Another Tired Wire Service Thread, what's your take?

lil_goldie

lil_goldie

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Apr 15, 2009
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Chatham, Ontario, Canada
www.pizazzfloralsandballoons.com
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I didn't want to Hijack BOSS's thread 'How much NET profit' so I will start my own.

When I get a $50 order I show a NET profit of $8
$50 - 27%= $36.50
Using Eric's Model of Total less delivery, COGS, labour, WS fees, Overhead, I get this:
$36 -$4 -$10 -$5 -$3.85 -$5= $8.15 net profit.
A non-wire order would be $26 using this model.
(Note: I took the COST of delivery, not what I charge, which is $7. I also figured high on this category.)

This will probably come off sounding very naive, but I'm a relative baby to the industry so I'm trying to learn.

We employ 3 full time designers, so 6 days a week there is at least 2 designers on staff.
I have always figured it is better to have them doing SOMETHING than dusting shelves at a higher pay rate waiting for an order to come in.

My opinion has always been: since the designers are there anyways, they might as well be filling incoming orders, because at least the recipient gets flowers from OUR shop and not THEIR shop. (only 2 tf shops in town)

Although our order volume increases over Christmas and Mother's day we don't hire extra staff we just shuffle around the staff members duties. There are, usually, two days over Christmas where the designers stay an extra hour or two each.

Mostly, though, orders at Christmas are such generic items (i.e. red and white centerpiece) that they can be pulled from our front cooler, so it doesn't seem to create THAT much extra work.

So, what is your opinion, then on Net profit for OUR shop?
Since the designers are there, they might as well fill the orders?
 
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I think if you're happy with you profitablity that's all that matters. I don't know what your volume in sales is, but for me, 3 full time designers is too many. I do well with less employees and no wire orders. But you probably have a much bigger business, so if it works for you, that's great.
 
Yes, that all depends, if you are employing 3 designers and one whole designer is there solely for wires you might not be making out. If you are offsetting enough of the acquisition fees from the ws with outgoing you might also be ok. It all comes down to volume and the extra numbers, you really need to run CHR's profitability calculator to know for sure what it costs you or doesn't...This kind of quick math will always net you some money but when the membersip and per order fees and low sending end up being like 5-10 dollars per order(depending on volume) this is where the vucusuck of your cash goes without even realising it!!!...

This last year with limiting my wire ins at holidays, I didn't have to hire someone extra in shop or for deliveries, I saved myself 500.00 per holiday and figured out that it would have been a wash from previous years numbers, so even at holidays with the added volume I wasn't making money I was just breaking even on the ws stuff...that's when I decided to get out. Of course this was on 800-flowers where the take on each arrangement is slightly lower because of their rules(always having to follow the recipe regardless of the prices you pay and the extra 2% they take on their own orders)
 
lil_goldie said:
Since the designers are there, they might as well fill the orders?
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I send them home instead....

Also, using 27% does not really equate in today's world, more like 32-34% to include membership/merc/dove/marketing advance to help market the .coms and other assorted taxes. Remember, if you charge $7.00 for delivery, and it actually costs you $5.00, your only being paid $4.76 (figured at 32%) so you're losing there...
 
Boss,

She used the cost of delivery, not the retail price.

Be careful adding the membership and Dove/Merc fees to the incoming side only. Remember outgoing is a revenue source, no matter how much you send. How you allocate the membership costs needs to be determined by the primary purpose of belonging to the wire service.

Which statement is true about your shop: (That's a general "you", not BOSS since he doesn't play in this sandbox :))
  • I belong to a wire service primarily to relay outgoing orders as a service to my customer, and as a profit centre for my business. Filling incoming orders is a necessary component of this arrangement.
  • I belong to a wire service primarily to get incoming orders to supplement my business. I evaluate the success of my wire service arrangement based on the revenue from incoming orders, and outgoing is a secondary issue.

If the first applies to you, then you have to assign most/all of the membership costs to the outgoing side of the ledger.
 
Bigted said:
lil G - It sounds like it's working for you. Actually, it works for a lot of shops or the wire services wouldn't be in business. However, don't expect much support for that thinking from the members here. It's just not politically correct.
Click to expand...

Lucky for me, I'm not a politically correct person.

This has been said many times, and you have already gotten the same answer. Every business model is different and if it works for you, that's great. If your model calls for two full time designers on staff at all times, then you are correct to be using their time in the most productive way. If you don't have enough local business to support that, yet you feel you need to have them there, then you are at least utilizing them.

Clearly, as you gain even more local business, your net profit would go up. The key here is when those sales DO reach a supportable number, and IF you have to make a decision as to whether you get to keep more money or hire another designer, I would think twice.
 
