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Kim Colavito Markesich
Green Profit Magazine, January 2002
The past few years have brought about dramatic change in the wire service industry. Teleflora consolidated with AFS, Redbook, and most recently, Florafax. FTD Inc. and the FTD association ended their alliance this year when FTS Inc. paid $14 million to purchase all FTD associate assets, creating two independent entities – FTS Inc., the FTD—while the former FTD association begins a new chapter with the Extra Touch Florists Association.
Teleflora, with 33,000 members in the US and Canada, holds the largest segment of the market. The three divisions of its parent company, Roll International, include Teleflora, The Franklin Mint, and several agricultural farming and processing businesses. These three, with annual revenues of $1.5 billion, add up to long term financial strength for Teleflora.
Amidst all the doom and gloom surrounding the industry, as well as charges that the PC revolution is killing wire services, Tom Butler, chairman of Teleflora, sees a bright future. “We think the industry is going to come through this fine,” he says. “It’s a challenging business. Any new century is always a time of dramatic change. We are transitioning Teleflora to be the new wire service. With that we’re now providing a lot of new services that Teleflora wasn’t doing ten years ago.”
Caroline Barni, FTD director of member relations, mirrors Tom’s enthusiasm for the industry. “We see the industry getting smaller in the number of players, but these players have to be stronger; and to play in this market, you have to have the financial resources to do so. We feel very strongly that we provide the brand image synonymous (with) flowers – that gives us our strength in any category we compete in.”
According to FTD, membership at 14,000 will continue to expand. And its subsidiary wire service, Value Network Service, has 11,000 members. “Now that FTD controls all functions of its membership, one can expect to see our speed increase as we increase coverage in underserved markets and welcome back returning members to the FTD family.”
Peter Moran, executive vice president of the Society of American Florists (SAF), isn’t surprised by the recent changes in the industry. “We’ve seen consolidation at all levels,” he explains. “Plus technology is changing. It costs so much money to be in the wire business, period. It’s conducive to weeding out and having fewer players.”
That said, Peter doesn’t see technology as the bane of wire service existence. “I think it’s going to be change how business is done, and it’s anybody’s guess how that happens right now. I think there’s always going to be room for a wire service. There needs to be a banking process and a clearinghouse.”
But according to Robert Heffernan, Connecticut Florists Association executive vice president, the local florist has been bruised and battered during the past decade. Florists endured a recession in the early 1990s, the PC revolution, as well as a rise in uncontrollable costs such as labor, rent, utilities and delivery expenses. Personal computers provide consumer access to a great deal of information, including an online phone directory, and a multitude of gift choices.
“The greatest crisis facing the industry is the profitability of the local shop,” Robert warns. “One fatal mistake that this industry made was it never marketed itself to young consumers. By letting the marketing slip, the industry has not invested in building the value of flowers.”
Robert believes that the personal computer will render the wire service obsolete. “There really is no future to speak of for the traditional wire service. The whole third party concept is so old – today’s young people can’t even conceive of it.” He also says that for a wire service to have any chance of survival, it first must begin a program of certification, allowing consumers to choose a quality florist. In addition, the industry leaders must diversify to build financial stability, while mounting a huge marketing campaign.
Another player in this changing field is the Extra Touch Florists Association. The nonprofit member-owned trade association focuses on a variety of needs that include a wire service function. Florists send and receive orders through the Internet only, florist to florist at an 80/20% split, while florists collect 100% on consumer-to florist orders; no commissions are paid to the organization. Members pay a $49.95 monthly fee and can opt to purchase a Web site at an additional $40 per month.
Jim Jordan, Extra Touch executive vice president, agrees that the Internet and 1-800 orders-gatherers have changed the floral industry and believes this Internet trend will continue.
“For may decades local florists have been able to provide a service to consumers that allowed for the sending of sentiment expression gifts around the world. As profitability became more compromised and the flood of order-gatherers became more prevalent, there was a tendency for some florists to give less value or substitute flowers in hopes that the buying consumer would never find out. This, along with higher costs of sending flowers, forced the consumer to look for less expensive ways…..”
“While we do not think of ourselves as a wire service, we do look at ourselves as a member-owned and run organization that is dedicated to improving the bottom line of our member florists.”
“Retail florists have been the backbone of this industry,” Jim asserts. “They deserve more than to simply exists for the benefit of the order-gatherers, [whom] I believe will further weaken the need for traditional wire services.”
What about direct e-commerce business? Heavy marketing has kept 1-800-FLOWERS a competitor in the industry. Say Tom of owner Jim McCann,” He started as a retail florist, and he found a need for a greater marketing idea: around the clock flowers. When he acquired the company it was almost bankrupt. He’s done a masterful job.”
1-800-FLOWERS holds 120 company-owned or franchised retail florist shops, part of its1,500-member network of florists. Tom doesn’t see them as a threat to Teleflora’s existence because they’re still promoting flowers as gifts. He says, “As an industry, our biggest competitor is not other florists, grocery stores or order-gatherers but people with national advertising in competing gift expression businesses.”
And there’s still dissention concerning the “send only” shops. Many florists balk at the idea of a shop taking in what they call the “cream of the crop,” sending orders that collect 20% of the dollar value with the click of a mouse. Receiving florists are credited 70% to 73% but are required to fill an order at full value.
At present, FTD doesn’t allow “send only” shops. Teleflora does allow “send only” shops. Tom says that only a small number of florists opt for this, the majority being in unique situations such as military installations, along with a few traditional florists. But again, he believes these shops add orders to the floral market and benefit the industry as a whole.
So where does this leave the retail florist?
FTD’s Caroline had this to say: “A few years ago, FTD executed two major marketing strategies to entice a younger audience. The first was to update its existing floral product selections featuring more upscale flowers and redesigning more traditional arrangements to position our product line with new trends. Secondly, FTD introduced a new advertising campaign with its “Be a Hero” TV and print ads that portrayed a younger audience having fun with flowers. We’re putting a new focus on the whole area of member services.”
And from Tom: “I still believe in the future of the retail florist. I meet with florists around the country. They’re optimistic about the future. It’s hard work….There’s a lot more competition. That’s why we’ve moved into other services. Teleflora will be a different company five years from now than [it is] today.
Representatives from both Teleflora and FTD see service as the key to their survival, from education to quality control. By keeping their members strong, they hope to ensure that consumers have a reason to visit their local florist.
Veteran florist Hy Cohen, owner of Bob Kelly Florists, Inc. of Hartford, Connecticut, sees the Internet as an additional sales tool but not a replacement for the retailer.
“People call saying ‘I’m looking at your Web site; I want to place an order’…or use their credit cards on the Web. They still want to call us.”
Cohen doesn’t mince words when it comes to 1-800 companies. “I think what’s really hurting the wire services is the order-gatherer,” he says. “They inflate the prices and have people taking orders that don’t know what they’re talking about. You don’t have to be a designer, but if you have someone in your shop who’s a florist, takes a good order and knows the product, you’re going to have a happy customer.”
“I got one in today from one of these wire companies – snaps, spray roses, hydrangea -- $25,” Hy says. “They come in with time deliveries. I’m going to give a customer the best product, but at least give me some leeway to do it. If I can’t make any money on an order, I don’t want it.”