News - January 22, 2004

Dutch flower business relies more on personal relations

While Holland is world famous for its auction clock in the huge international flower-trading hall, the role of the clock is declining. An increasing number of firms are shifting from trading through the auction clock, where there is virtually no contact between buyers and suppliers, to fixed lines in which long-term relationships based on trust are built up between buyers and suppliers.

PhD researcher in Business Administration Danny Claro came all the way from Brazil to study the relations between buyers and suppliers in the Dutch potted plant and flower business. He found that up to forty percent of all transactions no longer go through the clock. For closer buyer-supplier relationships to develop, it is important for both sides to get to know each other better. Buyers and suppliers make use of information from their business networks to do this, from colleagues, suppliers of raw materials, distributors and retailers.

Claro found that information from retailers and other partners close to the consumer is valued more than information from suppliers. This is a clear reversal of the traditional supply-driven flower production chain, according to Claro. The chain is now determined by what consumers want.

Claro took his research a step further by examining how the different parties express their long-term commitment to each other. Buyers are more likely to reaffirm the good relationship they have with a particular supplier by making specific investments, for example developing packaging that is specially designed for the flowers grown by the supplier. This binds the buyer to a particular grower. Growers on the other hand are characterized as more emotional, trust being more important in their relationships with buyers. They are more inclined to believe that if they maintain the quality of their product, the buyer will continue to buy.

Joris Tielens