COSTCO and Wire Services

[Doug Munro]

Interesting Point

No established WS will work on such margins because their monthly overhead won't allow for it. TFTD1800 are built on a real estate model and have high monthly payments. They have built them self up to this. The only way you could do this and offer the service at a good price is start a new one based on the net. But GL getting a network. GL getting florists to agree to that.

My only analogy that comes to mind is Blockbuster and Netflix. I bet Blockbuster would love to have the monthly payments Netflix has. Blockbuster is built on a real estate model. I wonder if Blockbuster said OH @@@@ or these guys are nothing, when Netflix came out a few years back. I know what blockbuster is saying now Oh @@@@! How does Blockbuster change their business model without competing directly against it by adopting Netflix's model? FTD and 1800 are pretty smart because they have been able to come up with new types of revenue. TF is screwed with consumers figure out.. wait.. this is a middleman and I am not getting my full 100%. This is a rip off, I'll just call direct is what they are learngg every day. I'd love to see how TF plans to battle this.

- All these old school models are going to get destroyed by a new generation of thinking and online models, I just hope that someone from our industry comes up with something before the over lords (TFTD1800PF) do.

In describing Blockbuster and NetFlix you could just as easy be describing the typical retail florist (Blockbuster) and direct ship companies such and Proflowers, 1800 Flowers or FTD (Netflix).

My point in this is that if as an industry we wait for the wire services to come up with a better model we may not be happy with the results. Of course, by then it will be far too late.

 

[kt4ye]

Doug...

I concur with your analysis of the floral market and the issues that challenge both the WS (as currently structured) and the state of the retail florist "industry" nationwide.

But...

<snip>
As for the Costco model, its a great one. But I will ask this question

Costco sells 2 dozen 50cm roses for $17.99 (In Canada) virtually year round

How many of you are ready to climb aboard with that concept?

Doug, you seem to be looking at Costco from the point of view of a florist competing with them.

When I shop at Costco, I see HAPPY MEMBERS grabbing bouquets galore as they head toward the checkout stands. (How many florists can make that claim?) I can only assume that the floral suppliers are also HAPPY. If they were not, they wouldn't be selling through Costco.

As I see it, Costco is a possible model for how a WS MIGHT recruit and maintain HAPPY MEMBERS.

How Costco sells flowers is an example of how they keep their members happy. It just happens to be too bad that they may be taking business away from florists. They do the same thing when they undercut the local supermarkets on rack-of-lamb (Sardha's favorite), undercut the local booksellers on the latest best seller, and undercut the local wine merchant on my favorite Cab.

That fact is irrelevant to the model, except to reinforce the idea that Costco is giving their members REALLY GOOD DEALS.

I wish I could say the same thing about ANY wire service!

All the best...

Bill

 

[Doug Munro]

Doug...

I concur with your analysis of the floral market and the issues that challenge both the WS (as currently structured) and the state of the retail florist "industry" nationwide.

But...




Doug, you seem to be looking at Costco from the point of view of a florist competing with them.

When I shop at Costco, I see HAPPY MEMBERS grabbing bouquets galore as they head toward the checkout stands. (How many florists can make that claim?) I can only assume that the floral suppliers are also HAPPY. If they were not, they wouldn't be selling through Costco.

As I see it, Costco is a possible model for how a WS MIGHT recruit and maintain HAPPY MEMBERS.

How Costco sells flowers is an example of how they keep their members happy. It just happens to be too bad that they may be taking business away from florists. They do the same thing when they undercut the local supermarkets on rack-of-lamb (Sardha's favorite), undercut the local booksellers on the latest best seller, and undercut the local wine merchant on my favorite Cab.

That fact is irrelevant to the model, except to reinforce the idea that Costco is giving their members REALLY GOOD DEALS.

I wish I could say the same thing about ANY wire service!

All the best...

Bill

Bill,

The reason that I pointed out the roses for $17.99 is that Costco is using a tried and true model for keeping customers happy, provide exceptional value. Its no great mystery, I would be smiling too if I just paid $17.99 for a product that my neighborhood retailer is asking in most case upwards of $100.00 for.

As for the floral suppliers I suggest what keeps them happy is the shear volume and being paid on timely basis. I have in fact over the years spoken with a number of big box floral suppliers in detail and trust me it is a very fine line they walk between profit and loss in any given month.

