Recently in FTD Category
According to recent florist wire service directory updates, there's a significant shift in the numbers of member flower shop affiliates in North American. The latest figures, which include both the US and Canada, as of the Oct. 1, 2007 electronic directory releases:
FTD
13,876 records including 313 new and 1151 deleted for a net change of <-6%>
Teleflora
25,913 records including 411 new and 1243 deleted for a net change of <-3.2%>
Bloomnet (1-800-Flowers)
6,978 records - previous records numbers unavailable. Per the annual report from FY 2006: "over 9,000 members as of July 2, 2006"
Membership directories are updated quarterly.
With rising wire service participant costs and decreasing numbers of orders flowing through the systems (primarily due to drop-ship boxed flowers being sold by national marketers like FTD.com and 1800flowers.com) declines in membership aren't a surprise, but the sheer numbers do not bode well for the floral industry.
FTD member florists report receiving a mailing outlining the flower marketer and wire service company's new plan for mirror site Florist.com. After spending an estimated $6-$8M to purchase Florist.com late in 2004, and rebranding it as an FTD-owned site, the company has now decided to remove all references to FTD.
The old version (screen shot below) included the online retailer's name in both the products and descriptions.
Today's update shows many product categories removed, and 'FTD' omitted from product titles and descriptions.
Could FTD believe they'll sell more flowers with their brand removed from the site?
Based on early reports, FTD members must opt out of participation in the new plan for Florist.com, which includes agreeing that
Substitution of flowers or containers (with the exception of greens) is not permitted, price adjustments will not be accepted. SRPs include delivery.
Orders destined for an area with no FTD local florist participant will be offered drop-shipped products only.
FTD member florists must now 'take it or leave it' at a fixed price when it comes to order fulfillment. Based on early reports, many are saying 'leave it'.
Earlier this week, an Associated Press article by business writer Mae Anderson covered FTD CEO Mike Soenen’s lowering of revenue forecasts for Mother’s Day. Based on national predictions of a positive holiday overall, the disclosure came as somewhat of a surprise.
-
“…industry analysts said the revision has more to do with FTD specifically than any Mother's Day slowdown.
Brean Murray & Co. analyst Eric Beder noted that, when it released its earnings report last week, 1-800-Flowers.com was bullish about the holiday.”
Seems Mr. Beder is correct. Here’s a strong signal of why Jim McCann of 1-800-Flowers was upbeat about sales while Soenen was lowering expectations:
FTD’s #1 'online only' affiliate, Blooms Today, has recently removed FTD floral designs from its sites and now features products delivered by local affiliates of 1-800-Flowers. With an estimated 500,000 orders sold annually through its various companies, which include BloomsUSA, Flowers Sent Today, FST, American Blooms and Blooms Today, the Haymarket, VA based call center’s move will clearly put a dent in FTD’s holiday order volume.
During Monday’s conference call, Soenen discussed selectively eliminating customers and mentioned two different ‘buckets’ of FTD affiliates.
-
I do have some customers on the other side who are in those top two quartiles who may have, by nature of their size or whatever, attractive financial incentives. You always have to look at those year to year and quarter to quarter and say well, Are these the types of relationships I want to maintain? For the most part the answer is yes. Some customers you obviously want to lose a little bit of money to keep them around, but then there are other customers where just the size of the loss or maybe they don’t have a long-term strategic value for the company, and while they have great near-term revenue that looks good on paper, long term they are financially draining. In some cases I've made elections to let those customers move on to competitors as a component of maintaining profitable growth and not sustaining unprofitable customers and introverting resources to that.
The large rebates generate funds for the order gatherer to buy advertising like the multiple full-page Yellow Pages ads of BloomsUSA and American Blooms found in communities across the US. Ironic that some of their recent ad copy includes headlines of “FTD’s #1 Sender”.
Large, money-losing rebates have been used by every wire service to lure affiliates away from competitors. Rebates keep order volume up, which in turn keeps fulfillment oriented local florists paying dues, buying Point of Sale systems, using website hosting services and clearing credit card transactions – the ‘good bucket’ profitable parts or the florist wire service business.
