Commercial Cut expansion of merchandising outlets for floral products needed to balance increased output capacity of growers

D. B. DeLaach

Concluding a two-part article. fected by prices or income-carries over lady and induce replacement or repeat Economic studies of the cut flower in- to of through other than re- purchase by the user; 4, convenient to dustry warrant the conclusion-among tail florists’ outlets, nor is there adequate display and easy to handle ; and 5, priced others-that there is ample productive statistical evidence to support a case for to appeal to a large number of people. capacity to supply the existing demand price elasticity for flowers sold through There appears to be no question as to for . Should additional de- mass market outlets or stands. the availability of some flowers through- mand develop more rapidly than is an- Many growers and distributors are oper- out the year in present retail florist shops. ticipated, the output can be increased ating on the assumption that demand is However, the industry is not geared to adequately without any appreciable elastic and present markets can be ex- mass or to supplying flowers change in the labor force, growing facili- panded and new ones developed. on a regular basis. The ties, or areas. Retail florists occupy a strong position Expansion of Markets in the commercial florist as it is estimated that about 85% or 90% of A fundamental problem of the cut the dollar volume is marketed at retail. flower industry is to find satisfactory Considerably less of the physical volume markets for an increasing output of of flowers is so handled. It is also esti- flowers from the present-or even less- mated that more than 90% of retail sales acreage, at prices that will cover costs and profits. are of the obligation type for funerals, weddings, promotional gifts, and cere- Available research findings fail to show that special sales, fewer services monial occasions. Sales for everyday use in home or office are of secondary and lower prices, or better displays have basis for buying and selling such staple the improved net returns to growers or re- importance. Because of their dependence items as carnations, chr on retail florists, growers have become tailers. gladioluses, and roses at Grower groups who advocate the de- whoIesaIer and wholesaler concerned over the increasing frequency velopment of new markets usually have of the request to omit flowers as a means taken the position that home-use buyers of expressing sympathy or tribute, and constitute a potential source of demand the decline in the use of corsages, which that has been scarcely tapped. The home- is attributed to changes in women’s user market is believed to be an entirely . different type of market which-when The daily volume of cut flower sales reached by mass merchandising through fluctuates greatly. Wholesale and retail established retail food and variety out- dealers find it difficult to adjust the pur- lets-would not detract business from re- chase of perishable flowers to demand. tail florists catering to obligation buyers. However, the obligation-buying type However, the fact that a product is sold market tends to give relative stability to in a mass market outlet does not mean the total flower sales. Furthermore-for that the product is being mass marketed. many small- and medium-sized retail Trials of mass merchandising of floral florists-the present methods afford a products have been undertaken by a few livelihood for the operator and his fam- of the larger food and variety chains. ily. Therefore, many established retail Some of the chains have taken the initial florists resist changes in selling methods. steps to establish their own buying setup The assumption within the cut flower and to perform their own assembly func- industry that the demand for flowers is tions in order to offer consumers a regu- not affected greatly by changes in retail lar source of supply of a wide assortment prices may be valid for flowers sold of flowers with a minimum of . through retail florist shops, but statistical Other retail food chains have explored proof is weak. The strongest support for the feasibility of handling florist items this has not proved true. the assumption of price inelasticity rests and have decided against introducing Mass merchandising depends an on various estimates that 85% to W% them, primarily because of supply prob- petitive buying by consumers. Regular of the florists’ trade is obligation-buying ; lems. of purchase and use enables growers, that there is a fairly customary pattern The experiences of many processing processors, and distributors to adjust for such buying; and that the purchasers and distributing firms disclose certain their operations to market requirements. seem to give a minimum amount of at- prerequisites to mass merchandising. Furthermore, a more or less continuin tention to price. The product must be: 1, available in flow of products or There is, however, no reason to as- adequate quantities at all times; 2, of nesses to operate with lo sume that a demand inelasticity-as af- uniform characteristics ; 3, used regu- Concluded on page

