Bleeding the Turnips

CHR

CHR

Design matters
Nov 28, 2002
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FTDs parent company, United Online, had a not-so-good, very-bad week this week. The NetZero division is launching 'free WiFi' but the devil in the details has the press roundly calling the offers poor or lame at best. This was supposed to be their 'new savior program' per UNTDs last conference call with investors.

UNTD paid $800M for FTD/Interflora a few years ago, but now the entire company (which includes several businesses) is valued at just around $400M.

Read this article to understand UNTDs management's issues and missed opportunities.

So where does FTD turn when it needs to goose the bottom line?

Local delivering florists, of course.

The announcement made today:
As of April 1, 2012, FTD
Florists with a ratio of incoming to outgoing orders of 3 to 1 or greater will be charged a reciprocity surcharge of 5% per month.
Click to expand...
So fill their under-priced, Frankenphotoed orders with 'receiving fees' equilvalent to nearly 5% of each order value and pay another 5% in penalties. (And y'all know that refusing dot com orders is also profitable for UNTD since you pay just to refuse.)

FTD knows their primary order volume comes from themselves and OGs, to many local florists will fall under the 3:1 ratio. (Naturally, no OG or supermarket member will be penalized since they can rarely or never fill.)

So the very shops FTD needs to fill their orders can pay nearly 40% to get them.

How do they not understand that getting blood from turnips is impossible.

(Am still wondering how they can change fees with 10 days notice but florists need 4 months to quit.)

To those florists with FTD POS systems, your ball & chain just got heavier. A lot heavier.
 
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There are rules and there are RULES. If a small market shop goes past 3:1, you can bet the extra fee will be waived. Metro area? Depends on whether the shops have FTD POS, ads, products, but surely the bigger buyers will be waived.

Know how to work the system or spend %40+ to acquire orders from FTD.

IMO their real goal is to get shops to quit other WSs.
 
I'm sorry, but this makes absolutely no sense to me. With more and more florists dropping out of the wire services, don't they need shops to be filling for the order gatherers and ftd.com???

Please explain what their rationale might be. Seems to me that this would cause more shops to quit, and they are cutting off their nose to spite their face. This makes their business plan and future even more untenable.
 
But Cathy, surely the point is the FTD IS getting blood from (small - mid-size) turnips! Such turnips are seemingly prepared to be pulverized, strained and left to evaporate.
 
blumen said:
I'm sorry, but this makes absolutely no sense to me. With more and more florists dropping out of the wire services, don't they need shops to be filling for the order gatherers and ftd.com???

Please explain what their rationale might be. Seems to me that this would cause more shops to quit, and they are cutting off their nose to spite their face. This makes their business plan and future even more untenable.
Click to expand...

Public company...need to keep the investors happy in the next few quarters....the horizon is but 2-3 quarters not 2-3 years or even a decade. Do NOW whatever it takes to put money in the coffers and boost the bottom line...we'll worry about 2014 when (or if?) it comes.
 
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CHR said:
IMO their real goal is to get shops to quit other WSs.
Click to expand...

I agree that's part of it. I would think a shop that was only FTD would not be hit with the charge. FTD and the other wire services realize many florist do not check there statement. The whole non sending charge by the wire services is very disturbing. The others will probable follow and raise their fees. Here's an opportunity for 800 flowers or Teleflora to be more florist friendly. You know save the florist
 
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I think Cathy's post is about "desperation". When money becomes tight, you go have who you have (not what you lose) in hopes that will cover the costs. Trust me, the halls of FTD are turmoil with cash flo. Groupon deals won't get the money you need, so you have to charge 7k florists $100 per. month and "hope". This three to one is for "cherry pickers' like me who take the good or easy and ditch the rest. This won't hold them long.

As for the value of business, they went to another service twice in the last year (twice) begging for a purchase or acquisition. Both times wanted in excess of 500 million, but was offered 200 million. I think it will be on the "auction block" sometime in the near future for much less than the 200 million.
 
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Looking at the 2011 Annual Report for FTD alone shows:
- Gross revenue for Products increases 9%;
- Gross revenue for Services decreases 3.5%;
- Operating Costs increase 5%; with
- Operating Income shooting up over 20%.