To shore up order volume with other affiliates, FTD has recently been using a few carrots and a big stick. FTD affiliates that run independent florist Point of Sale systems which also offer access to multiple wire service sending systems (FTD’s Mercury, 1-800-Flowers’ Bloomnet and Teleflora’s Dove) have been threatened with $500/mo penalties if they also send orders through a competing wire service.
The threat could certainly stifle competition and negatively impact the future sales of these independent POS systems.
But it’s no surprise that FTD affiliates would be looking for secondary affiliations after the Mercury Network failed during Valentine’s Day holiday, losing tens of thousands of orders.
FTD recently filed an S-3 with the SEC to describe the proposed sale of approximately 6.6 million shares by Leonard Green & Partners and executives and board members of FTD.
After announcing they were actively looking for a buyer in November, and failing to find an investor group willing to purchase FTD outright, the major shareholder and executive team are selling off a large portion of their holdings - at an expense of about $700K to be paid by FTD.
Readers will note that FTD's executive team including Mike Soenen, Jon Burney, Larry Johnson, George Kanganis, and Bill VanCleave indicate intent to sell approximately 50% of their personally held shares.
Florists digging into the details of the S-3 note the sentence "It also allows our consumer businesses to process peak order flow substantially above that of our average daily order flow without any meaningful incremental investment in systems or infrastructure" as being possibly related to the infrastructure failure during Valentine's Day that lost thousands and thousands of consumer and florist orders.
An article on Newsvine, Flowers Not So Rosy at FTD asks
If everything is so rosey then, why is over $120 million of this company being sold by its leadership?
When the leadership group of FTD wants out, why would an investor want in?
Big changes coming, or just a chance to take a profit?
Good questions.
Florists and consumers alike continue to react with anger and disappointment brought on by FTD's failure to deliver both flowers and orders during Valentine's Day week.
Left in the wake of the FTD Mercury Direct failure are thousands of customer orders that never reached florists for fulfillment - or Valentines to express love - during the busy holiday period.
On the florists' front, some long-time FTD member flower shop owners have reported taking down their logo signage and scraping decals from windows and delivery vans. As Mike of Holden's Florist, Dundas ON said in his comments to the previous article:
It’s so sad, that such a high profile “dis-organization” could lack such respect for it’s OWN customers in a way, as to deny that THEY were entirely responsible for the V-Day meltdown, and quickly take charge, control, and admit to it’s antiquated equipment failure!!Order transmittal is ESSENTIAL to many florists, and is an integral part of the florist business…it’s too bad that FTD’s lack of integrity, has lost them the internal trust they ONCE had from florist members, and their customers!!
On the consumer front, FTD continues to take a beating in shopper rating sites such as BizRate, The Consumerist, Yahoo, Epinions and PlanetFeedback.
One flower buyer has been so angered at FTD's lack of delivery and poor customer service that he created DontUseFTD.com in protest. Eight days after placing his order, he finally got through to FTD's customer service.
“Yes, we’ve been working 14 hour days trying to catch up.”, she said. “There was a weather related emergency and DHL could not deliver thousands of orders.”DHL? There are several, if not dozens, of florists within blocks of the address I wanted flowers delivered too. Why on earth would you SHIP them?
I returned, “I doubt they would have been shipped. I do have my order number if that would help.” and she took my order number and began typing away. “Oh”, she said, “this order was handled by a florist, let’s see what happened. Oh, I see, the order was rejected. We have been trying to contact those people for days, we must have missed you.”
One florist rejecting an order would have been no big deal if FTD's technology hadn't failed - but with the Mercury Direct break down, many rejected orders disappeared into a dark hole and didn't reappear until well after they could be re-routed for prompt delivery.
(Does anyone else think the CSR's explanation made it sound as if the non-delivery was a local florist's fault?)
