How do you buy flowers in 2017? On-demand, of course.
Online shopping has shaken every retail category and the floristry business is no different. From The Bouqs and Bloomon to UrbanStems, it seems consumers are looking for fresh and on-demand ways to get their blooms. And not just on special occasions.
"Most of our senders are sending for birthdays or when their friend gets promoted, when the friend had a bad day because it's raining really hard outside. Those are our most common reasons," Ajay Kori, co-founder of UrbanStems, told Circa.
It used to be that consumers only had a couple options for buying flowers – go see your local florist or stop by the grocery store. But the internet sowed fertile ground for digital flower stores to bloom. Places like 1-800-Flowers, Telaflora, and FTD.com (which began much earlier, in 1910 as a telegraph-based flower wire service) became the go-to places for finding bouquets. Even Amazon is in the flower delivery business.
Now, with the help of venture capital funding, a whole new crop of on-demand flower delivery startups are sprouting up. The $31 billion floral industry has never been more vibrant. But the influx of digital and mobile newcomers is coming at a price. Since the early aughts, the number of flower businesses in the U.S. has dwindled to just over 14,000 in 2013.
"In recent years, online flower shops have been popping up like crazy and creating all of this new competition for brick-and-mortar florists," Anya Cohen, an analyst with IBISWorld, told Circa. "As this market saturates a little bit more, revenue growth is going to be a little bit slower."
IBISWorld projects that by 2022, there will be steady growth in online flower sales, coupled with simultaneous steady declines within brick-and-mortar florists. In 2017, total revenue for brick-and-mortar flower shops will total $4.9 billion, per IBISWorld estimates. Online flower shop sales will reach $3.1 billion.
"You really see them [online flower shops] catching up with an expected annualized increase of 4.9 percent over the five years to 2022," Cohen explained.
Lambert van Horen, a floriculture analyst with Rabobank, told Circa that in Europe, nearly 14 percent of shoppers purchase their floral bunches online as web and mobile become the preferred channels for consumers. Today's shoppers have come to expect fast shipping times, so with the promise of light-speed delivery, it's easy to see why on-demand brands are appealing. But speed, according to van Horen, is just one factor.
"In a way, the differences are maybe not so spectacular."
"In a way, the differences are maybe not so spectacular," van Horen said while discussing the difference between traditional wire services versus the new on-demand brands. But, he said, what is appealing about the new crop of players is "the sourcing of the flowers, that's different. The new online web shops are sourcing their flowers directly from growers."
Each online florist boasts a different business model.
There's the aggregator networks like 1-800-Flowers and FTD that offer a bevy of bouquets online, which they route from a florist near you, while taking a cut of the profit. The percentage varies from service to service, but it's roughly 30 percent, leaving the local florist, who is fulfilling the order, 70 percent. Beyond that, in order to be considered to fulfill orders, local florists have to pay monthly membership and tech fees – a couple hundred dollars – to a given wire service.
Then there's the on-demand upstarts that offer cheaper blooms by cutting the middleman out entirely, sourcing directly from farmers and growers here and abroad.
"What we're doing is much more than just bringing someone flowers in a couple hours," Kori explained. "Our entire supply chain, where we're investing in farms and growing stems at the farms that are ingredients in our bouquets, and creating an entirely vertically integrated chain, removes a lot of costs. So, we're able to deliver flowers in about an hour starting at $35."
For now, UrbanStems offers only a handful of options to consumers, but each bouquet has a specific "recipe." With that recipe in hand, the company is able to let the farmers they work with know well in-advance what they will need for each collection. The bouquets are assembled on the farm before being driven or flown to UrbanStems, which further helps simplify the supply chain process.
Kori believes e-commerce has "made everything better, faster, cheaper." Everything, that is, except for the flower industry. "In this case, it's made it more expensive and a worse experience," he said. "Everything we do is about creating the most efficient system possible so that that end person can send a gift affordably and easily."
Brands have made strides in updating the tricky logistics of delivering delicate, perishable products like florets. Meanwhile, young, tech-savvy shoppers have helped the online floral market blossom. But the spike in competition is forcing brick-and-mortar shops to shutter. The farm-to-warehouse-to-you model eliminates fees for local florists, but it also removes them from the equation. So where does that leave your local florist?
Rabobank's van Horen believes the forecast for florists is not all bleak. "Florists will still play an important role in events (weddings, funerals, parties, etc.)," he said, via email. Alternatively, consumers are making more frequent purchases of indoor house plants, and florists could help meet that demand. Lastly, he sees florists as the best positioned to fulfill recurring corporate orders, for example for office spaces or restaurants.
"As we see prices of bouquets on the internet, these look definitely not lower than prices at florists," he said, adding, "In the end, there might be a new equilibrium between clicks and bricks, as it seems to develop in the case of books, wines and other 'luxury or gift' products."
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