 May Poland – 26 May France – 27 May 2007 (last Sunday in May or first Sunday in June) 

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