FTD's Valentine's Day 2007 menu was promoting far more lower-priced, high margin, DHL delivered boxes of flowers (even though they looked like arrangements on FTD.com) than florist-delivered, professionally designed flowers. So while local florists were heroically getting flowers to Valentines through near-blizzard conditions in many parts of the country, FTD's DHL delivered boxes, primarily shipped from Miami, had much further to travel - and missed many Sweethearts on their big day.
FTD could have contacted their customers about the weather delays - or placed a notice on their website, or sent out an email broadcast - just as thousands of local florists did - but instead, FTD chose to leave calls and emails unanswered and Valentines in the dark - for days.
This holiday debacle won't soon be forgotten.
Mercury Network experiences major outages during critical holiday period.
Word of an FTD Tech melt-down started brewing on florist message boards on Friday, February 9, when independently owned and operated flower shop owners started reporting orders sent through FTD's proprietary Mercury Network were not getting through to their stores. Some of the florists said FTD's Tech department was initially blaming the interfaces of Point Of Sale systems sold by third party vendors.
"After umteen phone calls finally a tech told me that all high-speed intranet members a gadget that is connected to host is down and that is what they are working on."
"We started the holiday on DSL and serious problems for two days, with FTD telling us it was our fault. We were fortunate enough to still have the old equipment sitting there so we went back to the good ol modem--which worked fine the rest of the holiday. We invested a good amount of time, effort and money in moving our system to dsl and to have it fail us during the holiday is a joke."
What ensued in the days leading up to and including February 14, Valentine's Day, was a catastrophic failure of the web-based Mercury Direct interface to the host computer housed in Downers Grove, IL - leaving FTD member florists to scramble as best they could to retrieve flower orders sold by FTD.com itself, other florists and via their own FTD-hosted websites.
"February 12 and 13 we had almost no orders sent to us from our web site to our POS system. We had to go to the web portal and print them out one by one. Each order we had to log in a second time to view the credit card information and hand writes the credit card #. Every order had to be typed into our POS system. The format they print out from the portal is hard to read."
Ironically, FTD members with older technology interfaces - dial-up MIMs and modems, were able to access the Downers Grove host. But their orders still had severe problems since the communications never made their way to the filling florists using web-based Mercury Direct.
"It's the new MNAPI system that frequently goes offline. Most of the time it's not noticed by the majority of shops - if it's offline for an afternoon in July, 80% of shops won't catch it, unless they become suspicious due to the lack of marketplace ad GEN messages. By our records, it was down on Feb 12, 13 and 14th."The biggest problem was that shops on dial-up were sending, but shops on Merc Direct weren't able to receive. Our orders were being bounced all over God's green earth, and resulted in many "That's not in our area" rejects."
FTD's Affiliate Order Gatherers Abandon Ship
Some FTD affiliates who also belonged to competing wire services like Telefora and 1-800-Flowers' Bloomnet, used those networks to send outgoing orders, with a number of florists expressed surprise at receiving Teleflora and Bloomnet orders from FTD's top affiliate resellers (order gatherers).
How much of an impact?
The numbers of lost, undelivered orders is unknown as of today but florists have shared their knowledge of the real and potential impact:
"From a very reliable source, there are two (flower) shops in one of the largest states that belong to FTD. One shop got 250 Mercury orders, the other 200 Mercury orders AT THE END OF THE DAY ON THE 14TH.There was no way to reject the orders. JUST 2 SHOPS, 450 ORDERS. IF THERE WERE JUST 1,000 FTD SHOPS WHO HAD THE SAME PROBLEM WITH MERCURY, THAT WOULD BE 250,000 FLOWER BUYERS WHO MAY DECIDE TO NOT SEND FLOWERS AGAIN."
"To date (I) have spoken to over 70 florists that could not get orders through to us and several hundred coast to coast that suffered greatly."
