I. Problem Definition
Calyx & Corolla (Calyx) needs to determine whether it should change its current strategy and positioning as a mail order operation to compete more directly against more traditional outlets, such as florists, and wire services, such as FTD. How could Calyx attract the largest group of potential buyers who patronized florists or other retailers and were not accustomed to buying by mail order. Calyx needs to determine what actions it should take to make a profit and grow its business.
II. Solution Possibilities
Calyx's objective is to position and market its flower business to fully utilize its competitive advantage to reach its profit and growth potential. To accomplish this objective, Calyx must determine whether it can effectively target potential buyers who patronize florists and other retailers versus mail order.
The retail plant and flower industry in the U.S. is a $9 billion per year industry. The industry has grown at a rate of 7.7% since 1985. The market landscape is broken into three areas. Twenty five thousand retail florists have 59% of the market ($5.31 billion) and supermarkets have about 18% of the market ($1.6 billion). Nurseries, mail order companies (seed companies) and other retailers accounted for the remaining 23%.
FTD is a member owned co-operative of 25,000 florists. Member florists take orders from local customers for delivery by member florists elsewhere. FTD positioned itself to target customers in a wide cross section of households with incomes greater than $35,000. FTD provided a service by allowing customer who desired to purchase flowers for someone in another location to conveniently use a local florist to make that purchase without a need to find a florist in another location. FTD processed 21 million orders with a total value of $700 million in 1990. FTD's average order was $32 in 1990. (Ex. 3) FTD retained 7% of the sales while 20% went to the order taking florist and 73% went to the delivering florist. Net profits for FTD member florists averaged 4.6%.
Calyx is currently positioned primarily as a more upscale mail order flower business. Calyx differentiates its product from FTD and other retail florists based upon its distribution system that allows it to deliver fresher flowers to the customer. Calyx eliminated two levels from the traditional florist distribution chain by linking the customer directly to the grower. The customer receives freshly cut flowers that are between 1 and 4 days old and can pick the delivery date as compared to FTD and other florists whose flowers are 1 to 3 weeks old when they reach the customer.
What makes Calyx's distribution system work is that Calyx has strong ties to its suppliers, the growers and Federal Express. Calyx has contracts with 30 quality flower growers. These contracts prevent the growers from supplying any other mail order retailers. Eight of its 30 growers supply 80% of its orders. Calyx does not account for...