ABOUT THE FLORAL BUSINESS

Wholesale flowers are a commodity.  That means that, like oats, gasoline, soybeans, milk and drinking water there is a huge world-wide market for flowers, and the prices of individual blossoms are pretty much the cost of production plus transportation and a wholesale margin that has been competed down to a common number throughout the world.  Over a billion roses alone are sold in America each year, and although most of these are members of fewer than 100 common varieties, there are actually over 16000 listed varieties of roses.  Plug in the word "coffee" wherever you see the word flower, and you get the idea.  So is a rose just a rose?  Yes and no.  Like other commodities, there are quality grades, and they make a big difference.  In addition to the basics, like the size of the blooms, the length of the stems, the coloration, etc., time is a key ingredient in flowers.  A bloom that was top grade on Thursday may be seriously degraded by the weekend, and depending on the species, may be a good candidate for the potpourri bag by the next week.  When we purchase stems (or blossoms) we contract for a certain quality level at a certain time, and we trust the growers to be fair in their representations, our wholesalers to be vigilant and careful, and ourselves to treat the flowers with care and caution so that they are not damaged or otherwise spoiled.  Because this is a commodity market, price is a much smaller component of the selection process than you might imagine.  If we (a medium-to-large floral company) were to buy a single bunch of Black Magic roses, we'd probably pay somewhere close to the retail price that you might pay.  If you were lucky, you might even get the same quality that we'd get.  But, there are two major differences.  First, we don't buy a single bunch of anything... we contract in advance to purchase large quantities over the course of a year, so we get better prices.  If you were willing to buy your coffee by the ton instead of by the pound, you could get supermarket-grade coffee for around $1.00 per pound.  Quantity discounts in the flower business aren't as good as coffee (since the product is MUCH more perishable), but it's certainly worth it to us to buy in quantity.  However, the second difference is that we don't buy the flowers you might buy.  We buy top grade stems that frankly, don't show up at your local florist.  Adding back the premiums we pay for quality, our cost per stem is pretty close to what most people think of as retail.  So why are we so obsessed about quality?  Two reasons... first, the quality of our product reflects the quality of the components, so we need good ingredients.  But second, if something were to go wrong with the blossoms we bought, we don't get a second chance.  If you buy a dozen roses and they wilt a little early, that's life, right?  Maybe you get your money back from the florist, but it's generally no big deal.  If flowers we buy go bad, weddings or other major events go bad, and that's a HUGE deal.  We don't gamble with weddings - we buy the best.  We buy enough from our wholesalers that if anything DOES go wrong, we wake them up at 2 a.m. and get replacements driven over in time to fix anything that went bad. 

So how do we get from the wholesale flower prices to the prices we charge our customers?  We know our fixed costs, which include our space leases, equipment costs, etc.  We know how much profit we want to make each year as a company (the same percentage as everyone else in our business, roughly).  We know how much we spend on labor, and the rest is materials (flowers, vases, ribbons, etc.)  Based on this information, we can compute our total selling price fairly accurately based on the costs of the inputs (flowers).  We use a few different computations that deal with the different product types we sell, but the differences are minor.  As you might imagine, every florist with a basic knowledge of business uses the same or a similar approach to pricing.  So if you are comparing florists based on price, pay attention to what you are comparing.  If you think that one company is trying to capture a higher profit margin than another, then comparing price might be useful to you.  But if their margins are equal, a difference in price either means a difference in efficiency, or a difference in input costs.  We are an efficient producer, partly because we're smart about the business side of the equation, but mostly because we focus on events and weddings instead of retail.  The majority of our leased space is industrial, which rents for a fraction of retail space costs.  We use large, efficient coolers, rather than pretty display coolers, so our operating costs are fairly low.  We manage our labor costs very carefully, and we use tools and process techniques that decrease the time it takes to make our arrangements.  This means two things to you, our customers.  First, that for every dollar you spend with us, compared to our competition, more of that dollar goes to inputs or flowers.  Second, if our price estimates are larger than our competitors, it is because we expect to spend more on flowers and materials than they do, or we are going to construct a more elaborate design, because we are both using similar ratios to compute our estimated price.  The danger with price shopping is that materials are never sufficiently described so as to give a fair comparison.  Suppose you like the large cascade arrangement in the middle of our bouquet gallery (the ivory colored teardrop-shaped arrangement).  That arrangement happens to have roughly 5 dozen stems in it, each of which were 50cm stems of top quality, common variety hybrid tea roses.  A competitor could purchase smaller, or lower quality blossoms for as much as 20% less and reflect that in their prices.  Similarly, they could use 4 dozen stems, instead of 5, and reduce their price by 20%, or they could do both and reduce their price by 36%.  Their labor costs could decrease accordingly as well - we spend quite a bit of time pushing water into the stems to assure they are fully hydrated and that they open properly.  A competitor might save 10-20% of his labor cost by cutting the bunches in bulk rather than stem by stem under water as we do.  Perhaps they'll use less expensive ribbons, or spend less time getting the wiring perfect on the bouquet.  The problem is that you can't really tell whether you're going to get the shabby quality or the super deal just based on price.  

So here's the deal - pick us, and here's why:  We buy in bulk, and we continuously check our prices through multiple wholesalers, as well as direct growers.  We buy at pretty much the optimal point on the scale curve.  Our operating costs are extremely efficient.  Our cost of sales are extremely low, primarily because our conversion rate is extremely high.  We have NEVER had a warrantee claim or a quality complaint.  Our spoilage ratio is small single digit.  Our staff is well trained, and extremely efficient.  Our profit margins are competitive (and they are the smallest component of our costs anyway).  You will get more from each dollar spent with us than with any but the most efficient competitor.  And most important of all: our arrangements are beautiful - they are the highest quality, most beautiful arrangements you can imagine.  If you want to spend less than our initial estimates, we'll take flowers out.  If you want to spend more, we'll put more in.  If it won't end up beautiful, we won't do it at all, but if you do business with us you can be sure that we'll always give you a fair price, for an amazing product. 

Copyright © 2005, 2006 Mayumi Miyata Floral Designs
Last modified: 06/23/06