1-800-FLOWERS, Inc.

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1-800-FLOWERS, Inc.

1600 Stewart Avenue
Westbury, New York 11590
(516) 237-6000
(800) FLOWERS; (800) 356-9377
Fax: (516) 237-6060
Web site: http://www.1800flowers.com

Private Company
Incorporated: 1987
Employees: 2,500
Sales: $300 million (1997 est.)
SICs: 5992 Florists

1-800-FLOWERS, Inc., headquartered in Westbury, New York, is one of the worlds largest florists. Recognized for the quality of its flowers and customer service, the company guarantees the freshness of its floral arrangements for one week. As a leading integrated marketer, the company maintains 150 franchised and company-owned retail stores, 2,500 domestic affiliates, 1,300 overseas affiliates, a web site (www.1800flowers.com), and other interactive services through 15 electronic retail partners, including America Online. A phone order system also is available 24 hours a day, seven days a week. The companys retail outlets, designed to resemble European flower shops, are located in such major markets as New York, Los Angeles, Chicago, Dallas, Atlanta, San Francisco, San Diego, Orlando, San Antonio, St. Louis, and Phoenix.

James McCann: Social Worker Turned Florist

1-800-FLOWERS was transformed from a small struggling business into a successful international operation by James McCann. As a young man living with his family in Queens, New York, McCann had initially hoped to become a police officer and studied at John Jay College of Criminal Justice in New York in the 1970s. He eventually became a social worker, however, accepting a job as the administrator of a youth home in Rockaway, New York. Finding that he needed to supplement his income from social work, he also went into business for himself in 1976, purchasing Flora Plenty, a small flower shop, using $10,000 that friends and relatives had lent him. In the early days, McCann explained in Forbes, you have no choice; you have all of your net worth in the business. I was running a cash business with a cigar-box mentality. I would never be able to give a bank a financial statement, because I had no clue. But I knew that if I wanted to build an enterprise with some legacy value, I had to make the leap into the legitimate world, doing everything the way youre supposed to.

McCanns little shop grew into a 14-store chain earning about $50,000 a year by the 1980s. McCann then made Flora Plenty a C Corporation and put himself on the payroll. Using his real estate and stock market assetsas well as mortgaging his home (several times)McCann acquired 1-800-FLOWERS in 1987. Headquartered in Dallas, Texas, 1-800-FLOWERS was then struggling financially, losing about $400,000 monthly.

McCann paid $7 million for the poorly managed 1-800-FLOWERS, then spent another $9 million covering the companys debts and liquidating assets. Nevertheless, McCann was able to turn the company around, largely by marketing flower delivery through telephone orders. At first, 1-800-FLOWERS utilized FTD, a florist delivery cooperative with thousands of members, including McCanns company. Thus, 1-800-FLOWERS retained a 20 percent fee from each order placed through FTD. In 1993, however, FTD launched a floral phone service of its own, and McCann positioned 1-800-FLOWERS to compete directly with FTD. Using previously untapped toll-free telephone technology, McCann capitalized on consumers needs for convenience and competitive pricing. McCann offered his customers a seven-day freshness guarantee, as well as a 100 percent satisfaction guarantee. He also established a Frequent Flowers Club for repeat customers. While FTDs service lost approximately $13 million during this time, 1-800-FLOWERS had achieved $100 million in annual sales by 1993.

The Business Takes Root by 1992

Over time, McCann contracted new affiliates and established telecenters throughout the United States. As technological advancements permitted, he also became active in electronic retailing. In 1992, 1-800-FLOWERS launched its first online store site on CompuServes Electronic Mall. Eventually the company joined with a strategic Internet development partner, Fry Multimedia of Ann Arbor, Michigan, to create a site driven by Microsoft Site Server Commerce. By the end of 1997, ten percent of the companys annual sales came from interactive marketingabout $30 millionand PC Magazine recognized the companys web site as one of the top 100 web sites in 1997.

In October 1994, 1-800-FLOWERS purchased the Conroys Flowers franchise system, established in 1961 and headquartered in Long Beach, California. One of the larger retail floral chains in the western United States and with the most stores in the 1-800-FLOWERS retail system, Conroys Flowers played an important role in the companys success. For example, Entrepreneur Magazine named Conroys/1-800-FLOWERS the best floral franchiser in its 1996 listing of top 500 franchisers. (Considered one of the foremost small business magazines, Entrepreneur began ranking franchises in 1980. By 1996, its Franchise 500 list was viewed as an authoritative source about the franchise industry in America, if not the world.)

