By Alex Frost
As consultants to many of the top florists in the country, my colleagues at QuickFlora and I have had the privilege of seeing all types of retail flower operations over the last 20 years—the good, the bad and the ugly.
One question we frequently get asked is “What is the most successful flower shop you have seen so far?” The answer depends on what your definition of “successful” is. We have seen thousands of flower shops in many countries around the world. Some do a remarkable job with events, some are great with flower classes, some excel at operations and some are wizards at branding. No one is great at everything—at least not that we have seen so far. There is always room for improvement or for someone doing something new and innovative.
The most common phrase we hear, time and time again, is “We do it differently here.” I can assure you that nothing is further from the truth! Whatever process, promotion or technology you have in place, there are dozens of other shops doing the exact same things. There are few, if any, original ideas in the flower business, thanks to tens of thousands of flower shops all operating in different manners. The key question is “Which combination of these generates the highest profit year after year with the least amount of work possible?
If we define “successful” as profitable, then there is no doubt that one operation we came across several years ago in the Northeast U.S. was most profound, on many levels. It was also the most profitable flower shop we have ever seen—by far.
How profitable? At first, in our initial consultation meeting, I did not believe what I was being told by the owner. Coming from the traditional retail brick-and-mortar world, I am very well versed in the key ratios for traditional brick-and-mortar flower shops such as labor costs, COGS, fixed expenses, EBITDA (earnings before interest, taxes, depreciation and amortization), and so on.
When the owner told me his operation was making “X” profit margins, I smiled politely and thought to myself, “No way! That is not possible in the flower business.” He then handed me the tax returns for the last five years, at which point, I realized his claim was true. He followed up with the comment, “Those are not true, either,” and he proceeded to open a safe that had hundreds of thousands of dollars, in cash, in it. This seemed like an operation that was printing money, so what was the owner doing that made the company so financially successful?
Well, for starters, let’s define what a flower shop is. There are traditional florists, boutique florists, event florists, online florists and bucket shops. There are many variations of a retail flower business these days, but I think “flower shop” can be best summed up as “a company that sells perishable cut flowers in one form or another.”
This shop did not take phone orders. It did not deliver anything and had no delivery vehicles. It did not employ any floral designers. It had no website or online orders. It had no wire services. It did no events or weddings.
Wow, that sounds like a dream operation to most people in the flower business today struggling to find people to work! This operation had managed to strip all the complexity out of an extremely labor-intensive business. Each location was then grossing more than $2 million per year, with many higher than that. In terms of sales per square foot, inventory turn and sales per employee, this company had, by far, some of the best KPIs (key performance indicators) we had ever seen.
As most of you can guess by now, this was a bucket-shop operation—but on a scale rarely seen. The owner bought thousands of boxes of flowers from growers twice a week and sold them at a consistent 2X markup. Translation, if he pays 20 cents for a stem of Iris, he sells it for 40 cents, $4 per bunch. There are no stem sales—grower bunches only—and all the flowers are wrapped in newspaper, all in an ugly industrial building. It does not get any more basic than that, in terms of flower sales.
When I asked the owner who his competition was, he said, “Every supermarket within a five-mile radius.” He never mentioned traditional flower shops; those were not even on his radar. He also posited that most consumers won’t drive more than five miles to buy fresh flowers.
If you look at all the successful and innovative retailers that have emerged over the last few decades, you’ll find that they all have a few things in common: huge profit margins, capital efficiency, fanatical customer loyalty, great management, scalable models and killer branding. While this operation definitely had the first three, it lacked the last three.
Just like Cold Stone Creamery redefined what a local ice cream shop is (when Dairy Queen and Baskin-Robbins dominated the market), the retail flower business is ripe for reinventing itself. Just when people said the neighborhood coffee shop was dead and dying, Starbucks reinvented the coffee business on so many levels and made it exciting again. Just when people said the doughnut business was stale, dying and could not grow any more, along came Krispy Kreme.
So, before you think the retail flower business can’t be profitable and might be dying, or that people are buying fewer flowers, think again. Maybe they are just not buying them from you. I can assure you there are some people making more money than you can imagine by thinking outside the box.