FTD's Lack of a Back-up Plan
Information from former FTD insiders and tech savvy florists shows how such a catastrophic failure could have occured:
"(The) EFOS (Florist Electronic Order System) or the Real (OLD) Mercury System was not at fault.... It was the new interface that connects the internet to EFOS was the issue I have heard different stories, that it was hard ware, a Firewall that went bad. Too many orders for server to handle,... What ever...The issue is equipment goes bad, telephone lines or cables get cut, but there needs to be some type of Redundancy which is missing... But let me let you they have redundancy for FTD.COM's 3 call centers"
"It's going to cost FTD a bundle now but they are going to have to set up a different system with pods in several areas so that if a problem occurs in one area orders can be automatically be rerouted through another pod and continue on it's merry way to the final destination (the recipient). Phone companies have systems like that in place.......when a major phone line goes down all long distance calls are redirected, it may slow things down a little but it usually doesn't kill the system and if enough pods are used it would only effect a small section of the landscape. It only makes common sense, when we order flowers for a major holiday most of us don't order everything from one supplier to all come in on the day before (I sure don't). FTD did and now it's really going to cost them big $$$ to fix along with a loss in unhappy members that will likely resign after this episode......not to mention the ton of customers that will not trust the floral industry any more.....Not just FTD but all flower vendors will suffer because all FTD's eggs were in one basket."
A Failure to Communicate
Frustration from florists abounds at FTD's inability to inform them the system was non-functioning.
"What I am finding appalling is the lack of them letting us know somehow there was a problem - but then again - how are they going to do that? By Mercury?"
Blame and Apologies
Most disturbing to FTD member florists are reports of consumers being told far-too-late that their Valentine's Day flower orders would not be delivered, and of an FTD spokeswoman blaming non-deliveries on lack of 'product availability'.
Sadly, many florists reported having the flowers and staffs in place to fill those orders - it's just that FTD technology Failed To Deliver consumer's purchase requests.
"Sorry does not cover the losses the shops incurred and we feel for the smaller shops that took a severe beating.""Who was hurt in this whole mess up was any CONSUMER that made a purchase from FTD.com, OGs (order gatherers), or FTD florists.
FTD's technology failure and lack of communication with consumers and florists - both of whom trusted FTD to handle orders effectively and efficiently - looks to make this the most complaint-filled and costliest Valentine's Day in the ninety-seven year history of the company.
'Twas the week before Christmas, when all through the net
Florist saw Yahoo! Local showing something instead;
Of their own URLs for their real flower shops,
FTD.com's link did Yahoo Local just plop.
Florist listings lead shoppers to the ‘national’ site,
Where commissions and fees FTD'd rake in with delight.
Or switch sales to boxes of FedExed bouquets;
Local florists unneeded to make those displays.
Leonard Green's Group just laughed at the URL swaps,
Knowing florists weren't able Yahoo's linking to stop.
Short-term profits! they thought 'til we unload this turkey
Hope The Street doesn’t notice our numbers are murky.
With a little young driver, fear in florists he strikes;
Wondering if Yahoo’s plot was a plan of this Mike’s.
"Now, Wal-Mart! now, Kroger! now, Stop and Shop stores!
On, Alberton's! Safeway! And other grocers front doors!
To the top of the Googles! to the top of most Search!
Killing profits of florists they’ve long left in the lurch.
He spoke not a word, but went right straight to work,
Thinking ’Send all your money, shoppers dollars we’ll divert,
To our drop shift gift boxes and surprise ‘service’ fees,
Soon we’re out of this biz with all the profits we can squeeze.’
From the goodwill we’ve had off those real florists’ backs,
Hope a buyer soon’s reeled in by elves Goldman Sachs.’
We heard FTD exclaim, as they saw Yahoo’s news,
"Who needs florist? 'Cept when they pay us their dues.”
FTD Slaps Dual Members of Rival 1-800-Flowers.com's Bloomnet With 2% Surcharge.
In what is seen as a challenge to 1-800-Flowers, FTD has informed its real florist affiliates with dual membership in rival Bloomnet of the assessment of an additional 2% clearinghouse fee. This raises FTD?s total commissions and fees on FTD.com orders to 29% and clearinghouse fees via its florist-to-florist network to 9%.
The fee applies to all orders received for local fulfillment, including flowers and hand-delivery charges, and is retroactive back to January 1, 2006. The letter states:
?We wish to notify you that effective January 1, 2006 your clearinghouse fee will be 9%. The rate is in line with clearinghouse fees charged for some time by a competitive wire service, of which you are currently a member.?