In August 1995, 1-800-FLOWERS established a toll-free telephone number for its customers around the world. In cooperation with AT&Ts USADirect 800 service, the florist provided customers in more than 130 countries with the technology to purchase flowers and gifts for friends and relatives in the United States without paying international and in some cases local telephone charges. By utilizing AT&T Language Line operators, 1-800-FLOWERS communicated with customers in more than 20 languages, a great convenience for U.S. citizens traveling abroad, business professionals, and U.S. military personnel stationed overseas.

The 1995 Documercial

During the 1995-96 holiday season, 1-800-FLOWERS initiated its first documercial. A combined infomercial and documentary, The Fresh Flower Half Hour appeared in three large markets in early morning and late night time slots. On December 4, 1995as part of the companys $30 million marketing plan1-800-FLOWERS launched the half-hour television program covering the operations of the company, floral care, and home decorating. Appearing for the Christmas holiday buying season, The Fresh Flower Half Hour aired on network affiliates in New York, Phoenix, and San Antonio markets before national broadcasting.

Entertaining and informative, the half-hour program profiled the business activities of 1-800-FLOWERS, including coverage of its Floraversity training program and procedures for handling and caring for flowers. The Fresh Flower Half Hour also featured home decorating advice and four two-minute direct response opportunities to purchase a holiday flower tree arrangement.

Sales for the 1995-96 Christmas season broke records for the company. Though retail sales nationally had been uneven or disappointing for many retailers, 1-800-FLOWERS saw its sales grow 39 percent over the previous years. The company also enjoyed strong sales during the Valentines Day holiday in 1996, accumulating an increase of 32 percent above sales for 1995.

Among the reasons for the increased sales were population and consumer attitude shifts. Industry observers noted that aging baby boomers were becoming more accepting of sending flowers as gifts, and more women, in particular, were buying flowers as gifts for others. While in the past most flower purchasers were men, busier lifestyles demanded more convenient forms of gift-giving just when sending flowers became easier. Fortuitously, 1-800-FLOWERS offered its customers service by telephone, via interactive media, or in person at one of the 150 company-owned/franchised retail stores throughout the United States.

The companys sales from Mothers Daythe highest volume sales day in the floral industryincreased 31 percent from 1995 to 1996. Sales and order volumes for this holidaytraditionally about 16 percent of the companys annual revenueswelled in all of the florists marketing platforms. Telephone calls broke the million mark, setting a record for the company, and interactive sales increased by 314 percent over the same time for the preceding year. December 1996 online sales exceeded those of the previous year by three times, and web site sales increased tenfold.

Interactive Marketing in 1997

By 1997, 1-800-FLOWERS conducted about ten percent of its business through interactive marketing online. The company expected its share of the online market to grow as additional convenience-conscious customers became more familiar with new technologies. Thus, the florist developed a system of online gift reminders to save customers the embarrassment of forgetting a birthday or anniversary. Based on this programs success, 1-800-FLOWERS also started mailing reminder postcardsabout 100,000 monthly in 1997.

To compete more effectively in the interactive market, 1-800-FLOWERS contracted with Network Computer, Inc., a subsidiary of Oracle Corporation, to install 2,000 of the companys computersconnected to an NC Enterprise Serverat 1-800-FLOWERS establishments in April 1997. The first corporate client to adopt Ellisons Oracle-backed Java computing system in place of a mainframe terminal environment, 1-800-FLOWERS then operated seven telecenters throughout the nation.

Company Perspectives:

1-800-FLOWERS guarantees the freshness of its floral arrangements for a full week and offers its customers a 100-percent satisfaction guarantee on all products and services. 1-800-FLOWERS maintains a comprehensive quality assurance program, which includes ongoing blind test orders, telephone surveys with customers and recipients, in-store and mail surveys, and customer service reports.

Within a few months, 1-800-FLOWERS announced a new four-year agreement with America Online. As that services exclusive online florist, the company anticipated more than $250 million in sales from this arrangement. The florist also redesigned its award-winning web site, the fifth revision of the site in three years, to facilitate holiday shopping in November 1997. Changes to the site included a one-click-to-product process that simplified shopping online. Specifically, this streamlined process allowed customers to order merchandise from the web sites home page; in the past, online shoppers needed to browse through several pages before placing an order. The new system offered web site visitors faster service and greater convenience in an effort to turn more browsers into buyers.

