Some weeks ago, I posted about the challenges florists face. Combining products with short shelf-lives with highly variable demand makes for a very difficult industry. But what if you could instead have very predictable demand? That’s basically the business plan of a New York start up called H Bloom. Here is how the company describes its offering:
H.BLOOM is a subscription-based floral service that delivers beautiful flowers right to your home or office. Each week, our designers choose the most extraordinary stems from around the world. We import flowers from Japan, Holland, and Colombia. We’re talking about amazing flowers that you simply won’t find anywhere else. And they’re delivered to your door for an amazing price.
The pay off to this business model is a low cost structure and a much simpler operations (Web floral startup uses subscriptions to grow business, Reuters, Feb 18)).
Unlike traditional florists, H.Bloom operates without a retail storefront, doing business online and via a direct sales force, said Burkhart, who launched the company a year ago and recently expanded into the Washington, D.C. area.
“Retail space in our current markets, New York City and Washington, D.C., can be over 30 percent more expensive than upper-floor office space,” he said, adding revenues in D.C. nearly tripled in the first three months of operation. “So by keeping our operation on the 10th floor as opposed to the first, we’re able to save each and every month.”
There is a good chance that the savings in retail space may be secondary to operational savings. First, wastage should be minimal. They effectively know what they are going to sell next week and can source the needed flowers with little chance that they will have to dispose of blooms gone bad. On top of that, they should get good usage of their staff. There are no surprise deliveries here. Looking at their FAQ, customers pick a delivery slot that basically remains stable over time so they are always going to the same building, say, every Tuesday afternoon. A similar logic applies to prepping flowers.
The question then is how big a business could this be. It clearly should be desirable for commercial customers (which make up 50% of sales). The consumer side might be a little iffier. At least some consumer sales are for things like birthday gifts and apologies. H Bloom does not serve these needs and, indeed, it is their willingness to give up on such idiosyncratic demand that lets them have low costs. So they need consumers who just like having fresh flowers on a regular basis. I have got to think there are a decent number of such customers out there. Grocery stores sell a decent amount of flowers — usually with minimum support of florist doing arrangements etc. Most of those sales are not for special events. Offering a higher quality product at a cheaper price would likely be attractive to many of those buyers.