case study

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CASE STUDY: INTEGRITY, PROFITS, AND CONFLICT PALLES FLORAL & GARDENS

C O M P A N Y O V E R V I E W A N D HI S T O R Y Palles Floral & Gardens (Palles) is a rather large retail facility that also facilitates a

wholesale flower & plant supply organization. The wholesale portion of their business

sells flowers, plants, small trees and other products in parts of four mid-western states.

G O V E R N I N G P H I L O S O P H Y : The company is primarily family operated, has a great reputation, and has opened several retail stores located between 40 and 70 miles

away from its main location. Because this is a family-run business, the business follows

the same Christian principles that the family uses in their daily lives. The Palles are

active in their church. They attribute much of their success to their Christian beliefs and

fair treatment of their customers. Besides their Christian standards, the Palles run their

company with the same business principles that many other top notch business

organizations use.

L O C A T I O N , L A Y O U T , A N D I N V E N T O R Y : Palles’ primary location might be better described as a "complex". Their location is comprised of a large retail location

with numerous components. There are large open air display areas throughout the

facility grounds. Twelve medium- and large-size greenhouses comprise the year-round

home for plants grown on the property or brought in from other growers. Most of their

greenhouses have low and medium height plant beds; in select greenhouses there are

usually hanging baskets of flowers, plants, or other related products above the plant

beds.

There is also a rather large "L" shaped retail store. Customers or commercial accounts

can purchase fresh flower and plant creations in the custom flower shop section of the

store. Next to the custom flower shop area is a Christian, or what some call religious,

section. This section features different products with a Christian or religious statement.

All items in this area are different from what is found in the rest of the store. Vases,

collectibles, wall plaques, candle holders, some bookends, and a variety of items with a

Christian theme can be purchased there. Even a few unusual and rather artistic yard

water fountains are featured, some with Christian themes, as well as a few beautiful

wall fountains.

This part of the store started fairly small and has grown larger as more interesting and

special products are added to the inventory. Over the years as this section has grown in

popularity, the Palles family feels a special place in their heart for this part of the store,

and they believe this small area within the store is an extra special source of pride.

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W H O L E S A L E B U S I N E S S : Other floral and garden stores purchase wholesale from the Palles Wholesale Greenhouses on a regular basis. These wholesale buyers sell

these items to their own customers. Over the years the Palles family has been very

customer service-oriented, with an emphasis on offering a broad variety of “home

grown” products to all their customers. Their reputation for the greenhouse is solid, and

they have a very strong customer base. The customer base comes from over five

decades of excellent products and service to their markets.

C U R R E N T S I T U A T I O N The Palles family wholesale business is strong; however, they have noticed their retail

sales have headed into a bit of a slump over the last three years.

N E W H I R E , I N V E N T O R Y A G R E E M E N T , & M A R K E T I N G : In an attempt to increase their own retail sales, the Palles family has recently hired someone

from the outside, so that they can get a fresh perspective on their retail business. John

Mellin was recently hired to run their retail store and the retail garden center. John is

not really involved with the wholesale greenhouse or any wholesale portions of the

business. John's background is in retail; he comes with a very good reputation and is

highly recommended.

In the final interview prior to being hired, John requested and received an agreement

from the owners of Palles which stated that he would be allowed to keep the sources of

new product offerings confidential. The owners would know where all products came

from, but other employees, wholesalers and retail customers would not get specifics (no

import or product labeling, State or Federal laws would be violated). John described this

request as an effort to help enhance the marketing and wholesale plan.

John is focused on improving all retail product areas, and wishes to increase store sales

and improve profitability. Part of this plan involves new "specials" to improve customer

interest and response from advertising programs. John also wants to bring some

diversity to the facility with new ideas, new products and some new market penetration

pricing strategies, as well as change some of the "same annual retail look" within the

facility. This idea sounds appealing to everyone on the inside at Palles; a fresh look in

the greenhouses and stores, new products to share with customers, and healthier

margins are always helpful, especially after three years of softer retail profits.