CALIFORNIA , MAY, 1959 avorable. Even the new legis- markets and shopping centers. A fur- fruits and vegetables is quite similar to ably will leave the United ther move to serve the consumer has been that used by florists, and the wholesalers tic cotton price somewhat the search for the most desirable pack- have an established retail food store orld market. Subsidies or ages, colors, and other measurable phys- clientele, which immediately a1 prices, therefore, still are ical characteristics that affect consumer available as potential customers to maintain existing export choice. This phase of merchandising is cultural items. Such a m levels. one of the most competitive aspects of rangement would reduce som Cotton ’ incomes in 1959-and retailing. Prepackaging of flowers for curement problems by makin possibly in 196O-quite likely will be sale to retail stores and consumers is in for the retailers to inspect their flower lower than in 1958 under either Plan A an experimental stage. From the stand- purchases along with other items bought Plan B. Nor can the growers expect point of the retaiIer, prepackaging by from the Wholesaler or to depend on the harp improvement in gross receipts the grower for consumer sale could have wholesaler to deliver acceptable quali- and profits for several years. Their net distinct advantages in handling. How- ties of flowers. Although a shift to fruit earnings may rule lower for five or more ever, the consumer would not be able to and vegetable wholesalers could have years than under recent relatively high inspect the contents of the package and serious repercussions on many of the price support levels. In spite of this rela- whether he would accept prepackaged specialized floricultural grower-whole- tively discouraging prospect for the near flowers on large scale remains to be seen. salers and wholesalers now serving the future, it is to the advantage of efficient The extent to which cut flower sales industry the procedure appears to be an growers to live with the new program or would be increased by placing more em- a comparable one that will allow do- phasis on price and less on service is not mestic-and ultimately world-prices for known. However, it appears that the cotton to come into line with competitive average man or woman is far less con- conditions. This is because there is a cerned with the finer points of a perfect sizeable growth potential in the United flower than are florists and breed- States market, particularly, and also in ers. A few produce dealers who have had experience in selling flowers, foliages, an3 p~~tedplants fou~3cus~o~i~~~ ree luctant to pay more than a dollar for my ers to take advantage of such one purchase of flowers or . On the growth. other hand, consumer demand caused one produce dealer handling floral items ages is Professor of Agrid- , Uni~ersit~of ~~i~oTnia~to add a number of special preparatioll services at a special charge. This service- home-grown flowers, a tendency which Caton, Agricu~tur~lEconomist, type flower operation is estimated to ac- is reflected in th Depurtrnennt of Agricutture, Davis, count for about 60% of the dollar sales n the research analysis on which but only 25% to 30% of the volume in the flower department. Apparently con- sumers are price conscious when buying flowers for home use but much less so CUT FLOWERS when making occasional obligation pur- Continued 3 chases to conform to social customs. on page There is an apparent conflict of in- terest among flower growers, wholesale dealers, and retailers that has become im- portant in the floral industry because of the use of improved production methods at the grower level and the need to find profitable markets for a greater volume turns may be high, particul been made on con- of products. The problem and the pres- competing retailers introduce sure to solve it originate at the grower level but the solutions being proposed could greatly alter established marketing channels and practices if introduced by who encourage experimentation and risk the industry. taking. However, the a Many prominent wholesalers and re- initially to establish a tailers--and even some growers-have with a wholesale or retai Wholesalers must show re- discouraged efforts to mass merchandise mean that such outlets cut flowers on the theory that their im- automatically. The g mediate interests would suffer and there tain service to his cust would be no long-run advantage to be product availability, q gained from such a change. The impetus Even then wholesalers to change appears to be coming from not be expected to m tential turnover and food and variety store operators who see in selling the product unless it yields a possibilities for using mass-merchan- dising methods for selling flowers and net return equal to or in excess of other products that can be handled equally potted plants. Such a change could lead well. to more direct dealing between growers and retailers. For independent super- D. B. DeLoach is Professor of Agricultural ern merchandising caters to consumer markets this has proved true. The type Economics, of Cdijornia, Los An- convenience as exemplified by super- of facilities required to handle fresh geles.

CALIFORNIA AGRICULTURE, MAY, 1959 15