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IPM market description of the flower and plant markets, Part 2

Challenges and opportunities for the green retail trade

From January 23 to 26, 2018, IPM ESSEN will gather the entire international green sector at Messe Essen. Digitalisation is confronting the green economic branch with new challenges. In times of individualisation and e-commerce, the retail trade must adjust to the altered purchasing behaviour of the customers. At IPM ESSEN, trade visitors will learn how the sector can prepare itself for the future and what products are especially popular. In particular, the hortivation trend show will display new POS concepts for successful business. Therefore, where is the journey heading? What are the trends?

Successes of products and companies are always subject to both current and long term trends because these influence the needs and behaviour of the customers. According to the future researchers at the Future Institute, there are twelve megatrends at present: individualisation, health, knowledge culture, security, urbanisation, connectivity, neo-ecology, silver society, new work, gender shift, mobility and globalisation. In this respect, the trends of individualisation, health and urbanisation constitute the driving forces for horticulture.

Amongst these megatrends, it is possible to successfully design and offer products and concepts for consciously healthy food, "Outdoor Barbecue Enjoyment", "Do-It-Yourself Idea", "Own Harvest Feeling", "Family Garden", "Garden Living", "Urban Gardening" or plainly and simply "Bee Feeding". For example, herbs or garden products as nibbles are resulting precisely in segments which did not exist at all in this magnitude a few years ago. Precisely herbs have been experiencing a veritable boom for some time. Together with perennial plants, the trade describes them as the growth segment from which long and positive effects will still emerge.

While the overall market for flowers and plants in Germany altered positively by approx. 2.4 % on the retail trade level in 2016 compared with the previous year, the herbs segment exhibited an above-average growth rate of 5.4 %. This growth is significant but it must be noted that the herbs segment makes up just 3 % of the entire market for flowers and plants in Germany at present.

Primarily in smaller forms, fruit and ornamental woody plants meet the needs of the consumers for space-saving green products with value added for the balcony or the terrace. At 3.6 %, the growth rate was also above the average. Similar to the herbs, the trade is expecting a positive development here in the next few years.

Even if the cut flowers segment is, at approx. 1 %, not growing as strongly as the overall market, it is possible to perceive a new "desire for cut flowers" according to gardeners, traders and florists. The demand for cut flowers and the consumer interest in them (preferably from regional and sustainable production) have increased in 2017.

Explanation approaches can be seen not only in the general wish for green products but also, amongst other factors, in a changing living culture. Living magazines are no longer propagating reduced furnishing styles but instead bold colours, high-value fabrics and accessories as well as romantic and playful ambiences into which cut flowers fit very well. It is conspicuous that, precisely in the case of cut flowers, the traditional forms of the tied round bouquet seemingly no longer find any place in the new living culture. The classic, round bouquet is out; the do-it-yourself look is in.

In cooperation with zeitgeist researchers, the Holland Flower Office has analysed the general lifestyle and made the findings available to the sector as a source of impetus. In Germany, the Trade Association of German Florists (FDF) translated and interpreted the findings for the flower and plant worlds. Trends which were long forgotten are suddenly in once again. For example, the recycling of products and unusual combinations will become subjects in 2018.

Increasing significance is being attached to products with which statements can be made, just as brands lose significance if the consumer is not in the limelight in this respect. According to the Holland Flower Office and FDF, the consumer can, in 2018, look forward to three different style directions matching flowers and plants in an outstanding way. The current zeitgeist will be interpreted under the names of "Punk Rebooted", "Re-Assemble" and "Romance 3.0". Depending on the style direction, the trend colours will range from high-contrast incorporating a lot of black to pastel colours in combination with various green shades. The shapes will extend from compactly round to playfully decorative. The Creative Team at FDF has transferred these currents into floral motifs and will introduce the results for the first time in the FDF World at IPM ESSEN 2018.

Individualisation is Important
Individualised products are in great demand amongst consumers. According to the Institute for Trade Research - IFH, 30 % have already purchased individualised products on occasion. 60 % of them are expecting the possibility of individualising products more often in the future. 47 % also have this wish even if they have not yet tried this out. It is interesting that approximately half of all the people are ready to pay a premium for this individualisation "service". To this extent, it is not surprising that ever more traders are developing individualised products.

Experiencing With All the Senses
In comparison with e-commerce which is becoming ever stronger, the strength of the stationary trade with regard to selling horticultural products lies in experiencing the products with all the senses. In garden centres, 80 % of the shopping public make their decisions on the basis of feelings.

Correspondingly, scents and haptics played great roles in selling the horticultural products in 2017. According to statements made by retail traders, there was a strong sales demand for roses or also for bedding and balcony plants with scent.

Moreover, the trend towards naturalness could be expanded even further in 2018. Wood as a design element is extremely trendy and increases the well-being character and the time spent in the shop in so far as the customer still comes into the shop at all.

Digitalisation-Induced Change in the Retail Trade is in Full Swing
According to the "Total Retail 2017" study elaborated by PwC, 34 % of the German consumers stated that the shopping at Amazon meant that they shopped in the stationary retail trade more rarely. Their purchasing behaviour has changed permanently.

For example, almost 60 % of the German consumers today conduct research online before they buy anything in the shop. In 2020, it is assumed that at least 75 % will obtain information via the Internet in advance. However, the Internet is being used not only for researching information but also, to an increasing extent, for purchasing.

Today, 85 % of the 18 to 34 year olds already shop online at least once per month and 15 % even every day. On average, 14 % of all Germans shop in the Internet at least once per week - with an upward tendency. The smartphone is playing an important role in this respect: 57 % of the smartphone users utilise their devices for shopping.

