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wholesalers talk shop
SAF sent out a series of informal questions querying wholesalers about specific aspects of their businesses.
While some shared themes emerged — service, service and more service is the mantra of many wholesalers, regardless of region — we also realized, quickly, that top wholesalers are rapidly becoming more individualized, more specialized, than ever. Consequently, they are facing problems that are unique to their niches and, in many cases, learning to face new challenges on the job. One thing is clear: For wholesalers intent on staying in the game, the rules of play have changed — and will continue to.
High Costs, Higher Levels of Service
Like other members of the floral industry, wholesalers, almost universally, are facing higher costs, and those costs directly affect business, with many wholesalers becoming smaller, more focused and more select, says Shawn Seagroatt, president of Seagroatt Riccardi Ltd., based in Latham, N.Y."The costs of distribution...continue to rise at a pace that exceeds the profitability potential of the product volume going through the traditional retail floral channel," Seagroatt says. "Surviving wholesalers will not be exclusively the 'mega wholesalers,' so often discussed, but also a host of smaller, niche wholesalers with varying fields of expertise."
"Top-line sales growth for wholesalers "has been difficult... to achieve," agrees Jeff Lanman, executive director of International Floral Distributors (IFD) in Richmond, Ind. Because of that, wholesalers are having to re-evaluate growth strategies and plans that, in another era, would have been sound.
"Survival [today] means holding onto your current customers and becoming important to potential customers," Lanman says. "In a market that has little-to-no expansion, you cannot afford to lose customers."
Scott Kitayama, president of Greenleaf Wholesale, based in Denver, tells a similar story. "We continue to look at productivity enhancement to keep costs in check," he says. " [We're constantly] dealing with continued rising costs of doing business -- health care, labor, fuel, capital expenses -- in an industry where the number of customers is not growing, prices are not rising and demand is not increasing. We look to technology, vendor partnerships and different customer offerings to reduce the cost of doing business."
Increased service and attention to customers come with their own demands, however, with wholesalers increasingly serving as a source for specialized, specific product, even in areas where generic choices once dominated. To stay competitive, retailers and wholesalers are diversifying their product lines, bringing in items and flowers previously ignored or unknown.
"Our fresh flower product line is more expansive, with more seasonal variety and smaller pack-sizes offered than ever before," says Seagroatt.
For Kitayama, the trend is multi-faceted.
"[We're seeing] less supplies sales as a percentage of total sales," he says. "[There's a] trend towards flowers in glass and the ability to get silk flowers, novelties, ribbon, glue, cutters and other products from big boxes. We're also seeing less California product and more Mexican product and South American fresh product."
For wholesalers, the shift doesn't have an immediate impact on daily business, but it will (and is) affecting other segments, especially domestic growers, says Kitayama. Still, other factors also are at play: Kitayama estimates his company gets more than 60 percent of stems from off-shore sources, a situation that comes with its own set of complexities.
"For example, the falling dollar means that we compete with the rest of the world for South American flowers," he says.
The increasingly global market and its implications are topics of frequent discussion among wholesalers - and likely will continue to be, says Steve Frye, vice president and general manager of branch operations for Baisch and Skinner, Inc., headquartered in St. Louis, Mo.
"There is an ever-expanding variety of fresh product available these days, which is a good thing," Frye explains "It's a good change that can sometimes create issues when a customer needs a particular variety of a particular grade, from a particular grower. But that's our challenge. We are here to serve the customer, not ourselves."
Colleen Taber of Gardens America in Miami agrees, saying the service question is one that often separates thriving businesses from struggling ones.
"One of the biggest issues seems to be that [wholesalers] don't know what to do or how to do it," Taber says. "They seem to think that if they buy cheap and let go of some people, they can reduce costs and thus increase the bottom line."
Finding a Niche
While retail florists remain "the most important customer to wholesalers," changes in the marketplace and financial concerns are forcing wholesalers to diversify customer bases into supermarkets, event planners, garden centers and more, says Jim Wanko, executive vice president of the Wholesale Florist and Florist Supplier Association (WF&FSA) in Annapolis, Md. And, that shift is representative of changes reverberating around the industry.
"Hard goods represent 17.8 percent of sales and perishable goods represent 82.2 percent for the typical wholesaler," says Wanko, citing the annual WF&FSA Operating Report. "This ratio used to be 30 percent hard goods and 70 percent perishables in the '90s. Based on what our members tell us, retail florists sell fewer of the products they used to sell like silk trees, plants and flowers. A lot of what the retail florist used to sell has gone to the large craft retailers."
The phenomenon is one Lanman has seen firsthand.
"In most markets the number of wholesalers has reduced and provided some relief from pressures of the shrinking retail florist market segment," Lanman says. "With retail florists consuming less, many wholesalers developed additional customer bases and now sell to interior decorators, caterers, grocery retailers and produce companies."
