 Pricing Floral Design Work

Next Generation Science / Common Core Standards Addressed!
 CCSS. Math. Content.7. RP.A.3Use proportional relationships to solve multistep ratio and percent problems. Examples: simple interest, tax, markups and markdowns, gratuities and commissions, fees, percent increase and decrease, percent error.
 CCSS. Math Content. HSS ‐ IC.B.6 Evaluate reports based on data

 1. Explain the importance of effective buying.
 2. Explain how to determine the costs for floral arrangements.
 3. Describe typical pricing strategies.

 Broker
 Combined pricing
 Cost of goods
 Gross sales
 Hard goods
 Labor
 Leader pricing
 Multiple price points
 Multiple unit pricing
 Nested baskets
 Net profit
 Odd end pricing
 Operating expenses
 Percentage mark-up
 Pricing strategies
 Ratio mark-up
 Retail price
 Tie-in pricing
 Unit cost of goods
 Variable ratio mark-up

 Wholesale cost of goods or wholesale price
 Wholesale florist

Suppose you were to buy this arrangement at a local florist. What do you think it would cost? What if you were to make if yourself. Would it cost just as much?
Why or why not?

 Effective buying requires knowledge, organization, planning and a degree of flexibility.
 Retail florists must consider several factors in regards to suppliers and their products:
– 1. A wholesale florist is a link in the marketing chain between the grower and the retail florist.
• Often referred to as wholesalers

• Wholesalers may only provide fresh flowers;
Or they could supply fresh flowers, supplies and houseplants.
• In order to deal with a wholesaler, you must have a sales tax number or be tax exempt.
• Retail florists may use more than one wholesaler due to delivery times, product availability, customer service and getting the best price.

• 2. Growers are the production end of the florist industry; they may be domestic or foreign.
• They will sell direct to retail florists if quantities ordered are large enough.
– For example, a florist may purchase roses for Valentine's Day direct from the grower because it is cheaper.
– 3. Flower markets exist in some large cities.
• All wholesalers will be represented at this market.
• Florists are able to compare and buy a wider variety of materials.

– 4. A broker is an agent who buys flowers and sells them to wholesalers and retailers
• May purchase flowers at auction or from the growers. Quite often flowers are purchased on the international market.
• They usually never physically handle the flowers.
– 5. Other factors to be considered when buying flowers include:
– A) Knowing who in your region can provide the best quality and price of flowers is valuable to the retail florist.

• Retailers need to inspect each shipment and let the suppliers know when satisfaction is not met
• Being cooperative and honest will allow for a successful relationship with the supplier;
Paying bills on time also builds trust in the relationship
– B) buyers need to know bunch sizes for typical flowers.
• Sizes are usually 10, 25, if not a single stem.
• Buying in larger quantities may reduce the unit cost of an item.

– Ex. Gerbera daisies sold by the stem may be $1.00; If you buy 40, they may cut the price to $0.85.
• By planning ahead, a florist may save money.
– C) The florist needs to determine the unit cost of goods.
• The unit cost of goods is the price of a single item determined by dividing the overall bunch or case price by the number of items in the bunch or case.
– Used in determining the cost of an arrangement.

Small design vase: $18.00 per case

36 (vases per case)
= $0.50 per vase
Tulips: $7.50 per bunch

(tulips per bunch)
= $0.75 per tulip

• Hard goods , which are supplies such as ribbon and floral foam, also have unit cost.
• The unit cost of goods is a wholesale cost not a retail cost.
– The retail cost is the florist’s selling price, which is determined by marking up the wholesale cost of goods.
• Another method used is combined pricing , a method of adding the total cost of supplies used in a typical arrangement to the cost of the fresh flowers.
– This method saves time on frequent purchases.

6” Plant
Foil
#9 ribbon
Card, envelop, cardette
Care tag
Wrapping supplies:
Wax tissue
Cellophane
Ribbon
Totals:
Costs 9” Bud Vase
Bud vase
Floral preservative
Card, envelop, cardette
Costs
Care tag
Wrapping supplies:
Wax tissue
Cellophane
Ribbon
Totals:

 The three most common methods of pricing design work are ratio mark-up, variable ratio mark-up and percentage mark-up.
– The method used varies from shop to shop.
– Depends on type of shop and the profit strategy.

 A. Ratio mark-up is a method of pricing based on a predetermined increase from the wholesale cost of goods.
– The selling price is called the retail price.
– Ratio for hard goods is 2:1; Ratio for perishable items is 3:1.
• In other words, multiply foam by 2 and fresh flowers by 3.
– Ratios vary from store to store; Will often be higher for more labor intensive work.

