Expanding Jeddah's Flower Market Online

Executive Summary

The business plan highlights an expansion of a flower business in Jeddah City, Saudi Arabia. While the business has been in existence for a while now, a new segment of the business is being developed to boost its sales and further open up a prospective market for flowers that is guaranteed to boost income. This is the development of a website for online shopping where individuals will be able to buy flowers, easily, conveniently and quickly with just a click and have the product sent to them in whatever geographical location they prefer. The business also expanded in strategy to include the sales of flowers as a package accompanied with supplementary products that are relevant and significant to a specifically targeted market. This adds up to the competitive advantage of being one of the few online stores selling perishable products (flowers.) the business set up is so that the company will be able to attract the maximum possible customers within the first 12 months of operations and develop a market share. in addition the pricing techniques have been developed to ensure each product attracts a profit of 20% regardless of the market segment it is sold in. this highlights a potentially high viability of the business plan and thus a significant opportunity for investment that is guaranteed to succeed

Business Details

The business involves an online flower shop named Pance flowers with a headquarters located in As Salamah, Jeddah in Saudi Arabia. It is one of the few online stores within the country that is involved in the sales of perishable products, specifically flowers of all kinds and occasions. The business was developed to be able to provide easier access to fresh flowers among the population of Jeddah. Through an online website, the business provides a wide range of flowers designed to suit any occasion from weddings, to funerals, office decorations and gift flowers. While the customers can explore among new products, search for their favorite flowers and even order for them, the flowers are supplied through a physical shop in Jeddah City. The vision statement that the business was developed upon is to provide an opportunity for people in Saudi Arabia to access fresh flowers of their choice with just a click. The company’s mission statement which is the major force behind all the business decisions and objectives developed include: to develop an online business where individuals can easily and conveniently shop for fresh flowers from whichever geographical location they are in with just a click. It aims to make fresh flowers of all kinds and types available for all individuals in Saudi Arabia who need them. Among the businesses major objectives include the development of an effective and efficient online store for perishable products such as flowers, as well as making the flowers available to all the population of Jeddah City and Saudi Arabia.

Industry and Market Analysis

Industry Size, Growth, Structure

According to the Flower Expert (2017), flowers are considered as a prime object of greetings in the current setting of Saudi Arabia thereby making it a product on demand and as such a considerably huge market. Given that the consumers prefer and often go for fresh open flowers, the flower industry in Saudi Arabia therefore mostly consists of retailers who sale flowers on a small scale. Vellekoop (2016) points out that roses make up the majority of the flowers sold in Saud Arabia making up to 65% of the total volume of flowers sold. The flower business in Saudi Arabia was commercially developed in the year 2000 when tulips flower business was first introduced in the Middle East region. Regardless of the very recent start, the flower business across Saudi Arabia and the general United Arab Emirates region is estimated to be worth over Dhs 140m , and even much bigger in the Gulf Corporation Council where it is estimated to worth up to Dhs 970m (Thottathil, 2013). Its growth and structure continues to evolve given that retailers are in cooperating better sales procedures which include sending flowers with scented perfumes and special packages which further increases the demand for flowers in the country given that it is also engraved in the countries culture (Aisha, 2017)

Industry and Market Trends

Vellekoop (2016) points out that the Saudi Arabian flower market prefers very open flowers, however supplying cut roses at this stage is difficult and therefore the retailers operate on an order basis enabling the flowers to be shipped and sold immediately while they are still fresh. This trend is all over the country and thus limits large scale sales of the flower making the industry predominantly consisting of retailers. Moreover the major suppliers of Saudi Arabian flowers include Kenya and Ethiopia which are focused on the Europe market in contrast to Saudi Arabia due to their preference of tight cut stage flowers (FloralDaily, 2016), this limits the exports to Saudi Arabia making flowers a highly demanded but scarce commodity in Saudi Arabia.

Market Segments

The market segmentation in the flower industry is quite wide and can go as far as one imagines including flowers for wedding ceremonies and love expression occasions, flowers for home and office decoration purposes, flowers for expressing other sentiments such as congratulations, apologies, appreciation as well as best wishes in examinations or life events. The market is also segmented to provide flowers for gift purposes. While no specific demographical factor can be associated by any of these segments, Al-Fawaz (2014) points out that roses are the most popular flowers in Saudi Arabia with a total sale of up to 180,000 rose stems on a weekly basis. This highlighted the reason for the target market selection which includes: One main segment (couples getting married) and three sub segments including customers who need flowers for decorations, gift purposes on various occasions and for individuals looking to buy flowers for people they care about. The business will provide a special package consisting of a selected range of roses for the main target market.