After a few months of late winter behind him, John’s marketing plan is about to take

effect. As part of the April/May push John plans to introduce some plants from a

Southeast Coast wholesaler. These new products will add some diversity to the product

line; in addition, the items would provide a "different" kind of look to the product mix

and add visual appeal. There is also a group of more tropical appearing plants (for

indoor use) that John wishes to purchase from a Florida wholesaler. In addition to

variety, these product lines would add some price advantage to the Palles stores. The

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contracts for the new products are signed, some products are in stock, and subsequent

shipments will arrive as agreed over the next four weeks.

P R O D U C T R O T A T I O N : Some of these new products have to be purchased in rather large quantities. As with most flower and plant facilities, how long the products

can be kept "on the shelf" is a concern. The Palles had agreed to purchase a large

quantity of product in order to get a low overall price. To help facilitate the new

"product's rotation" and keep products fresh and healthy, John wants to sell some of

these same flowers and plants at a marked up price to Palles existing wholesale

customers. There is room for margin because of the low price at which they purchased

the products, the turnaround times would be helpful, and the profits from reselling

would be unanticipated income. It sounds like a good plan, but it is a new strategy that

the company has not used before.

B E N E F I T S : These shared cost wholesale transactions would help reduce the freight costs for his in-store purchases, and make margins better for the facility. In addition, the

wholesale sales would create a faster rotation of the products. As part of this process,

John would prefer that the wholesale customers not know where these items were

grown. In John’s marketing plan, keeping the source location gives him a competitive

edge and allows him to have an "exclusive" of sorts with these products. These "new"

plants are based from seeds and starter plants that ultimately had to originate in

portions of Central America, an area with a wide variety of healthy, beautiful flowers

and plants. These items would be entirely new to the Palles customers.

I D E N T I T Y C R I S I S : The Palles family has no issue with the products being purchased elsewhere; however, John wants to mix new product in with the products

from their own greenhouses. Because of this, an issue of product identity has come up

in their conversations. John wants to let all the customers believe the new products

(including the more price sensitive flowers and plants) are grown in the Palles

greenhouses, which is not true. Additionally, the price-sensitive products that are

brought in from Florida have durability and seasonal longevity issues; both of these

things could cause customer dissatisfaction.

One concern with John’s scheme is that the Palles have a long tradition of simply telling

it "like it is" and being candid with all of their customers. Additionally, the Palles family is

concerned that their reputation would be damaged if any quality problems would arise

from new products that are grown from an area with which they have little history or

experience in selling. John insists that where the plant/flower seeds originate, or where

they are actually grown is not important, after all as John put it "we all grow products

the same way and in temperature and humidity controlled environments.” John's focus

is to simply increase sales with new products and healthier margins from another

geographic area. He would imply to customers that the new products are grown locally

in the family greenhouses.

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Q U E S T I O N S

Q U E S T I O N 1

If a plant or flower product line is more sensitive to the climate in which it is being sold

(i.e. it is actually from a geographic area with much different weather/climate), does the

retailer have a responsibility to notify the customers of this fact prior to purchasing that

product in case of sensitivity to the local climate? Does this matter? State your position,

and provide justification in about a paragraph.

Q U E S T I O N 2

With a situation such as the Palles Family business, past customers have always

purchased products grown in the local greenhouses - unless otherwise clearly stated.

These customers will now be purchasing items, at least some of which are grown

elsewhere. Is it necessary to advise the customers of this change in part of the product

line? Ethically does this matter?

What are the arguments for and against telling the customers what the origins of the

plants are? Where do you stand on this issue? In your response, include one outside

citation that backs up your position. Be sure to cite using APA.

Q U E S T I O N 3

If you were a member of the Palles Family, what would you wish to share with John, the

new manager, about the Palles business that he might not realize? Please reply with a

two-three sentence answer, and then provide about a paragraph of justification for your

comments as well as a plan for how you would approach John.