FloraHolland’s current marketing system is no longer affordable and is to change drastically. The Dutch flower auction will present a blueprint for a new auctioning process at the general meeting for their members held on 2 June 2016.
FloraHolland will then choose from two scenarios that they have in mind. Both scenarios will involve a separation of price formation and information flow on the one hand and the physical flow of flowers and plants on the other. According to Mr Ronald Teerds, programme manager for the new auctioning process at FloraHolland, everyone is in agreement with this concept.
The first scenario involves introducing an advanced direct day-trading system in which the clock is no longer the primary instrument. The clock will not disappear entirely, but part of the trade that now takes place via the clock will move to the day-trading system. It is not yet known which type of day-trading system will be chosen; the auction is hoping to find inspiration from other sectors.
The second scenario is the so-called ‘off-nursery auction’. The clock will remain, but will be separated from the physical flow. Products will be auctioned while they are still in the nursery; the timing of the auction will be moved forward.
A whole new situation
According to Mr Teerds, both scenarios still involve some questions and uncertainties. Both present a sketch of a whole new situation. There are, therefore, no data that FloraHolland can use to estimate what will happen after the changes have taken place. Mr Teerds explains that the flower auction will try to calculate the outcomes of both options to determine the effects of each scenario.
Last year, FloraHolland started to think about the new auctioning process within their vision for FloraHolland 2020. There are two primary objectives. The flower auction aims to ensure stable and optimal pricing, and FloraHolland’s cost level has to fall by one-third.
‘A questionnaire amongst our members shows that 75% of them expect to conduct more direct trade in the next few years,’ Mr Teerds explained. Only 25% of the members indicate that they will bring more products to the clock, which implies that trade via the clock will diminish. At the same time, the questionnaire shows that 99% of the members indicate that FloraHolland has to ensure a healthy future for the clock. ‘That’s causing some tension. The tension between individual expectations and what’s best for the collective. If 75% of the members want to increase direct trade, then you’ll get a different sort of clock: a less healthy clock,’ Mr Teerds continued.
The amount of products offered at the clock has been falling for some time. According to Mr Teerds, this is because a demand-driven chain has developed. ‘That doesn’t suit a clock. Direct trade provides the answers for a demand-driven chain. In recent years, the clock has no longer been setting the price; that’s no longer possible.’
Mr Teerds expects another development. The intricacy of the trade has increased, both in direct trade and via the clock. Customers order smaller batches more frequently, which makes selling via the clock more expensive for the auction. ‘And we cannot simply pass on these extra costs because then direct trade will gain even more.’ The intricate trade also causes increased costs through direct trade. ‘The orders are getting smaller and smaller. The process will become unaffordable.’