Clearly, FTD are doing something right for their shareholders.

However, in doing something right for the shareholders, despite what certainly seems to be a drop-off in member florists (assumed from drop in gross revenue for Services), I summize that their on-line activity is reaping real dividends for FTD (and their average sale only rose by around 4% to US$62+). I also think that buried within their Operating Costs, the "Cost of Revenue" increase of 7.5% suggests to me a higher pro-portion of their income is coming from Drop-Ship sales.
 
David said:
I agree that's part of it. I would think a shop that was only FTD would not be hit with the charge. FTD and the other wire services realize many florist do not check there statement. The whole non sending charge by the wire services is very disturbing. The others will probable follow and raise their fees. Here's an opportunity for 800 flowers or Teleflora to be more florist friendly. You know save the florist
Click to expand...
I think fewer and fewer florists DON'T check their clearinghouse statements anymore.......most have come to realize they CANNOT trust the "host" to be correct!
 
Simon Says said:
Looking at the 2011 Annual Report for FTD alone shows:
- Gross revenue for Products increases 9%;
- Gross revenue for Services decreases 3.5%;
- Operating Costs increase 5%; with
- Operating Income shooting up over 20%.
Click to expand...
I am surprised sales weren't higher since they would include the funeral orders generated through the Batesville affiliate sites.

Agree that they're likely selling more drop-ship products since that's what FTD promotes most.
 
CHR said:
I am surprised sales weren't higher since they would include the funeral orders generated through the Batesville affiliate sites.

Agree that they're likely selling more drop-ship products since that's what FTD promotes most.
Click to expand...
the more they "drop ship", the MORE we "drop quit"....
 
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From my past experiences, links on both obituary pages and FH websites do not generate many direct sales. Perhaps the same applies to FTD/Batesville...

And consumers ARE getting smarter everyday....too.
 
BOSS said:
And consumers ARE getting smarter everyday....too.
Click to expand...

I, too, think the consumer is getting smarter. However, increased sales year-on-year by FTD suggests otherwise and contrary to my opinion, and seemingly yours. So, what are FTD doing right?
 
Simon Says said:
I, too, think the consumer is getting smarter. However, increased sales year-on-year by FTD suggests otherwise and contrary to my opinion, and seemingly yours. So, what are FTD doing right?
Click to expand...
They are riding the backs of their florists, the very ones that "promote" the brand....customers that "trust" trust their friendly local florists, sometimes, with dire counter productive results.....
 
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Per FTD/UNTD Q4 report:

Order volume was flat. Average sale was up a few percent... so they're upselling (or the increase in funeral business drove up average order value.)

Regarding OIBDA (up 12%), those numbers are not acceptable under GAAP standards and if you look at the numbers closely, you'll see the increase was due to attribution of stock shares since FTD now generates more profit than the other parts of UNTD.

It may be helpful to note that the board voted to change rewards from compensation in shares to compensation in cash. This really says they have little confidence the value in shares will improve.

Like the link in the article in the opening post said, the UNTD leadership is really doing little 'right'.

If I had to guess, my gut says UNTD bought FTD based on the cash income from post-transaction marketing. Their other companies made incredible profits off it... but as we know, the whole ruse of fooling consumers via that method has been deemed illegal. UNTD also made loads of cash off telling folks someone was looking for them in Classmates.com, but that marketing ploy was also shut down - and cost them plenty via class action lawsuits.

They truly don't seem capable of making real money without scamming consumers.
 
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Missed the reference to order volume being flat so, yes, it must be trading up/up-selling. Also good point regarding the board vote on compensation.
 
Uh..check your statement TF members...they do charge a reciprocity fee. It's not a monthly charge but a quarterly charge (I think). As for 800flowers, they will charge you a low sending fee which is more than $70 a month at the time we dropped out almost 2 years ago.

As for their gross revenue.....IMO it's the bottom line that counts, you know after all the salaries to the biggies and the money for their lawyers and settlements not to mention everyday business costs.........
 
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