Lets face it, anyone who has shopped at Costco (myself included) can vouch for the fact it is not the "exceptional customer service" that keeps their customers coming back.

How this would translate to a wire service model is anyone's guess. If I had to make one I would suggest it would crash and burn.

1) For one thing Costco has more potential "members/customers" in one trading area than wire services do in all of North America. This in itself allows them to charge a token membership fee and profit by it. I do not imagine, FTD, Teleflora, or Bloomnet surviving on $35.00 per year.

2) Costco's actual customer service stinks, no doubt about that, ask where something is and you usually get a finger pointed in the approximate direction. This is not something I suspect the average retail florist is going to readily accept, most are unhappy with the service they receive from wire services at the present.

3) Part of Costco's (and Walmarts) corporate philosophy is to squeeze the suppliers to pass savings directly onto the retail customer, well in the case of the wire services the florist is the supplier and from what I continuously read on this board the florist feels squeezed enough.

Just my thoughts

 

[kt4ye]

<snip>

Again, I agree, but the excellent points you made are not relevent to a WS emulation of Costco.

Lets face it, anyone who has shopped at Costco (myself included) can vouch for the fact it is not the "exceptional customer service" that keeps their customers coming back.

Let me suggest that the customer service they provide is consistent with the needs of the member AND their goals.

First, my experience with Costco customer service AT THE MEMBERSHIP DESK and at the returns desk have been very good. The folks there are very knowledgeable and efficient. Maybe its different in the GWN?

Second, it is in the best interest of any LARGE retailer to make the store layout essentially inconvenient for the shopper. There is a reason why the Turkeys are on aisle 11, the stuffing on aisle 17 and the cranberry sauce on aisle 6. (Sorry, Doug. Those are the key ingredients for a USA Thanksgiving feast, but I expect you knew that anyway!:dunno They WANT you to wander around so that you can also stumble across the macadamia nuts, the artichokes and the champagne! That increases the $ value of the purchases.

How this would translate to a wire service model is anyone's guess. If I had to make one I would suggest it would crash and burn.

1) For one thing Costco has more potential "members/customers" in one trading area than wire services do in all of North America. This in itself allows them to charge a token membership fee and profit by it. I do not imagine, FTD, Teleflora, or Bloomnet surviving on $35.00 per year.

Where did $35 come from? If anything, I would expect a member-oriented WS to actually charge MORE than current prices -- and get it -- when they provide an environment that is MEMBER FRIENDLY.

2) Costco's actual customer service stinks, no doubt about that, ask where something is and you usually get a finger pointed in the approximate direction. This is not something I suspect the average retail florist is going to readily accept, most are unhappy with the service they receive from wire services at the present.

Covered above. If a WS is providing all the "stuff" that I think we agree is lacking (profitability, proper designs, adherence to coded minimums etc.) then the NEED for customer service will PLUMMET.

3) Part of Costco's (and Walmarts) corporate philosophy is to squeeze the suppliers to pass savings directly onto the retail customer, well in the case of the wire services the florist is the supplier and from what I continuously read on this board the florist feels squeezed enough.

I guess I did not explain my point well enough. Florists are NOT the suppliers. Florists are (or should be) the MEMBERS -- just like I am a member of Costco. The WS provides needed products (orders) and services (a means to send and receive orders). If the WS does that profitably enough, then the member florists will be HAPPY.

Right now, there are very few REALLY HAPPY WS members, in my NTBHO.

Just my thoughts

And you have obviously thought about this a lot.

I apologize that I did not state clearly enough the idea that if WS treated their members as well as Costco treats THEIR members we would have a much better -- and mutually profitable -- relationship. (Where's that beating a dead horse smilie?)(Oh, yeah. Different group.)

All the best, as always.

Bill

 

[goldfish]

One thing Teleflora could do is to financially reward good filling florists, by reducing their monthly fees for example. If this incentive program works, it would help improve the overall quality of the network.

They need to find money to finance this program. Part of it can come from re-structuring the rebate program.