Typical ratio mark-up
Perishables Carnations 10@$.30=$3.00 x3 = $9.00
Leather leaf 10@$.10=$1.00 x3 = $3.00
Hard goods Vase 1@$.90=$0.90 x2 = $1.80
Floral preserve 1@$.05=$0.05 = $0.10
Total: $13.90
Across the board 3:1 pricing ratio
Perishables Carnations 10@$.30=$3.00 x3 = $9.00
Leather leaf 10@$.10=$1.00 x3 = $3.00
Hard goods Vase 1@$.90= $0.90 x3 = $2.70
Floral preserve 1@$.05=$0.05 x3 = $0.15
Total: $14.85

– A major draw back to this system is that no net profit is planned and no overhead costs are incorporated into the calculations.
• Labor may be added based on an hourly wage, but benefits may be added as well.
– For example: the labor wage may be $8.00 an hour, but with benefits added, the cost of labor might actually be $12.00.
– Another method is to add a flat 10 to 20% charge to the final price to cover labor and overhead expenses.

Amount to be added to Price of Arrangement
Time Spent Wage Wage with Benefits
(Hours)
1/4
1/2
3/4
1
(Assume $8/hr)
$2
$4
$6
$8
(Wage rate + 50%)
$3
$6
$9
$12
Vase arrangement Cost
Hours to Complete 1/2-
Wages including benefits
Total Price
$15.00
$6.00
$21.00

 B. Variable ratio mark-up has different mark-ups depending upon two factors: type of design/type of flower and labor required to make it.
– Advantage is that the labor is included in the calculations.
– Disadvantage is that net profit is still a guess; May cause confusion with employees.

Type of Design Mark-up
Basic arrangements, bud vases, boxed flowers, decorated plants.
Creative designs, corsages.
Wedding flowers, party flowers, special designs requiring time and attention, funerals.
3:1
4:1
5:1

Type of Flowers Labor Required
Form flowers
(orchids, lilies, tropicals)
Average flowers
(carnations, roses, gladiolus)
Filler flowers (spray mums, baby’s breath, statice)
Low
Medium
High
Mark-up
2 ½ :1
3 ½ :1
4:1

Ratio Mark-up Variable Ratio
Mark-up
Standard carnation
$0.24/stem
Orchid
$1.20/flower
Pompon spray mums $0.60/stem
$0.72
$3.60
$1.80
$0.84
$3.00
$2.40 (5-7 placements)

 C. Percentage mark-up is a pricing method that plans for profit.
– Uses the wholesale cost of goods divided by the cost of goods percentage as reflected in the shop’s financial statement.
• Requires the florist to analyze the business’ financial statement to determine the percentages of the major factors of gross sales:
– 1. Gross sales = total dollar amount that a florist shop sells

– 2. Operating expenses = The costs of running the business.
– 3. Labor = Operating expenses, which involve people and time it takes them to produce the products.
– 4. Cost of goods = The cost of merchandise and supplies.
– 5. Net profit = The return on a florist’s investment.

Wholesale cost of goods = $6.00
Cost of Goods Percentage = 30%
$6.00

.30 = $18.00
Retail cost = $18.00
If the consumer wants to spend $30.00, then calculate the wholesale cost of goods to use:
$30.00 x 30% = $10.00
Wholesale cost of goods = $10.00

 Pricing strategies are well-planned methods and practices of pricing intended to attract customers to the floral shop and motivate them to buy.
– Successful strategies can increase sales volume and gross sales.
 Strategies to attract customers - Good retailers are always looking for ways to entice the consumer into their shops.

– Advertising and window displays are effective methods, along with open houses at various times throughout the year.
• 1. Leader pricing is a method of offering commonly purchased and recognizable items at a significantly reduced price compared to the competition.
– This will suggest to the consumer that all other items are reasonably priced.
–
Key is to negotiate good buys from the wholesaler.

• 2. Multiple unit pricing is a strategy to encourage the customer to come into the shop and then buy more by offering price breaks for purchasing additional items.
–
For example: one rose for $2.00 or three for
$5.00
– Bouquet specials and buy-one-get-one-free offers are other examples.
 Strategies to motivate more buys -
Everything in a store should be priced so that the consumer knows exactly what it costs.

– Various stickers and tags can effectively do this.
– Signs can be created to make consumers aware of specials.
– Rounding odd prices up make prices easier to understand.
– Types of pricing:
• 1. Odd end pricing = is rounding a product’s price downward.
– For example: change $13.00 to $12.99
– This product will then seem less expensive.

• 2. Multiple price points = aAmethod of pricing and displaying several related designs or products in varying sizes and varying prices to provide customer choice.
• 3. Nested baskets = Are a multiple price point concept, using three baskets that fit inside one another and varying the price of each so that the consumer will have more choices.
• 4. Tie-in pricing = A method to encourage customers to buy related items by offering special discounted prices when the products are purchased at the same time.
–
Ex. Candles and centerpieces

 How is wholesaler florist different from a retail florist?
 What is the job of a broker?
 What is the unit cost of goods used for?
 How is gross sales different from net profit?
 Explain leader pricing.
 Give an example of multiple unit pricing.
 Why is odd end pricing so effective?
 How would tie-in pricing increase profits?