Calyx & Corolla

Executive Summary

Calyx & Corolla is a young company that offers a very unique choice for customers who are interested in buying fresh flowers. Fresh flowers industry valued approximately $9 Billion in the United States in 1990 with steady market growth rate of 7.7% since 1985. However, the market potential did not reach the top yet. US fresh flowers market still has more room to grow. Per capita consumption of flowers and plants in the US was $36 per year, while the average in Europe was $60.

Since a flower diminished its value everyday due to lacking of freshness, efficient distribution is the key to the flower industry. Calyx & Corolla has a distinctive way of delivering flowers to the consumers. Calyx & Corolla links its customers directly to the growers via the reliable delivery service of FedEx, whereas other companies rely on the traditional distribution channel which contains at least four layers: growers to regional distributors, regional distributors to wholesalers, wholesalers to retailers / florists, and florists to end-users. Thus, Calyx and Corolla can deliver fresher flowers to its customers bypassing those distribution processes. Calyx and Corolla also earns higher profit margin than its competitors due to its uncomplicated cost structure. For instance, Calyx and Corolla does not have to spread its profit to distributors and wholesalers.

FTD was the biggest player in the fresh flowers market. FTD was a member-owned, worldwide cooperative of 25,000 florists. Florists usually used FTD to provide delivery service beyond their service area. The florists who originated the order received 20%, the florists who delivered the order 73%, and FTD 7%. The powerful network of 25,000 florists was the main advantage of FTD to penetrate the fresh flowers market. However, its price structure was not so flexible. "800-Flowers" was the largest member of FTD network and it was becoming more and more popular. 800-Flowers received 25% fee of the flower order from the delivering florist. Its revenues were about $16 Million in 1990.

Another channel that we need to keep our eyes on was supermarkets. Supermarkets were becoming more popular and more powerful in the fresh flowers market. The average annual sales for supermarket floral departments were $104,950, having grown almost four times in the past ten years. However, supermarkets had two major disadvantages. First, supermarket employees lacked the sensitivity and expertise required to sell flowers. Second, the location of flower departments in supermarkets was usually near produce departments and ethylene gas might hasten the deterioration of flowers.

Stepping into the growth stage of the business life cycle, Calyx and Corolla was looking for organizational and financial implications to support a more aggressive long term growth strategies. This report suggests both short term and long term strategies that align with Calyx and Corolla's long term goals.

First of all, Calyx and Corolla should further stimulate sales during the peak period and increase the off-peak sales amount in order to stabilize its income and gain more capital to invest in the long term plan.

In order to achieve in the long run, Calyx and Corolla needs to change its organizational structure to be more competitive in the fresh flower market. Calyx and Corolla has to be more customer intimated. Calyx and Corolla has to understand more about the fresh flower consumer buying behavior in order to expand its market base.

We would suggest Calyx and Corolla to open its direct shops in strategic areas. Calyx and Corolla should set up at least three new internal departments: formal internal marketing department, a database management team, and a corporate account team. Customer Relation Management (CRM) is another management aspect that Calyx and Corolla would want to consider. Last but not least, we would suggest Calyx and Corolla to fund research for the development of flowers growing techniques for its growers in order to ensure the highest quality for its customers and gain competitive edge with new products in the long run.

Calyx and Corolla's Business

Calyx and Corolla offers a unique business model by connect growers to buyers directly. Calyx and Corolla sell fresh flowers by mail using reliable carrier like FedEx to deliver flowers to end users. Relationship between Calyx and Corolla to the growers and FedEx is very important.

Calyx and Corolla is currently moving toward growth stage of business life cycles since the its growth rate has been increasing exponentially and it started to attract more competitors with the same business concept. This is a very critical stage for Calyx and Corolla to think about more aggressive growth strategy.

Calyx and Corolla's Product Lines

Calyx and Corolla offers variety of flowers products to consumers. Its product lines include fresh and dried flowers, bouquets, selection of plants (eg. Bonsai), vases, and also special product such as its continuity programs.

Calyx and Corolla's Customers base

85% of Calyx and Corolla customers are women whose age in between 30-55 and also have substantial disposable income. Calyx and Corolla views its active customers as those who buy at least 2 times a year. However, its potential customers are those who are unaccustomed to mail order buying.

Calyx and Corolla's Strengths

- Operation Excellence by fast delivery though FedEx so its customers get fresh flowers

- Excellent relationship with growers and FedEx

- Lower cost compared with other retailers by eliminating the layers of middleman leads to higher profit margin (~80%)

- Good brand image (gain good feedback from customers and media)

Calyx and Corolla's Weaknesses

- Supply and Delivery situation during cold season

- Does not offer Sunday / holidays service (while customers can buy from other florists)

- Limited customer base

Short Term Strategy

Objective :

To increase sales amount in order to gain more capital for further investment in long term strategy

(i) Further stimulate