 

[Doug Munro]

I guess I did not explain my point well enough. Florists are NOT the suppliers. Florists are (or should be) the MEMBERS -- just like I am a member of Costco. The WS provides needed products (orders) and services (a means to send and receive orders). If the WS does that profitably enough, then the member florists will be HAPPY.

Right now, there are very few REALLY HAPPY WS members, in my NTBHO.

All the best, as always.

Bill

I certainly can not debate most of the points you bring forth, however I will point out once again that the floral industry is unique in many ways. One of these is the fact that a florist filling a wire order is in fact both a supplier and a member. After all, are they not being given an order and supplying the goods only to be paid by the wire service at a later date.

If your local wholesaler put in place a membership fee of say $50.00 for retail florists would they still not essentially be a suppler of yours?

 

[BOSS]

They need to find money to finance this program. Part of it can come from re-structuring the rebate program.

There would be huge industry corrections if the only thing they ALL did was eliminate the rebates all together!

 

[BOSS]

If your local wholesaler put in place a membership fee of say $50.00 for retail florists would they still not essentially be a suppler of yours?

Yes, they would be...but...

And it's a big BUTT...

There is little similarity between the two, thus the argument is a moot point. I see no advantage to a wholesaler in marketing against me to get between me and the consumer/recipient. Unless of course, he's going to become a florist and deliver designs...

 

[Doug Munro]

Yes, they would be...but...

And it's a big BUTT...

There is little similarity between the two, thus the argument is a moot point. I see no advantage to a wholesaler in marketing against me to get between me and the consumer/recipient. Unless of course, he's going to become a florist and deliver designs...

Mark,

I was not suggesting that wholesalers impose a membership fee or open their doors to John Q Public, I was simply pointing out to Bill that because florists are wire service members it does not change the fact they are also suppliers to the wire service when you boil it all down.

In today's world the wire services in most cases market directly to the end user, once they have made a sale they forward the order to a florist to fill (here is where you replace the word "florist" with "supplier").

Bills suggestion of using the Costco model for wire service does not take into account the complexity of our business. The Costco model creates happy raving members (customers) in most case by offering lower pricing. Lower pricing that is achieved in two ways, lower margins and by negotiating lower pricing with suppliers.

So unfortunately in our industry we have a Catch 22, the florist wants more orders and higher value paid, the wire services in order to create more orders either "buy them" (through bonuses or rebates) or lower prices to the consumer. Either method of generating orders ultimately comes from the florists pocket.

 

[BOSS]

BOSS's Quote of the day!

So unfortunately in our industry we have a Catch 22, the florist wants more orders and higher value paid, the wire services in order to create more orders either "buy them" (through bonuses or rebates) or lower prices to the consumer. Either method of generating orders ultimately comes from the florists pocket.

Understood El'capitan!

have a good night!

 

[goldfish]

There would be huge industry corrections if the only thing they ALL did was eliminate the rebates all together!

Rebates will not disappear, nor need to be. The program just has to be re-structured in such a way to encourage certain behaviors from the senders.

Right now, the rebate simply encourages order-gathering without regard to what kinds of orders they are gathering.

For example, instead of giving a fixed dollar amount as rebate, WS could give a fixed percentage of the order. This would further encourage OGs to sell more expensive orders, which would benefit the filling florists.

Another interesting rebate gimmick I thought about is change the rebate amount according to the product sold. Designer's choice - $5, "Stunning Beauty" - $4, and so on.

What the differential rebates would achieve is that WS would be able to use this mechanism to manipulate OGs to not show certain products. All they have to do is to give a small rebate for these products.

Designer's choice (DC) is always the best order for filling florists. WS could encourage the sale of DC by giving a higher than normal rebate for DC.

 

[kt4ye]

Doug, Mark & Goldfish...

Does a REAL florist care if the rebates go up, down or are tiered IF whatever the WS does with the OGs has the desired results for the florist member?

When I go to COSTCO, I neither know nor care about the relationship between COSTCO and their suppliers.

Doug made a great observation about the different relationship between a member florist and the WS vs the relationship between COSTCO and their members.

In my NTBHO most real florists want smooth and profitable incoming wire orders and have little interest in outgoing wires (except that they want an easy way to send the outgoing order and make their "regular" customers happy.)

Note that this is the exact inverse of the function of a Wire Service 20+ years ago.

All the best,

Bill