The average growth in the online trade in the last ten years was over 12 % while the stationary trade exhibited a growth rate of just 0.2 % in the same time. The online trade is thus growing decisively more quickly than the stationary trade and is taking ever more market shares away from it. In 2016, a total of Euro 48.7 billion was turned over via e-commerce in Germany. The German garden market accounted for around Euro 760 million of this. That was a 15 % plus in comparison with the previous year. In any case, the group of goods called "Living Green Products" is still in its infancy in this respect but was able to exhibit percentage increases of 3.9 % in 2016 and 6.1 % in the first two quarters of 2017. A turnover of around Euro 55 billion via e-commerce is being forecast for 2017. This would mean a rise of over 12 %.

Stationary Trade is Alive
Nevertheless, the stationary trade is far from dead. Precisely when the figures for the garden market are examined more exactly, the opposite is the case. For example, the online marketing channels of the Internet pure players, together with the online marketing channels of the manufacturers, the stationary trade and the catalogue mail order companies, account for "just" a somewhat more than 4 % market share of the garden market.

In 2017, too, the customers continue to want to experience, feel or see the products or to try them out in situ. They primarily wish for a seamless shopping experience, not only in the shop but also in the Internet.

The hortivation trend show in Hall 13 at IPM ESSEN will demonstrate how shopping becomes an experience. In cooperation with the green stylist Romeo Sommers, strong-selling POS concepts for garden centres will be introduced under the subject of "Family Garden" - extending across different ranges and oriented to societal trends such as sustainability and transparency.

Many online pure players have recognised the stationary trade for themselves and opened their own shops or showrooms in 2017. Here, examples are not only "Amazon go" but also the Hamburg-based fashion start-up called About You with the shops with its Edited brand or large Internet traders which suddenly show themselves in the city centres temporarily with popup shops.

With their omni-channel solutions, they have now put the traditional retail trade under even stronger pressure; precisely because the protagonists can use their customer data obtained online very efficiently for their stationary trade and can design their product ranges with the aid of data analytics. The stationary trade must therefore redefine its business models. Thus, the trade experts from ECC Cologne are forecasting that, by 2020, around 70 % of the traditional traders will have to reinvent themselves or will disappear from the market.

It is interesting that stationary trading operation forms already accounted for over 60 % of the online turnovers in the garden market last year, here primarily specialised garden centres, nurseries and specialised flower shops. Accordingly, the Internet trade in horticulture is dominated by mixed forms between online and stationary trade. The pure distance trade such as Internet pure players, mail order companies online or online TV shops accounted for a 40 % market share of the online volume.

However, this could change drastically as soon as, in the future, Amazon as an Internet pure player were to concentrate on the garden market more strongly than until now. In 2016, the online giant already experienced a 45 % rise in its turnover in the DIY field.

There is No Typical Internet Customer
According to experts, big sellers in the online trade in horticultural products are seeds, perennial plants, house plants, roses, small trees and shrubs.

However, there is no specific consumer type. It is conspicuous that, in the DIY & flowers field, men generally do more online shopping than women. Correspondingly, precisely men have discovered online shopping for themselves in this field. From 2015 to 2016, their turnovers in the Internet rose by 23 %. In contrast, the turnovers of the women grew by just 3 % in the same period.

Internet as a Source of Information
Many people often use the Internet as the primary source of information about products and the primary inspiration for the garden or "special needs". In this connection, 81 % of the users find it attractive if they can see online whether products are available from local traders. Another 64 % find it attractive if they can order their products online and pick them up in the shop.

Due to the large number of digital ranges on offer, the consumers today have very differentiated expectations with regard to the shopping locations, no matter whether online or stationary.

For example, they wish not only for an attractive product range but also for individual addressing, technologies and services which organise their shopping in a simple, convenient and quick way. In this respect, central significance is attached to subjects such as "User Guidance & User Friendliness" as well as "Information Value", "Terms of Ordering & Payment" and "Shipping/Return" in the case of e-commerce.

The expectations are rising ever more, with regard not only to the product but also, above all, to the speed of owning it. Moreover, e-commerce will increase along with improvements in the logistics. A rise in the online share of flowers and plants is expected as the logistics become ever better. However, none of the experts dares to say how high the share of the overall market might be. The statements range from 15 % to 50 % of the overall market.

For e-commerce, it is important to win over the trust of the consumers. In the future, it will therefore be ever more important to attract attention and to create trust. Today, 34 % of the consumers already follow their favourite brands or traders on social media channels. These media must be exploited more strongly in 2018, too, since age groups from 20 to 60 years old as an interesting target group are reached, amongst other ways, via blogs.

2017 has shown that digital changes were implemented more quickly than a lot of people in the sector had thought. The Bloomon mail order service for flowers and logistical platforms for the worldwide Floriday trade are just two examples here. Digitalisation alters behaviour and altered behaviour entails structural changes.

In most European countries, there is rising trust in the economy. Combined with the society's trend and affinity for green products, this is a basic mood conducive to selling flowers and plants.

In spite of political uncertainties, the results until now are raising expectations of a good year in 2017.

Success factors for this are not only digitalisation and efficient logistical systems but also, above all, finding new sales channels and setting up new trade relations. In parts, it has already been successful - not least because other countries are exhibiting positive developments and the desire for plants and the purchasing power for this purpose are rising there, too.

The market description was elaborated by: CO CONCEPT, on behalf of Messe Essen for IPM Essen 2018

Dr. Marianne Altmann
Andreas Löbke

Expert discussions as well as EUROSTAT, Agricultural Market Information Company - AMI, Association of the German Flower Wholesale and Import Trade - BGI, Trade Association for DIY, Construction and Gardens - BHB, Consumer Research Association - GfK, Association of the Wholesale Traders in Ornamental Plant Products - VGB, TASPO, German Garden Industry Association - IVG and Gabot

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