Buyer Behavior across Segments

While a major flower on demand in Saudi Arabia includes the roses, different buyers from different segments occasionally request and pre order different types of flowers such as tulips. Across all the market segments however, Vellekoop (2016)points out that the Saudi Arabian Market prefer very open flowers regardless of which flower it is. In addition the consumer associate flower buying with some of the culturally embedded practices in the Saudi Culture including associating flowers with a form of greetings.

Competitor Analysis

At Present Saudi Arabia has a big number of flower suppliers and sellers within the different cities in the country including Riyadh, Jeddah, Mecca, Medina and many others all of which have established stores and a consumer base that is constantly growing (Aisha, 2017). Among the strengths of these flower suppliers are their established supply channels which enable effective delivery of fresh flowers. Other strengths include developed brand names as well as a working business strategy. However the major weakness include the lack of an online presence and as well as lack of consumer satisfaction due to the challenges involved in transporting open flowers that are most popular within the country (Vellekoop, 2016). This highlights a gap in the market that can be exploited by Pance flowers to be able to reach a more digital and remote market and therefore be able to secure a significant market share in the flower market in Saudi Arabia.

Customers and Value Proposition

The business looks to significantly impact the process of flower supply and sale in Saudi Arabia and enhance consumer satisfaction. Given the high and rising demand of flowers as well as the scalability of the flower business, the plan includes ensuring customer satisfaction through enhanced convenience as well as convenient pricing that is guaranteed to top the competitors. The target market for the business includes majorly couples who are getting married. Further, customers looking to buy flowers for decoration purposes, gifts as well as buying for their cared ones are secondary targets, each of which will receive a unique value proposition that will not only market the business and ensure retaining of customers, but will also enhance customer satisfaction which is at the core of the businesses mission.

Value Proposition

Main market segment (Couples getting married)

On top of a special delivery to any geographical location across the country, the business adds onto the value of the flowers sold to couples getting married through a provision of wedding packages. Based on an article on the Frugal Flower (2016) website, choosing flowers for ones wedding is among the major decisions made during a weeding planning journey. Developing a wedding package plan that suits ones vision and budget is quite crucial in the eventual outcome of the celebrations and as such Pance looks to be able to develop a wide range of affordably priced wedding florist packages to not only save the couple a fortune in hiring wedding planners to develop these packages but also spark a few ideas on ideal flower combinations for different themed weddings as well as offer ready packages for any emergency situations. These packages will in addition include items like bouquets, boutonnieres, alter pieces, centre pieces and Corsages to help in the decoration of one’s wedding venue and enable the actualization of the clients perfect wedding flowers reality. Some packages in addition will include assistants that will help layout the flower arrangement in the venues and literally ensure the perfect set up of flower decorations in such venues to enhance the ambience. These value added propositions will aim to attract wider market and enable a convenient and efficient entry into the flower market of Saudi Arabia given it is a new company.

Sub Segment

The market sub segments focused on by the business include: Individuals looking to buy flowers for decorations, as gifts or for the ones they care for. The business looks to include a wide range of value propositions for these customers including decoration vouchers and decorative illustrations on the website that give individuals ideas of how they can decorate their spaces as well as actual support in the process of decorating their intended spaces. These are also develops in special packages of flower combinations that are then sold at fair prices to these customers. Selling flowers for gift purposes with gift cards printed with touching and appreciation messages is another value proposition for this segment of customers. In this way rather than buying flowers and cards separately they are provided together in a single package and the cards even scented to match the flower which further elevates the mood created and enhances the value of the flower as a gift. This will also include specialized customized cards for customers buying flowers for people they care about. The customization will be so as to fit whatever occasion prompts the buying of the flowers whether success, apology, appreciation, congratulatory or even upon recovery process. All these occasions will be specifically pared with flowers whose scents are effective for the specific mood they are intended to arouse. In addition Pance flowers also offers updates on new products in the market including new types of flowers for all the segments of their market via the online website developed. This is a clear advantage over the competitors who do not engage the use of online platforms in the process of their sales. Based on the package pricing and the general pricing techniques as well as the expected market traction within the first 12 months of operating the business, a profit of 20% os expected from each and every sale.