While the letter does not specifically mention 1-800-Flowers as the ?competitive wire service?, US and Canadian Bloomnet florists have been the only shops to report receiving the surcharge penalty.
During FTD?s more than 90 year history, the company has derived its core profits from florists? clearinghouse and related services. Last year, 1800Flowers.com began an aggressive campaign to sign up local florists as members of its rival clearinghouse, Bloomnet. With a lower monthly fee structure and higher rebates for orders transmitted through its system, Bloomnet has been quickly able to grow to more than 6000 local florist members.
The letter follows a failed FTD phone campaign effort to these dual members in early December. Sales team staffers were reported as calling florists and warning of the loss of FTD controlled incoming orders while offering product and service incentives available only if members committed to quit 1-800-Flowers? program prior to the upcoming publication deadline of the Bloomnet directory.
Joint FTD and Bloomnet members will be assessing whether the benefits of both affiliations outweigh FTD?s increased expenses. With 1-800-Flowers? reporting approximately $300M in floral gift sales versus FTD?s estimated $180M for the fiscal year ending July 2005, many local florists note the Westbury NY company?s substantially higher volume. 1-800-Flowers? florist-delivered orders are spread between approximately 6000 members versus FTD?s nearly 20,000.
FTD?s florists have been able to participate in competing clearinghouse networks, such as Teleflora, without financial penalties since a settlement was reached with the US Department of Justice in 1985. That enforcement order expired on August 1, 2005.
Industry insiders question whether FTD plans a similar approach with respect to joint membership in any of its other rival florist clearinghouses.
Ironically, in areas where 1-800-Flowers lacks a local Bloomnet affiliate, orders are currently transmitted and fulfilled via the FTD network.
Order gatherers, ?online-only florists? and other non-florist selling agents with dual membership in both FTD and 1800Flowers.com are not affected by this surcharge.
FTD's Research Flawed?
This is mostly commentary on my part, but if you are a member of SAF the Society of American Florists you can read the complete article online or in Floral Management Magazine.
Back in October, Mike Soenen FTD CEO explained FTD-sponsored research, where consumers ranked price first and service last. The second part of the FTD research found that florists rank service first, design second, and price last.
Mr. Soenens comments eluded to the theory that florists should offer more lower-priced boxed flowers (single stems) to consumers in lieu of high end floral designs.
A well respected Columbus Ohio research firm, Prince and Prince, also did their own study. Prince and Prince: "some observations we at Prince and Prince have made over the last decade support different conclusions". The P&P research showed that providing "value" was the top priority, followed closely by quality, and then sales assistance/courtesy. Price was the FOURTH most important.
The P&P research also found that since 1998, florists involvement with single stems has declined more than 25%, with the decline most pronounced among larger florists.
*************************Commentary
It seems that FTD's question format may have been somewhat responsible for the outcome of their research, since they appear to have asked the cost question directly, rahter than utalize research methods such as trade-off anaylisis and structural equation modeling, to generate more accurate resullts.
One can not help but wonder, if this was FTD's attempt to convince florists to lower their prices, and be willing to accept the lower price points offered by FTD on their own site. I assume this was part of their battle plan to try and take on Proflowers in a low price war. Again FTD's thinking is somewhat flawed, as I do not see them hurting Proflowers in any way.
All we Real Florists can say, is good luck FTD, you're going to need it.
BOSS
http://www.reuters.com/fi...storyID=6900634
Florist FTD Group Inc, Green and Group seems to want to try and emulate the success Perry Capitol realized with FTD while under the direction of Robert L Norton. You can read it here FTD Group files for $180 mln IPO
As I see it the FTD Group will have some trouble matching the feat. They have come into the game, with old tools, and are finding a florist base that is more connected than ever before thanks to forums like FlowerChat.com where florists can communicate and learn.
Florists are once again learning to work together thanks to sites like Real Florist Forums where they share information on everything from technology to marketing, products, customer service tips and more.
BOSS