Here's another thought....I have always been of the mindset that wire in's is a marketing tool not necessarily a money making endeavor. If your shop is new or under a new ownership, a WS may assist you in getting into the doors of your potential customers.

I certainly hope that you are attempting to market to the people you deliver your wire in's too. We have a small business card size marketing material that basically states that we hope you enjoy your beautiful arrangement created and hand delivered by your local florist. Here is a coupon code worth $$$ towards anything in our shop. You can use it online, over the phone or in person. It fits neatly inside an envelope or within the folds of the POS ticket.

Also, since you already have their address, you can send a post card to the close by customers asking to visit you for Christmas Open house or whatever you may have going on.
 
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lil_goldie said:
$50 - 27%= $36.50
Using Eric's Model of Total less delivery, COGS, labour, WS fees, Overhead, I get this:
$36 -$4 -$10 -$5 -$3.85 -$5= $8.15 net profit.
Click to expand...
Also subtract the $1.50 'receiving fee' per order and IIRC Canadian florists also have to pay taxes (GST 5%) on the gross value of incoming orders so your net profit to overhead is probably more like $4.15? Still, it's a few more dollars to pay overhead if the margins are there.
 
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After all is said

You must divide the number of orders you received or sent into your monthly wire service fees (not commissions)

So you can see what the prorata amount of wire service fees apply to your orders.

Also, check out and download my little spreadsheet and play with it a bit. You can do what if also with it.

The link is in my sig
 
Ryan, I agree, the cost's must be laid out against both the incoming and outgoing sides. In fact you could go so far as to apply a portion to every sale store wide to lower the burden on wire business. Cost shifting, something our government is getting pretty good at.

IMO "most" shops are either senders or fillers, not too many do both in equal volume, thus the fillers support a bigger burden of the business model. We know the big senders, and considering that 80% of outgoing orders are generated by 20% of the members, the scales of balance are tilted in favor of the senders and it's the fillers that deserve the lions share of the profits.

That's not how it works....sadly....
 
Why? To me incoming is stand alone. You can still collect revenue from outgoing, just by a different method. If you have a wire service you are all ready cost shifting between incoming and outgoing. Why, why, why, would you want to cost shift to a profitable cost center to feed the hungry mouths of the wire service, the only reason is I can see is convenience and possibly fear of the unknown, and of course having to pay off that incredibly expensive POS.

Anyway, most of the outgoings have been sucked out of the florists revenue stream by the .coms, so they are probably not a positive cost center when you factor in their share of the wire service expense including the labor involved in sending.

BOSS said:
Ryan, I agree, the cost's must be laid out against both the incoming and outgoing sides. In fact you could go so far as to apply a portion to every sale store wide to lower the burden on wire business. Cost shifting, something our government is getting pretty good at.

IMO "most" shops are either senders or fillers, not too many do both in equal volume, thus the fillers support a bigger burden of the business model. We know the big senders, and considering that 80% of outgoing orders are generated by 20% of the members, the scales of balance are tilted in favor of the senders and it's the fillers that deserve the lions share of the profits.

That's not how it works....sadly....
Click to expand...
 
Just because I like to argue--

The argument that you can't make money on incoming, or wire services at all is pretty strange. Doesn't that mean that all 30,000 - 40,000 members are stupid? That's a pretty tough argument to make.

It's much easier to make the argument that while the current system may be profitable (although getting less so every day), it is doing serious damage to the industry in the long term.
 
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First of all, there are not 30-40,000 members, now, that may be a stupid comment. I would think that if shop is big enough and old enough to generate large numbers of incoming and outgoing orders the wire service orders can be profitable. But in my case and in the case of several florists on flowerchat who did the numbers it is not profitable.

So I don't get how you can make the case that the current system is profitable for the florist. I do beleive it is currently profitable for the wire services.

The statement below is an illogical statement.

Doesn't that mean that all 30,000 - 40,000 members are stupid? That's a pretty tough argument to make.
Click to expand...


Bigted said:
Just because I like to argue--

The argument that you can't make money on incoming, or wire services at all is pretty strange. Doesn't that mean that all 30,000 - 40,000 members are stupid? That's a pretty tough argument to make.

It's much easier to make the argument that while the current system may be profitable (although getting less so every day), it is doing serious damage to the industry in the long term.
Click to expand...
 
Don't you just love it...

First of all, there are not 30-40,000 members, now, that may be a stupid comment.
Click to expand...

Now you want to call someone's comments stupid. Here are some real winners.

[video=youtube;8BHyqtaECLI]http://www.youtube.com/watch?v=8BHyqtaECLI[/video]
 
hollyflr said:
Gee, aren't you an adult, not!
Click to expand...

Sure wish your put down was true, alas it's NOT to be.

You can really get an earful of stupidity if you watch the video above all the way through.

Then click on some of the other videos on that account.
 
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