Marketing Strategy

Market Mixing

The shop offers a wide range of flowers all of which are available within the website and customers can effectively view and even learn more facts and details about before the purchase. In order to attain the desired level of sales the flowers will be sold with a combination of other products such as cards, Bouquets and services to develop a perfect market blend that will be able to effectively attract the customers. Services include decoration setup personnel as well as after event collectors who ensure the added value to the product and eventually its demand.

Price, Promotions and Distribution

The pricing strategy is divided into two part of pricing; the first part is the fixed cost, and the second is the product cost. Fixed cost is a cost that does not change regardless of the increase or decrease in the profit. The fixed cost will be as minimum as possible to increase the profit and reduce the risks. To do so, sales will be conducted on a website and application this business as well as the website will be a sole proprietorship in order to limit the number of personnel paid which cuts down on revenue in the early days of its development. Furthermore, in the beginning, the website will run on a free server. Thus, the overall fixed cost will be approximately = £96.4 to have an online presence at both the app store and Google Play. The sole purpose of using the online store is to expand the business boundaries of the existing physical store and to increase the customer base. This will enhance profit making which should be up to 20% per sale. For instance, in the segment 2, the shop buys one flower for £0.34 and sells it for £1.10, generating a profit of more than 300%. Further, in the main market segment, if someone ordered a wedding package through the application or website, with an average cost of £3000 for a package, then the profit from one wedding package could take care of the fixed cost for this idea. Similarly, in sub segments, most of the profit is not just from customer buying flowers but also from the flower packing which is between £4 and £6.

Launch Strategy

The launch strategy involves capitalizing in the business advantage through using online marketing methodologies to enter into new market. The business will put at the fore, core value propositions for the various segments of the market highlighting the associated benefits and advertising in the internet. For instance the various packages available for the wedding customers in the main market segment, as well as a wide range of flowers for different occasions for the sub segments. The launch will include the development and posting of advertisements and illustrations of the online shopping process through the website on all major Google applications including You Tube Emails and social media. Links for the online shops will be shared among social media users instantly tapping into the online market.

Sales Tactics

Flowers will be sold on the website with a wide range of other complimentary products and services which enhance the commodity to be a package and not just a flower. This sales strategy is meant to add value and impact the consumers taste and preference. Rather than just selling flowers for couples to be married, a combination of flowers is developed for different purposes including decorations, banquets in addition to services such as decorations and after event collections to form a package that is more attractive to the consumer. These packages are not only for the Main segment market but for the sub segments as well, flowers for gifts, or apologies or even congratulatory flower bouquets will be accompanied by reasonably matching cards to generate a package that should be more appealing to the customer and as such enhance increased sales. Sales tactics will also include discounts for loyal customers as well as for special packages. The shop will provide a lot of additional services and offers to the customers, For instance, if a customer buys a full wedding package, a 20% discount will be given to the customer.

Brand Development

At Present, Saudi Arabia has little online shops dealing with perishable products such as groceries, unprocessed food (agricultural products), and flowers. Therefore, developing a platform, that allows entrepreneurs to sell their perishable products (in this case flowers) and buyers access reliably, timely, and efficiently these products while taking cost into consideration, will solve cost and demands of these products by bridging consumers’ needs. This adds into the development of the brand as a leading online store an advantage over all its competitors. In addition the various unique packages offered to the different customers as well as the pricing levels and quality services will also account in the process of brand development.

Competitive reaction

Minimal competitive reaction is expected as concerns entry into the market. This is given that Pance online flower shop is among the very few of its kind in Saudi Arabia and as such the market for online shopping is only just starting to grow. Through product differentiation in terms of the packages and other services they offer along with the sales of the flowers, the business can be able to curve out its own market share and retain them through different discounts and other sales tactics and consumer value proposition.

Product and Market Development

The product will be effectively differentiated through the development of unique packages for all the different consumer segments. In cooperation of other supplementary products such as cards as well as service enables the development of the product as a package rather than a flower. This in addition to the convenience to the customers adds a touch of class and uniqueness which enhances the product development. Product development on the other hand enhances customer loyalty which enables the progressive market development in the city of Jeddah.