In response to this dynamic environment, wholesalers have created strategies that encourage concepts of partnership and flexibility when it comes to working with retail customers, says Katy Miller, vice president of Dillon Floral Corporation, based in Bloomsburg, Pa.
"Some service the non-traditional retailer by making changes to their pricing structures, logistics or product mixes," Miller says.
"Some focus on the traditional retailers. They find products and services that can help traditional flower shops find their place in the market (such as high quality flowers and continuing education opportunities through the company's Dillon University). Others find a happy medium between the two retail segments."
Often, the strategies wholesalers adopt are directly in line with changes prevalent in the retail segment - shifts involving access to more product, more sources and a changing end consumer, for starters.
"Most retailers, regardless of size, are much less willing to speculate on unsold quantities of inventory, regardless of cost," Seagroatt says. "As a result, frequent access to smaller units of sale has become more prevalent."
Seagroatt says his company is seeing a "continued demand shift on the part of our customers away from product sold in full-cases and toward bunch product sales.
"This isn't a new trend, but the rate of change has certainly intensified. In response to this demand, we're simply reducing the pack sizes of some of our full-case product and sourcing more bunch products where appropriate."
"The trend of disappearing retailers will continue," agrees Rene Streng, co-owner of Cut Flower Wholesale in Atlanta. "The more avant-garde flower shops will do well, which will create a great demand for the niche business with a smaller group of retailers."
And, contrary to what many industry analysts may have predicted 15, 10 or even five years ago, the traditional retail-wholesale relationship has not died. In some cases, it's showing signs of a healthy recovery, Seagroatt says.
"We are seeing direct-buying come full-circle," Seagroatt says. "Some retailers are just starting to experiment with direct buying and others have abandoned direct buying in favor of the flexibility and consistency of buying from a regional wholesaler.
That's not to say the future - or the present - is entirely rosy. It's still a competitive world, and customers' expectations, even for small, family-owned businesses, often are formed by their experiences with mega corporations with deep, deep pockets
"[Customers] expect pictures and real-time pricing and other computer-related bells and whistles [from Web sites]," says Eric Levy, President of Hillcrest Garden in Paramus, N.J. "They feel we should have all the Web technology that big box retailers now have."
Innovative Solutions
In the midst of these various changes, at least one thing is clear: Wholesalers who are truly innovative have a leg up on the competition. Wholesalers are recognizing that the online world is crucial to their present and future business strategies, says Wanko. "More innovation - not less - is down the pipeline, specifically in areas such as global trade identification (GTIN) numbers, which would allow wholesalers to receive flowers by scan, and e-selling initiatives.
"Wholesalers have to be ready to take an order in any manner their customers want to give it to them," Wanko says. "Today, two-thirds of florists use the Internet to gather information. Half of florists have fast DSL/cable access. About one-fifth of florists use the Internet to purchase cut flowers, while more than one third use it to purchase hard goods."
For Taber's part, she says customers are going to the Web intuitively now, having grown accustomed to buying items for their personal and professional lives online, and wholesalers must respond in kind.
"People do not have the time or man-power to talk on the phone," she says. "They want offerings e-mailed. They want us to do their promotion fliers, they want to order/speak on [instant messenger]."
Even so, integrating technology effectively into daily processes isn't always easy - or even effective. For wholesalers, the pay-off of technology often becomes a necessary, if frustrating, game of wait and see. At Seagroatt Riccardi, for instance, exclusive product branding has become an "essential part" of growth in the past five years, while other new initiatives have yet to create tangible returns. (For more on branding, see sidebar.)
"E-marketing has become a critical component of our business over the past five years," Seagroatt says. "[For us,] e-selling is yet to have materialized."
Still, trying out new technology and fine-tuning existing systems - seeing what sticks - seem to be part and parcel of the wholesale world today. Dillon Wholesale, for example, recently upgraded its Web site to facilitate customer use, and Miller says the company's account managers "use e-mail much more now than in the past five years to be in constant contact with our customers."
"In order to be successful we have to carve our niche in our market areas, offering products and services that retail florists need and want," Dillon says.
Similarly, in Atlanta, Cut Flower Wholesale launched an online flower gallery (www.cutflower.com/search) last year, specifically to help its customers sell more flowers.
"We do all we can to help our customers increase their sales and make more money," says Rene Streng. "In the process, we hope to earn more of their business. Our customers seem to appreciate the added value we bring to the table."
Still, it's important for wholesalers to re-evaluate business strategies across the board, not just those that involve customer interactions, Kitayama says.
"Some wholesalers are going to disaggregate their services so that they can provide trucking or coolers or processing or other combinations of services to ensure that they are able to continue work with the larger retail customers," he says. "A retailer with any size has a mix of ways of buying flowers: direct, online, [through] FTD, Teleflora and local wholesaler."
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