For this flower company CEO, it’s not just about growth

Kai Ryssdal and Maria Hollenhorst Feb 23, 2022
Heard on:
Christina Stembel, CEO of the direct-to-consumer company Farmgirl Flowers, said inflation and Apple’s new privacy policy are forcing her to pass higher costs on to customers. Courtesy Farmgirl Flowers/Anna-Alexia Basille

For this flower company CEO, it’s not just about growth

Kai Ryssdal and Maria Hollenhorst Feb 23, 2022
Heard on:
Christina Stembel, CEO of the direct-to-consumer company Farmgirl Flowers, said inflation and Apple’s new privacy policy are forcing her to pass higher costs on to customers. Courtesy Farmgirl Flowers/Anna-Alexia Basille

The National Retail Federation figured Americans spent almost $24 billion on Valentine’s Day gifts this year, up from about $22 billion in 2021. 

For Christina Stembel, the CEO and founder of a direct-to-consumer company called Farmgirl Flowers, last year’s holiday was a turning point. Shipping delays cost her company $5.5 million, forced her to reorganize its distribution model and changed the way she thought about risk. 

With another Valentine’s Day in the rearview mirror, she spoke with “Marketplace” host Kai Ryssdal about how her new strategy played out this year and other challenges facing her company.  

Kai Ryssdal: I ask this with some trepidation, given what a train wreck Valentine’s Day last year was for you, but how did it go this year?

Christina Stembel: Well, I mean, the bar was very low, as you just mentioned, last year. So it definitely surpassed that, which was great. But we went into this knowing it was going to be probably the most challenging Valentine’s Day at least in a while since it was on a Monday this year, which is the worst day of the week to ship from.

Ryssdal: Wait, why?

Stembel: Because for small, medium [size] companies, we’re not created equal with the big companies. And so we can’t get weekend pickups for Monday delivery.

Ryssdal: From, like, FedEx and UPS?

Stembel: Yeah, from the big transportation companies. So we only had one location that we could ship from to arrive on Monday, and that was our South America location. And so we had to, you know, leave money on the table from that location because we didn’t want to put all of the eggs in that basket again.

Ryssdal: So what did you do other than, you know, leave some money on the table? I mean, was it less stressful? Did you just say, “Whatever happens happens”? How’d you do it?

Stembel: Um, yeah, we definitely had to think about how much risk I was willing to take on. And then we had a lot of other things playing against us as well, as with something people are starting to read a lot about right now, you know — the Apple privacy settings and how that impacts small, medium businesses as well, with marketing. You know, we have under a $100 average order value, and so we can’t afford to spend $50 to acquire a customer that’s going to spend $100.

Ryssdal: So back up for a minute. We’ll get to the Apple thing in a second because that frankly is fascinating to me, but the logistics hurdles, inflation — I mean, all of that other stuff — you’re just kind of dealing with it?

Stembel: Absolutely. It’s just a lot of responding very quickly and trying to do our best to mitigate risk and also figure out better ways to do things.

Ryssdal: Are you raising prices? 

Stembel: Yes, absolutely. Our prices were significantly higher this year. Valentine’s Day is, you know, typically a holiday that people will spend more — more than Mother’s Day, actually, which is a little bit sad to me. 

Ryssdal: Really?

Stembel: Absolutely. We had to pass some [price increases] on to consumers because you know, they’re things like even with supply chain that the price going up 20x on container pricing, that impacts our industry because that’s how all the bulbs and tubers come to the growers to be able to plant. For instance, roses were more than double the price that we typically pay. So we had to pass that on.

Ryssdal: First of all, that goes to show you I did not buy roses for this Valentine’s, but that’s a whole different thing. But how did, how do you get the message across to consumers that, “Hey look, everything’s gonna be more expensive,” without them going, you know, “I don’t need to buy flowers this year”?

Stembel: So you know, we just believe in transparency. So we just explained it. We also did some kind of creative ways, you know, of how to spread it out so the prices go up for about a week-and-a-half period of time, and we blended it out over a month. So we didn’t have to, you know, double our prices, but we could go up, like, 25% and then spread it out longer.

Ryssdal: All right, so let’s get back to this Apple thing. For those who aren’t aware, Apple has changed its privacy rules, and it’s no longer letting you be tracked across all these different platforms. And that is making it tough for you, small-business person, to get in front of your customers, and you’re having to pay more to acquire a customer. Is that the deal?

Stembel: Absolutely. We used to spend about 5% on marketing, and now we’re looking at more like 30% to 50% on marketing. It’s just more than we can afford with perishable products. I have tiny margins.

Ryssdal: Get away from percentages, how much money are you spending to acquire a new customer?

Stembel: Yeah, we used to spend about $8.65. And now it’s anywhere between $33 and $60.

Ryssdal: That’s insane. How do you run a business like that?

Stembel: You don’t very successfully if you do that. So we are, you know, again in the position of we want to be profitable, not just growth at all costs.

Ryssdal: Although it’s very interesting because, if I remember correctly, the first time you and I spoke, which now seems like a very long time ago, you were like, “Grow, grow, grow. Man, I gotta grow.”

Stembel: I’m very different now. I’ve learned a lot, especially in the last three years. My philosophy has changed, and it’s definitely more about, “I need to run a healthy company.” So it’s my responsibility to my team to keep us here long term, and that’s getting harder and harder to do.

Ryssdal: You lost a boatload of money last year Valentine’s Day. You had to lay off, I think it was like, 200 people, right?

Stembel: Yeah, over 200. About two-thirds of our company.

Ryssdal: Are you healthy now? Are you sustainable now?

Stembel: Yeah, we’re sustainable now. We’re smaller now, but sustainable. As far as team members go, we’re about 100 people instead of over 300. [It’s] not what I wanted to do, but what I needed to do to be here long term.

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