Growth Potential

The market of flower in Saudi Arabia especially in Jeddah is still growing owning to the increasing population in the city, these people however do not have access to these products due to geographical constraints and physical incapability. Internet shopping opens up new opportunities aligned with e-commerce. Therefore, introducing the online business idea create a massive profit from the business by targeting more clients across the city. The business will provide easy access for people in Saudi Arabia especially those who live in Jeddah city where the physical shop is located of perishable flowers reliably and easily without the needs of storage facilities while giving the customers the option either collect the flowers or have it delivered at their convenience. This presents a potential for growth of the market all over the city and beyond and thus a growth potential for the businesses.

Operations Plan

Online sales are quite complex due to the added responsibility of delivery of the product to the customer in case they need delivery. This makes the operations of the business quite complex and lengthy

Key Operating activities

The key operation activities will include importation of the flowers from prospective flower producers mainly from Africa (Kenya and Ethiopia), their preparation and packaging and delivery to the customers in the different locations of their convenience. Operating from a physical store in Jeddah city, the flowers will be prepared and packaged as well as photographed for the online inventory. Another key operating activity involves the management of the online website acknowledging and taking orders from the various customers and preparing deliveries as well as aiding to their inquiries and providing feedback on the products and services offered.

Partnerships

Selling perishable products specifically flowers has proven to be a problematic ecommerce business to succeed at. Developing an online platform where people would order and purchases flowers is a hard enough challenge, where making sure that flowers get to the client looking fresh and smelling aromatically as they appeared on the website can also be a great challenge according to Cheema et al. (2013). However, then, flower business in Saudi Arabia is thriving each year with at least 230 million flowers produced each year, for various occasions such as weddings, parties or house or office decoration. This highlights the importance of developing partnerships not only in the local economy for an effective distribution channel but also with regards to the importation of the flowers, this is crucial to the business and ensuring efficient and timely delivery of flowers for sale.

Business Control

While the business is looking to be a partnership in order to maximize the efficiency of operations as well as supplement on the financial requirements, the control of the business is reserved to the owner as a sole proprietor. This highlights that the partners involved will be silent partners. The only physical partner will be a company on the countries where the flowers are sourced. Other operations as involving operations of the website and online business as well as deliveries within the local city of Jeddah will be conducted solely by the sole proprietor. The proprietor will contract a one of service from other courier companies should any deliveries originate from out of the city limits of Jeddah to enable flexibility of business operations.

IP Issues

Some of the IP issues include being able to identify the critical assets the business has and filing patent right protection. The internet and online marketing being a current development, and the lack of efficient laws to cover all types of vulnerabilities and risks that websites and online assets are exposed to, the operations maybe quite at risk and identifying intellectual property such as trademarks and trade secrets is at the for front of the development strategy before going to market.

Scalability

At Present, the number of e-commerce sites and online shopping sites dealing with perishable products such as groceries for unprocessed food (agricultural products), and flowers in Saudi Arabia are quite limited as such, developing a platform, that allows entrepreneurs to sell their perishable products (in this case flowers) and buyers access them reliably, timely, and efficiently while taking cost into consideration, will solve cost and demands of these products by bridging consumers’ needs. This highlights the market entry strategy that is forecasted to secure a reasonable market share within the first 6 months of operations. According to the Flower Expert (2017) flowers are considered a prime object for greetings within the modern form of living in Saudi Arabia and with the continued increase in the population of Jeddah city, The demand is only foreseen to continue rising. Given the unlimited nature of the internet the business is quite widely scalable to not only national levels but international levels . in addition Floral daily (2017) points out that the flower business in Saudi Arabia is thriving each year with at least 230 million flowers produced each year, for various occasions such as weddings, parties or house or office decoration. This points out the scalability of the sectors economy as well which opens up more room for the business expansion.

Management Team and Company Structure

From the initial evaluation Pance flowers was determined to be an expansion of an existing business in the physical domain through the start up of an online branch that will facilitate online sales. As such the business will only bring in one individual to the management team. The sole proprietor will be able to manage the operations of the online shop receiving orders and scheduling deliveries after which the deliveries will either be collected from the physical shops or be delivered by the sole proprietors to the customer’s premises within the city. As such the management of the business only involves a single individual in conjunction with the partnership of the firm in the country where the flowers are imported from. The business as such being run by a sole proprietor has no specifically defined structure. The most necessary skills required from the business manager include basic computer skills and the awareness of the website and its operations.

