Few things cause more operational challenges than severely peaked demand. When demand one week is 20 times higher than average demand, one needs creative ways to satisfy customers without letting costs get completely out of control. A spike 20 times higher than normal might seem like an exaggeration, but that is what the CEO of ProFlowers claims they see when Valentine’s hits and they ship 20% of their annual sales in just a few days.
Vodpod videos no longer available. I find their approach to managing demand an interesting part of their strategy. Arguably, an advertising blitz weeks in January serves primarily to get men off their butts and order from ProFlowers and not some other firm. But it also allows for additional planning. It doesn’t completely address the peak demand problem. An order in early January still must be delivered on or about February 14th and the flowers can only be prepared around the 14th as well. Still it allows for some staff scheduling and procurement planning. The real question is how early orders correlate with late orders. One possibility is that advertising specials in January just gets customers who would order from ProFlowers anyway to place orders early. The other is that the early birds are a totally different segment and those sales allow for a better forecast of total sales.
It is not just big national flower firms that see a big spike in sales with Valentine’s Day. Small flower shops also see high demand. However, they may not be well positioned to take full advantage of it. The challenges here are not merely operational. As NPR reports (Overhead Keeps Florists From Cashing In On Feb. 14, Feb 11), small players in the rose supply chain are at the of mercy of the market when it comes to prices and those only go one way in early February.
KAUFMAN: Most of these long-stemmed roses come from Ecuador and Colombia. And ordinarily, those growers charge somewhere around 50 cents a stem for a premium quality rose. But for Valentine’s Day, the wholesale price can more than double. Otani says it’s a classic example of supply and demand.
Mr. DOUG OTANI (General Manager, Northwest Wholesale Florist): From the grower’s standpoint, you know, this is their one chance to try to make a killing. For the rest of us down the chain, we have to mark up because our overhead has increased.
KAUFMAN: And it’s not just the flowers, but the cost of shipping and wholesalers and retail florists alike, need lots of extra staff to handle the flood of orders for Valentine’s Day. So, despite what you might think, the holiday isn’t a huge money maker for most retail florists.
So small retailers are kinda screwed. This is an interesting problem. At Valentine’s, florists likely serve two segments, their regular customers who routinely come in for a bouquet because they like having flowers in the house and people who just need an appropriate gift. Jacking up the price on the latter is what it is. They may prefer to buy from a real florist rather than Costco or they are just settling for the most convenient option but they are not going to be around for the long haul. The question is whether there is a creative way to give a price break for the regulars. These are folks who might be offended that rose prices have doubled and whose patronage matters. One wonders whether an early pitch to order flowers early like ProFlowers makes to everyone would be an effective way of protecting regular customers from sticker shock on the holiday itself.