Do you wonder what the future of floristry will look like in five years? Confused? You are not alone!
We are living in a rapidly changing world (just in case you hadn’t noticed!) and what makes thinking about how these changes will play out for the flower industry difficult, is that these changes are being driven by three separate global factors.
1 – Demographics
The least considered, but probably most important factor.
Our population is ageing but more importantly, the major sector of the population (the baby boomers) are now moving into a lower spending mode and for the first time in their history they are no longer the target market for retailers.
Retailers have followed the boomers from childhood to retirement because they were the greatest force in economic and social events. The Boomers’ habits drove the pattern of the economy for half a century, but now even the upper end of the market e.g. David Jones is re-targeting its’ stores to the younger generations.
What has this to do with flowers? Lots. The habits and spending priorities of the younger generations are different; they buy flowers for special occasions but have little interest in them for general decorative purposes. Their lifestyles are different.
I suspect demographics is the underlying cause in the massive reduction in the volume in flower sales in both Europe and the US while at the same time the volume of sales for special days continues to rise.
2 – Technology
Universal access to information – and each other – anytime anywhere is a new phenomenon.
While the technology has matured into easy use and low cost for everyone, how this technology will change human behaviour takes a lot longer to mature.
At the moment we are all exploring the new opportunities. It’s a bit like buying a new car, we think of every reason we need to drive somewhere, after a while this slows down as the novelty wears off and then we only use it to do what we need to do as fits our lifestyle.
I doubt humans will live in Facebook for ever. Just because we can talk to a 1000 friends – will we? Will anyone care when the novelty wears off?
There is no doubt technology is changing many aspects of our lives, the difficulty is in seeing where these changes will end up when human development catches up with the technology. Clearly technology is changing consumer behaviour: customers are now fully informed before they walk into your store (that is assuming they continue to walk in instead of purchasing through some other channel, mobile etc).
Technology is disrupting many old business models, rendering them obsolete or uneconomic and effecting business in three key ways:
a) Technology is shortening the supply chain
With technology, manufactures can now deal directly with end customers requiring only logistics (FedEx, etc) to complete the chain. For many industries this will deliver low cost global competition direct to the customer.
Fortunately for the flower industry distance and time are significant barriers, at least in Australia. Elsewhere in the world these barriers have collapsed and flowers are being shipped internationally direct to consumers.
b) Technology is empowering customers
They now know all about the product and quite possibly how much it cost the retailer, so margins are under pressure and the customer has many options.
c) Technology is reducing the cost of business and the cost of many products
Customers expect more for their money everyday. Compare the cost of a dozen red roses at Valentines’ with a colour TV or a mobile phone and the problem is apparent – desirable consumer goods fall in price but the cost of flowers rise. Flower production, distribution and retailing costs for flowers have not fallen substantially as technology has not had a major impact on these costs as they are currently structured.
The flower industry will have to change to survive.
3 – Global Financial Crisis
In Australia the GFC has changed consumer behaviour.
The often talked about ‘confidence’ is one factor. Consumers are slowly reducing debt and attitude to debt has changed. Even as banks offer higher limits, credit card debt is falling. Customers are more careful and more determined to achieve higher value for their money.
A less talked-about factor is that while incomes have approximately kept pace with inflation, discretionary income has fallen as fixed costs have risen faster than incomes (energy, government charges, mortgages, food, etc). Discretionary income expenditure in some sectors is down as much as 20%. Flower sales are very sensitive to changing discretionary expenditure.
The GFC has accelerated change. Humans are reluctant to change unless they have to; we respond to threats much faster than opportunities. The GFC has seen Australia’s economy relatively strong, this has changed the relative value of our currency which has weakened some industries (manufacturing) and strengthened others (import based). These changes were occurring slowly as global markets put local manufacturers under pressure, the GFC made it happen quickly.
The GFC is not the cause of the changes in the flower industry but it is the accelerant.
Polish Your Crystal Ball!
So, for those of us that lie awake at night wondering where our industry is going and how to make sure we are going in the same direction, the factors that are driving change are relatively easy to see, the outcomes are a little more obscure!
Written by Steve White, CEO, Tesselaar Flowers
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