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When we sit in the audience watching a Broadway-scale production, we tend to view it in the present, just what we see on the stage, without thinking of all the moving parts necessary for it to come together. There’s the set that had to be built, the props acquired and moved on and off the stage with finite timing, the songwriters and scriptwriters, the choreographers, the lighting and sound specialists, the voice coaches and actors, the orchestra and the financial investors who made it all possible. When everyone does his or her part and all of the pieces seamlessly come together, the audience is enthralled and mesmerized by the overall performance. And even when something goes wrong – an actor gets sick, an electrical circuit blows and some of the stage lights go dark, or one of a million possibilities that could go wrong – the team is so well prepared and professional that most of those in the audience aren’t even aware that something went awry.

“Challenges and opportunities face the floral industry in 2019. Here is our annual analysis, with a little historical perspective thrown in.”

Most mass-market floral consumers are concerned more with the flowers they buy and the experience they have in purchasing them than knowing what it took to get the flowers to that point, the moving parts, and all the players and processes. Yes, things sometimes go wrong, and if we are able to compensate for the problems, the consumers never know the difference. But if any problem in the chain disappoints the consumer in any way, we all lose (see “Stats & Facts” on Page 38). And we’ve had our share of challenges to deal with in 2018, primarily with transportation and labor.

Transportation While flower production and availability haven’t been major issues, getting the flowers from the farms to the consumers has been somewhat problematic. There hasn’t been enough air cargo capacity or “lift” for flower shipments from South America (namely Colombia and Ecuador) to the U.S. The cargo airlines can fill planes with flowers heading north, but they have problems filling the return flights. As a result, the airlines have both decreased the frequency of flights or moved their aircraft to other routes where they have better round-trip efficiencies. Offshore producers and U.S. importers are constantly looking for options, one of which is shipping by sea containers. And almost all flowers move from Miami and domestic growers on trucks. With a shortage of more than 100,000 drivers, truck availability and timing are becoming increasingly challenging.

Labor The lack and cost of labor is becoming a major issue for flower producers. With the unemployment rate at 3.7 percent and hourly wages rising due to state and municipality minimum-wage increases, a high demand for labor and a broken immigration/guest-worker system, we have a shortage of workers, and we’re paying more for those we can get.

Despite the issues we’re experienced, we’ve increased sales in 2018 as well as the mass-market share of the total floral marketplace. With a continuing strong economy forecasted for 2019 and the momentum trends we’re on, 2019 should show continued success – unless ..

Walmart and Amazon We have two 800-pound gorillas molding the retail economy – and customer perceptions and buying habits – that will directly impact all other retailers: Walmart, with its EDLP (everyday low price) model and rapidly developing online presence, and Amazon, with its new, innovative and disruptive programs and processes. Both have established major beachheads based on low prices with amazing results. Walmart now has a 25 percent share of the $800 billion grocery market, and grocery now accounts for 55 percent of Walmart’s total U.S. sales. And Amazon, even before factoring in the acquisition of Whole Foods Market, accounts for 30 percent of all online grocery sales!

Now that these two companies have established their base on price leadership, they’re forcing their conventional supermarket and low-price competitors, including Lidl and Aldi, to re-examine and redefine their respective value propositions. At the same time, Walmart and Amazon are adding programs that provide customer convenience, forcing conventional retailers to make some hard decisions and investments. And those decisions have the potential to seriously disrupt our traditional floral business models!

Walmart and Amazon have conditioned consumers to not only demand but also expect added convenience, catering to the way consumers want to shop without the retailer defining the playing field. To be competitive with the market gorillas, almost all chains are charging ahead into home delivery and hybrid programs, such as BOPIS (Buy Online, Pick Up in Store) and ordering online with curbside pick up. In some cases, the retailers are doing their own fulfillment from their individual stores; in other cases, fulfillment is from a central warehouse; or it might be a combination of both methods. And in other examples, fulfillment is through third-party companies such as Instacart, Peapod and Shipt.

Reduced in-store traffic For most of the year, floral is an impulse category, attempting to convert existing store traffic to floral sales by means of enticing displays, good aisle exposure, and a strong marketing message communicated with signage and POS materials. The result of an increase in online and hybrid ordering and fulfillment is reduced in-store customer traffic; and with reduced traffic, there are fewer opportunities to convert them to impulse floral purchases.

To maintain and grow floral sales in the face of reduced in-store traffic, we need to figure out a way to play in the same online ordering and fulfillment processes the rest of the store is utilizing, whether it’s in-house or third-party fulfillment. But it’s not so easy for floral to succeed in this new environment. It’s totally different having a known entity like Tide detergent in a given size on an online assortment offering menu than it is to offer a bouquet that has color, variety, size, design, etc., as attributes consumers consider while making their purchase decisions. And then, if we can convince consumers to purchase online, we need to develop the logistics and packaging to allow the floral selections to be handled, picked up and delivered along with the rest of the assorted grocery items the consumers order online. Perhaps floral departments will evolve into two distinct business models: a full-service full-assortment model for in-store customers, and a separate scaled-down logistics-friendly model for online fulfillment.

So, our opportunity for 2019 is to increase the conversion rate for in store traffic walking past the floral department and to ramp up online sales, using the processes the rest of the store is utilizing.

Let’s remember that, like that Broadway play, there are lots of moving parts, people and processes that have to come together seamlessly to enthrall the audience. In floral – everyone from breeders to producers, from airlines to truckers to hard-goods suppliers, from importers to wholesalers to retailers – we are all part of the floral chain. Each and every one of us plays a crucial role in delighting our customers and making their experiences memorable. At the end of the day, we are all mutually dependant on one another to attain our ultimate goal – satisfied consumers. Best of luck in 2019!