Network Economics and Demand Aggregation: How Online Flower Platforms Became Market Makers

Why are online flower delivery services so popular? Flowers are fresh products that are not shipped from one country to another. Consumers who live close to a local florist may be able to receive fresher flowers more quickly than if they ordered them online. Nevertheless, Yet platforms that promise to send flowers to the USA at the click of a button have grown into multi-billion-dollar businesses. The success of these online flower delivery services can largely be explained by the network effect, a core concept in economics that is taught in most undergraduate- and graduate-level courses on industrial organization and digital markets.

Network Economics as the Core Principle

Network economics studies markets where an increase in the active user base will positively increase the value of that product or service. This can happen directly (e.g., additional users providing demand for the flower delivery service) or indirectly (e.g., producers, or sellers, receiving increased revenue due to more customers and vice versa). Online flower delivery systems represent classic two-sided markets.

As such, these systems create additional value through their ability to link consumers with florists willing to very quickly fill these orders. With an increase in consumers purchasing flowers through the system, there is a corresponding increase in the number of florists who are now able to fulfill those orders. As a consequence, both sides of this market benefit from the characteristics of network economics.

Why Platforms Scale

Online flower businesses make money by performing three distinct and related functions:

First, they accumulate all of the national flower orders in one place. Since flower purchases are made infrequently and geographically scattered, many flower shops receive only a small number of orders per week from outside of their local area. By collecting these orders from thousands of locations, these platforms create a single, “thick” national market, where previously there were many small local markets.

Second, these platforms coordinate orders between customers and the florists that will fill those orders. Instead of having flowers shipped across the country, the platform sends an electronic message with the order to a local florist located near the person receiving the flowers, who has the flowers already in stock and can deliver them locally. This greatly reduces shipping and logistics costs while still maintaining the appearance of a national service.

Third, these platforms standardize their bouquets. Bouquets are presented in a consistent manner, with images, price ranges, and categories based on what type of occasion they are appropriate for. While this limits the variety of bouquets available at the individual florists, it makes it easier for consumers to find what they are looking for and increases conversion rates, which is an important source of efficiency in network economics.

The Platform as Market Maker

Platforms, through these processes, become market makers rather than retailers. They do not grow flowers or manage last-mile delivery; instead, they set the rules governing exchange—such as pricing templates, delivery guarantees, quality standards, and dispute resolution. Their position as market makers strengthens as network effects intensify.

As a platform expands its market coverage, it also increases brand recognition through the reliability consumers experience in emotionally significant and time-sensitive situations, such as birthdays, funerals, and apologies, where failure carries high social costs. As a result, consumers tend to revert to platforms they already trust when facing urgent or emotionally charged purchasing decisions.

As platforms continue to grow, they gain increased bargaining power by controlling access to national demand. This allows them to negotiate commission rates and impose standardized terms on participating florists. Industry estimates suggest that platform commissions typically range from 20% to over 30% per order. Given the cost and uncertainty of acquiring customers independently, most florists accept these terms as the best available option.

Real-World Examples

Companies such as FTD and 1-800-Flowers.com are strong examples of businesses that operate through affiliate networks while simultaneously establishing direct relationships with consumers as national brands. Public filings show that both companies handle millions of orders each year, even though their average order values are significantly higher than those of local, in-store purchases. The difference is that consumers are paying for the service quality and reliability provided by the platform, rather than solely for the flowers themselves.

Economic Forces Driving the Model

A variety of socioeconomic trends underpin this development. Increased geographic separation between families, friends, and local communities has raised demand for remote gift delivery, as the opportunity cost of in-person purchasing has increased. Digital marketing further enables these platforms to efficiently capture interest-based searches at scale, something traditional florist shops are generally unable to do. Together, these factors amplify network effects by concentrating demand within centralized platforms, even though purchases originate from geographically dispersed consumers.

Ramifications

The mixed effects on welfare show that consumers experience the advantages of having ease of access, dependability, and a broad national supply chain; however, they frequently incur a greater cost than local flowers. Flower shops receive a small increase in net sales from these outside orders, but they also lose control over their pricing and the ability to establish their brand. Ultimately, the combination of these elements could lead to greater levels of concentration in the market, thereby increasing many of the problems associated with networks: barriers to entry, reliance, and reduced competition.

Conclusion

In this model, network effects allow online flower delivery platforms to outcompete physical-store florists, even where those florists may have an advantage in product quality. Instead, these platforms leverage network economics and demand aggregation. In other words, they combine demand for flowers from customers across the country and route orders in a way that allows a large volume of demand to flow through a single national network. While this may appear inefficient when examining individual flower orders, at the market level—and in the context of network economics—it represents an efficient way of conducting business.