The War of The Roses

By Maryanne Murray Buechner

If you went online to order that Valentine's Day bouquet, you probably found plenty of Web vendors wanting to send one to your sweetie. The $15 billion floral industry is blossoming with new competition, but what's happening on the Web is only part of it.

When FTD.com and 1-800-Flowers.com started selling flowers online six years ago, they introduced a new way to place orders but stuck with the old way of filling them: by farming them out to the nearest florist. Now a new patch of online merchants, including Proflowers.com and Martha Stewart, are pushing petals shipped directly from the grower, altering the industry's economics and shortening a supply chain that generally keeps flowers in transit for more than a week after they've been picked. Result: better flowers at better prices. Another company, Gerald Stevens, is working to achieve the same goals by setting up its own distribution system and buying up local flower shops--a level of consolidation never before seen in the floral industry.

Proflowers.com offers a first clue to how things are changing. Like a handful of its competitors, the company has growers fill its online orders right at the farm, so that flowers arrive within a day or two of being plucked. During the February rush, a dozen long-stemmed roses are selling for $48 (including shipping)--$37 cheaper than the same order at FTD.com and $46 cheaper than the same order at 1-800-Flowers.com the two leaders in online sales. The Proflowers bunch will last longer because they're not making the usual pit stops--importer's fridge, wholesaler's warehouse, retailer's display case--before landing on your doorstep.

The trade-off is that your Proflowers order comes in a box, not a vase, and you have to spend a few minutes trimming stems and arranging. Overnight shipment is standard, but same-day service is not an option. These differences will make direct-from-grower a tough sell, says Jill Frankle, an e-commerce analyst with Gomez Advisors. Martha Stewart, who launched her own direct-from-grower flower store, marthasflowers.com last month, concedes that the do-it-yourself bit might not appeal to everyone. "Growers' bunches are for the person who wants to arrange flowers, who understands the culture of flowers and the care of flowers," she says. "I feel there are millions of people in the U.S. who will want to do this." The going rate for 25 Martha-quality red roses on her site? $115.50.

The floral firm Gerald Stevens, based in Fort Lauderdale, Fla., thinks it can offer the best of all worlds--fresher flowers, professionally arranged, delivered the same day--by taking cost out of the back end. In the past 16 months the company has acquired 315 flower shops in 33 U.S. markets to serve as the front end of a Gerald Stevens-brand national chain. Buying directly from growers, the company removes importers and wholesalers--cost and time--from the equation. Call centers and websites generate the orders; regional distribution hubs deliver them; retail stores cater to walk-in traffic--still a lucrative business.

Gerald Stevens is aimed directly at the 90-year-old FTD system, which allows someone to walk into a flower shop in Washington and order flowers for someone in Wichita, Kans. In an FTD order, the referring florist gets a 20% cut of the price and the wire service 7%. That's money that can't go into the flowers, argues Adam Phillips, a Gerald Stevens senior vice president. The company hopes to attract consumers, like bees to flowers, with better quality and more value for their money. Merrill Lynch analyst Neil Godsey thinks they have a shot. "They're doing some things that have never been done, and they've got to put inventory management and other technologies in place and build their brand to make it work," Godsey says. "In four or five years, we think everyone will know who Gerald Stevens is."

For next year, suffice it to say that your Valentine-shopping choices are expanding--and your excuses for messing up diminishing.