In addition, the web site now included an updated look and expanded content; for example, the site featured a new registration area, an expanded floral reference and how-to area, a retail store locator, and information on the companys franchising efforts. The company also planned to add more features to the web site in January 1998, notably real-time credit card authorization.

In December 1997, 1-800-FLOWERS introduced an enhanced version of its BloomLink system to network online with its franchisees. BloomLink initially served as a vehicle for order processing, but partnering with AT&T, 1-800-FLOWERS transformed it into a web-based communications system that offered basic ordering capabilities, a home page on the web for individual florists, online training programs, e-mail and chat groups, and wholesale purchase opportunities with farms worldwide. As a comprehensive, open architecture system, BloomLink allowed florists to interact with other communication networks or point-of-sales systems with software provided by 1-800-FLOWERS at no charge.

December 1997 sales through the Internet reached a record-setting $4 million, about ten percent of the companys total holiday sales. Customers placed approximately 80,000 orders through the companys web site and through online services such as America Online, the Microsoft Network, and CompuServe. In all, Internet sales rose 150 percent from the preceding year, with men representing two-thirds of the online buyers.

With nine million customers nationwide in 1997, 1-800-FLOWERS neared sales of $300 million. The increased growth in salesabout 25 percent since 1996prompted 1-800-FLOWERS to open new stores in New Hyde Park, Selden, West Babylon, Bay Ridge, and Brooklyn, New York, and on Manhattans East Sidewith more outlets planned.

Entering the Catalog Market: 1998

1-800-FLOWERS entered the catalog market in 1998 with the purchase of an 80 percent interest in Plow & Hearth, a home-and-garden products marketer. Plow & Hearth founder Peter Rice continued to administer the 18-year-old company as a subsidiary of the florist.

In 1998 1-800-FLOWERS also added a new management level. Owing to its consistent growth and expansion over the years, the company appointed four employees to serve as vice-presidents: Donna lucolano, director of interactive services; Bill Shea, company treasurer; Tom Hartnett, director of store operations; and Vinnie McVeigh, director of worldwide call center operations. (Previously, Chris McCann, brother of Jim McCann, held the only vice-president position, and he became a senior vice-president at the time of the new appointments.)

The Future

Jim McCannwho won much recognition for his work at the florist, being named Direct Marketer of the Year, Retailer of the Year, and Entrepreneur of the Yeartalked of making 1-800-FLOWERS a public company in the future. He hoped to triple the companys size as well. He told LI Business News: We just want to get bigger and better at what we do at a pace we could handle.

Principal Subsidiaries

Teleway; Plow & Hearth (80%).

Further Reading

Campbell, Tricia, The Drama of Selling, Sales & Marketing Management, December 1997, p. 92.

In Online Odyssey, 1-800-FLOWERS Lands on Microsoftss Plaza Mall, Interactive Marketing News, November 15, 1996.

Johnson, Stephen S. Flower Power, Forbes, July 4, 1994, p. 144.

Martorana, Jamie, New Management Team Blooming at 1-800-FLOWERS, LI Business News, July 27, 1998, p. 9A.

McCann, Jim, Building Relationships On-Line Is True Promise of Interactive Marketing, Marketing News, October 27, 1997, p. 10.

______, Stop and Sell the Roses, New York: Ballantine Books, 1998.

McCune, Jenny C., On the Train Gang, Management Review, October 1994, p. 57.

McKenna, Patrick. Ellisons Network Computers Heading to 1-800-Flowers, Newsbytes, April 7, 1997.

Miller, Paul, Flowering Hearth: 1-800-FLOWERS Buys 80 Percent of Plow & Hearth, Catalog Age, May 1998, p. 5.

Oberndorf, Shannon, Flower Power Half Hour, Catalog Age, March 1996, p. 28.

Online: 1-800-FLOWERS, Report on Electronic Commerce, January 14, 1997.

Pellet, Jennifer, and George Schira, This Buds for You, Chief Executive (U.S.), March 1997, p. 24.

Ringing up Sales with Cable, MEDIAWEEK, March 27, 1995, p. S30.

Warshaw, Michael, Invest in Yourself; Get Professional Help and Diversify Your Fortune, Says the Owner of Industry Giant 1-800-FLOWERS, Success, April 1997, pp. 27-28.

Charity Anne Dorgan