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US manufacturing jobs are not in demand any longer: Farmgirl Flowers CEO on moving jobs to Ecuador

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Last year, Farmgirl Flowers had a hiring problem.

The e-commerce flower delivery startup struggled to find people to fill open positions at its flagship distribution center in San Francisco.

“We had at least 30% of our positions open all of last year,” Christina Stembel, founder and CEO of Farmgirl Flowers, told Yahoo Finance in a Breakouts series interview. “We had no less than 40 positions open the entire year trying to find people, especially in San Francisco.”

Farmgirl Flowers, a bootstrapped startup with more than 160 employees, delivers between 6,000 to 8,000 bouquets across 48 states in a typical week and brought in more than $30 million in revenue last year.

For a company that depends on shipping a highly perishable product to customers across the country, the lack of staffing was palpable.

“It’s a universal problem in the United States right now,” Stembel said. “Manufacturing jobs are not the ones that are in demand any longer, and so trying to find people that want to work at these types of jobs is very challenging.”

‘We found a different way’

Stembel’s struggle underscores a broader trend of weakening in the domestic manufacturing sector, an area where output has slumped and employment growth has been lackluster. Manufacturing jobs rose by a net 46,000 in 2019, including three months of declines in payrolls, according to the Labor Department. That was down sharply from the 264,000 manufacturing jobs added in 2018.

And that came as the broader U.S. labor market continued to tighten, with the unemployment rate shrinking to a 50-year low of 3.5% at the end of last year and further putting pressure on employers to find qualified labor.

Stembel’s eventual solution was to look south of the border.

Earlier this year, Stembel announced she would be launching Farmgirl South, a distribution center in Latacunga, Ecuador, where workers would take on similar roles of fulfillment, packaging, cutting and preparing flowers as employees at Farmgirl’s flagship San Francisco center. The company works with farm partners in Ecuador to manage workers, which now number around 40.

The decision helped ensure Farmgirl Flowers would be able to meet increasing customer demand with timely shipping, as well as help provide work in a country where the unemployment rate has held stubbornly high relative to that of the U.S.

“I was in Ecuador on a trip last summer, and it was a sourcing trip for growing flowers,” Stembel said. “And I was just amazed at how many people [were unemployed].”

[Read more: How Farmgirl Flowers took off – without VC]

Farmgirl Flowers recently opened a distribution center in Ecuador. (Courtesy of Farmgirl Flowers)
Farmgirl Flowers recently opened a distribution center in Ecuador. (Courtesy of Farmgirl Flowers)

Ecuador’s unemployment rate was 4.9% in the fourth quarter of 2019, up from 4.8% in the prior year period, according to official data from country’s national statistics agency. The underemployment rate was even higher, coming in at 17.0% during the final three months of last year.

Visiting Ecuador, Stembel said she remembered seeing lines of workers waiting outside factories, hoping they could get even a few hours worth of work.

Farmgirl Flowers, first founded in 2010, had already begun sourcing flowers from South America several years ago. Stembel had struggled to find enough local farmers willing to sell to her start-up, trouncing her initial plans to source from U.S. farmers alone.

To adequately meet customer demand, Stembel said Farmgirl Flowers will eventually need some eight distribution centers, including those in San Francisco and Ecuador. In March, the company is planning to open another distribution center stateside, this time in Miami.

But in the meantime, deepening Farmgirl Flowers’ roots in South America made sense, Stembel said.

“We also were at a stage, where we were at a crossroads of being like, are we going to just stay this size? Because we can’t grow, or are we going to find a different way? And so we found a different way,” Stembel said.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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