Resources

The business will require a variety of basic resources for its effective functioning and operation: key among these include premises and facilities, machinery and equipment as well as staff.

Premises and Facilities

The business being set up in the sole proprietors’ inherited physical flower shop provides the necessary premises required for basing the operations of the website and online shop as well as the physical shop for inventory and delivery base. The shop has a warehouse with basic facilities such as cutters and blades to be able to prepare the flowers before delivery and even set up some of the decorative packages used for marketing to the different market segment identified.

Machinery and equipment

The business requires a wide range of equipment and machinery to run some of which are already secured in the physical flower shop including flower preparation equipment such as cutter and blades, bouquets and flower wrappers as well as the supplementary cards. To be able to kick off the online shop however two computers and an operations office and internet will be a crucial prerequisite within the same physical location of the shop to allow easier coordination.

Staff

Staff required is employees to prepare and run the physical shop which is already in place, the sole proprietor setting up the online shopping however will be the only added personnel into the business. His duties will include updating any new stock onto the online inventory, checking up status updates on any purchases and organizing deliveries to any orders made. The personnel will also be responsible for the online marketing of the business as well as receiving feedback from the customers and offering back feedback in any inquiries made.

Financing

The basics of the business are already set up and the expansion into the online shopping and developing and online presence is the only requirement needed for financing. In addition given that the indulgence in online sales is forecasted to significantly increase a wide customer base in the first 6 months of operations, expansion of the entire physical store and management is required to be able to meet the potential market expected. The existing business will be used as collateral for securing a loan to be able to purchase the required technical equipment and software necessary to develop and start the online sectors of the business these includes, computers and the internet as well as various relevant software required. Further to be able to meet the customer demand the company will consider entering into partnerships to be able to supplement their finances and effectively scalability and expansion of the business as it grows. The business is not looking to get any equity investors rather all the loans and external investment used and secured from partners will be paid back in full and with any necessary interests required within the first 12 months of the business operations. Another financial alternative under consideration is the use of crowd funding websites to be able to source the necessary and required funds. The business is ambitiously looking to capitalize on gaining and developing an online market through the internet, a quality that investors in crowd funding sites are likely to consider as advanced and with a potential due to its tapping into the internet.

Financial Projections

In being able to calculate this projections the report assumed a number of figures which are represented in Appendix I

Assumptions of Financial Projections

All sales make a 20% profit

Sales will increase by 5% every month leading to an increase in the revenue collected due to the dynamic and increasing population of Jeddah and the increasing demand for flowers within the countries society.

These figures are used to develop an illustration of projected income within the first 12 months Appendix II.

Risk and Strategic Options

The major risk associated with the start up of the online shop is the lack of traction to prospective and potential online customers as well as the vulnerability of business information in the online domain without lack of appropriate intellectual property protection rights. Towards this end, a strategy for a wide online marketing and campaign upon the launch of the website is at the fore to ensure reach of as many individuals online as possible. This should be able to generate enough enthusiasm among a wide range of potential customers to be able to check out the site and probably use it in purchases of flowers. The business is also looking to invest in a cloud network to be able to secure their online data right from the start as it grows on so as to enable easier management of the data and extensive security protocols that are guaranteed to safe guard the information. Another expected risk is the potentially high growth of the online market such that a deficient in the demand of flowers is experienced. Given the major flower exporters from Africa are focusing on the European market and the yet to develop local farming of flowers in Saudi Arabia. A continuously increasing population, coupled with the efficiency and convenience of online shopping could trigger a sharp increase in demand to surplus the actual supply. The company is looking to develop partnerships with other flower companies within Saudi Arabia and within the GCC to be able to ensure efficient and continuous supply of flowers should the expected occur.

Key Milestones

Some of the Key milestones expected based on the strategic plan as well as the goals and objectives of the business in its newly rejuvenated state include: developing the e-commerce website and ensuring it is up and running. Managing sales from the online website for all the segments of the targeted consumer market to indicate the viability of the business plan as well as successfully making sales and income to enable the return on Investment in order to ensure profitability of the business. Other milestones will include sales targets for given periods as well as maintaining a consistent increase in sales in the first 12 months to ensure a groeth in the business.

References

Cheema, U., Rizwan, M., Jalal, R., Durrani, F., & Sohail, N. (2013). The trend of online shopping in 21st century: Impact of enjoyment in TAM Model. Asian Journal of Empirical Research, 3(2), 131-141.