I have to ask the question ...... What came first, the chicken or the egg?
Or in this case, the florists success and size, or providing value to their customers?
I think the "egg" (value) must come first, or the "chicken" (size) will never be born. As the old adadge goes, you plant seeds first and harvest the fruits later, not the other way around.
For that $19.99 rose arrangement, actually almost any florist can sell one of those if we want to. All it has in the arrangement is 12 stems of 40's in assorted colors and a few sticks in a bubble bowl. Even for a small shop, the cost would be $7 or so.
No florist, however, will be able to survive by making a meager $13 gross margin per sale (i.e., $19.99 - $7 cost). I suspect that's the case for even a big, efficient shop like Randy's. But here's the thing...
I think one key metric in florist micro economy is the 'minimum gross margin required per sale' (let's call it MGMPS): total fixed expenses divided by average sales count. For example, if the monthly fixed expenses is $10,000 (rent, utilities, payroll, etc) and average sales count is 300 per month, 'MGMPS' is $33 ($10,000 / 300). This shop must make $33,
on average, every time it sells something.
The problem that most florist are facing is that MGMPS has been increasing, because the fixed expenses has been increasing with no concomitant increase of sales count . The florists have tried to compensate that by increasing the price, which aggravated the problem, because high-margin sale always suppresses the sales count. Now that instead of ahving to make $33 per sale, this shop must make, say, $40 per sale, because the sales count decreased. Higher-margin -> lower sales count -> more higher margin -> even less sales count -----> It's a vicious cycle, which may eventually lead to oblivion.
What $19.99 rose sales might do (I'm jusy guessing because I'm not RC spokesperson) is that it helps reverse the cycle. It will increase the sales count or at least stop the hemorrhage, by keeping price-consious consumers engaged with his shop rather than letting them go to supermarkets. These customers in turn, when occasions come, will be ordering more profitable products with him.
By contrast, if a shop only sells $65 rose arrangement, it will probably decrease the sales count further, eventually all the way down to the 'hard core' loyalists whose number may not be large enough to sustain the business.
