Thanks to everyone for their kind remarks.
What has always interested me about the discussion of wire service profitability is the terms used to support the idea that incoming orders are profitable has never changed. Florists will also rely on the fact that if their current number of monthly outgoing orders is sufficient to pay for the basic fees of membership, then it must be alright to belong to a WS. The problem is that belonging to any WS is a two-headed coin, or in most cases, a two-headed monster. You can't judge the fessibility of a WS by just the math numbers on sending orders or a separate need to fill orders. In less you are a sending only florist, a WS requires you to both SEND and RECEIVE and you have to evaluate the true cost of both aspects for YOUR business.
I've used this example before. If you are a florist sending out 30 orders a month at a $50 per order average, the commission and rebate funds you receive is $390. Subtract the monthly cost of $250 (monthly dues and fees) and you only net $140. If that florist sent those same orders out direct and charges a $6 sending fee, the net would be $180. In both cases you would have to subtract the internal cost of labor to send the orders, but it would be hard to convince anyone that cost of the latter would be $40 more than the prior. Hense there is more profit to the smaller sender.
For the record, everyone has EXCESS CAPACITY. Henry Ford could produce Model T's at the rate of one every 10 SECONDS. He was able to accomplish that by putting troughs throughout the plant and if you HAD TO GO, you went in the trough because no one was allowed "potty breaks". Every company has some form of excess capacity, but most smart businesses realize that they are more profitable by working at less than capacity. Most manufacturing companies I have worked for liked to be at 80-85% capacity. That means they have 15-20% excess capacity. All will tell you that in most cases, once you start working in that excess capacity time, efficiencies decrease, problems increase and profits per hour decrease.
The problem for florists in particular, on incoming wire orders, it is not just the labor factor of the designer, but also the additonal cost of delivery. A traditional florist does not separate all the costs truely connected with incoming WS orders. The florist doesn't have a separate designer that just does wired orders or a driver and vehicle that just does delivery for these orders. In reality, florists are subsidizing the true cost of wired orders with profits from their full value business. If a florist truely did that and had 4 incoming orders for the day, the designer would be sent home and the driver would fill up the tank at the end of the delivery for those 4 orders and florists could get a better idea as to the full cost. Gas around here went up .20 this week. Did anyone change their pricing to compensate?
Fulfillment centers are geared to handle discounted incoming orders. The way the buy their product and schedule their labor allows them to handle this type of business. 1-800 fullfillment centers uses contract drives, who use their vehicles, their gas, their insurance and their labor for delivery and are paid by the delivery and not by the hour. I know of florists that are designated fillers for FTD and they too schedule designers and drivers based on work load. When the last design is done, the designers go home. The vast majority of florists are NOT geared this way.
Put both sides of the wire service pictures together and you begin to see why RC's 98% figure is not too far off.
What has always interested me about the discussion of wire service profitability is the terms used to support the idea that incoming orders are profitable has never changed. Florists will also rely on the fact that if their current number of monthly outgoing orders is sufficient to pay for the basic fees of membership, then it must be alright to belong to a WS. The problem is that belonging to any WS is a two-headed coin, or in most cases, a two-headed monster. You can't judge the fessibility of a WS by just the math numbers on sending orders or a separate need to fill orders. In less you are a sending only florist, a WS requires you to both SEND and RECEIVE and you have to evaluate the true cost of both aspects for YOUR business.
I've used this example before. If you are a florist sending out 30 orders a month at a $50 per order average, the commission and rebate funds you receive is $390. Subtract the monthly cost of $250 (monthly dues and fees) and you only net $140. If that florist sent those same orders out direct and charges a $6 sending fee, the net would be $180. In both cases you would have to subtract the internal cost of labor to send the orders, but it would be hard to convince anyone that cost of the latter would be $40 more than the prior. Hense there is more profit to the smaller sender.
For the record, everyone has EXCESS CAPACITY. Henry Ford could produce Model T's at the rate of one every 10 SECONDS. He was able to accomplish that by putting troughs throughout the plant and if you HAD TO GO, you went in the trough because no one was allowed "potty breaks". Every company has some form of excess capacity, but most smart businesses realize that they are more profitable by working at less than capacity. Most manufacturing companies I have worked for liked to be at 80-85% capacity. That means they have 15-20% excess capacity. All will tell you that in most cases, once you start working in that excess capacity time, efficiencies decrease, problems increase and profits per hour decrease.
The problem for florists in particular, on incoming wire orders, it is not just the labor factor of the designer, but also the additonal cost of delivery. A traditional florist does not separate all the costs truely connected with incoming WS orders. The florist doesn't have a separate designer that just does wired orders or a driver and vehicle that just does delivery for these orders. In reality, florists are subsidizing the true cost of wired orders with profits from their full value business. If a florist truely did that and had 4 incoming orders for the day, the designer would be sent home and the driver would fill up the tank at the end of the delivery for those 4 orders and florists could get a better idea as to the full cost. Gas around here went up .20 this week. Did anyone change their pricing to compensate?
Fulfillment centers are geared to handle discounted incoming orders. The way the buy their product and schedule their labor allows them to handle this type of business. 1-800 fullfillment centers uses contract drives, who use their vehicles, their gas, their insurance and their labor for delivery and are paid by the delivery and not by the hour. I know of florists that are designated fillers for FTD and they too schedule designers and drivers based on work load. When the last design is done, the designers go home. The vast majority of florists are NOT geared this way.
Put both sides of the wire service pictures together and you begin to see why RC's 98% figure is not too far off.
