What is wrong with OF's?

[BOSS]

WOW... A thread where everyone is RIGHT!

There are many things that come into play when you look to becoming a fulfillment center, as was described in the very first post, and each subsequent post contained bits of what really transpires when you go down this road. Eric provided a very good example with his experience, and I think I have the answer he needed back then to continue down the road he "was" on...

A small point being, I was involved with the design and set up of the Boston 800Flowers LFC a few years back and have some experience with this animal.

First point is, that it's very hard to run an order fulfillment system and a traditional retail operation at the same time as they are extremely different and require a different set of business rules. Most important being staffing. The Boston LFC was designed for efficiency with the cooler located in the middle of the building to eliminate "steps" to and from, and set up so that trucks could drive right to the cooler. Everything on roll-out racks, and processing centralized too.

The staffing thing is this, all orders come in electronically...no phones...local orders are taken at the few local retail outlets that are staffed by one (1) minimum wage employee. The design staff comes in early in the morning, fills all the orders and then is sent home, might be 11am and they are out of there depending on that days orders, and the additional "extra" designs done ahead for last minute orders Notice 800 shuts orders off at 3pm EST for same day). You have to be brutal on hours.

Drivers come in, load up and head out, also going home when their runs are done, most only have 1-2 a day, as all orders for the day are in ahead of time with little same day delivery. These same drivers carry stock to the local retail outlets as they go buy.

There is no design done at the local retail stores, only loose stem sales or something out of the cooler, pre-made.
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I do think that we could maintain the "art" of it all, even in this scenario, but that would require more standardized "art" and as few as possible "one-offs".
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The other thing, not too many shops can cover an area the size Eric did. The reason this does not work in middle America is because there are not enough orders to sustain even a 3 person operation built on the above. I myself have considered doing the same thing, but it would require me to expand the delivery area I serve by 300% and then you are....

At the mercy of "them" continuing to send you orders, which they can cut off at any time they wish, or when you become a thorn in their side...

 

[Joe Mioux]

lots of great posts in this thread. thank you.

couple thoughts.....

first, this model isn't really much different than a florist that specializes in weddings. it is just one department out of many that a business would focus on.

second, I don't think a business would gain the efficiencies needed if they were both a traditional retail shop and a floral factory. One or the other but not both -- given the volume of business needed for success.

third, distribution would need to be farmed out to a delivery service. That is the only way I could see delivery costs being controlled. Delivery would be 100 pct fixed cost. Much easier to factor in a profit.

fourth, a floral factory would need more than just one or two large customers. Yes, I absolutely agree one large customer is a recipe for failure. It has happened many times in the greenhouse industry. No more than 20 pct of the volume of business would come from one source. That 20 pct is just a number for illustration.

fifth, buy flowers really cheap

good comments.

joe

 

[lori042499]

In my opinion the first assumption you have to make is that big wire services have no problem competing with their member shops. They'll work together with member florists on one aspect of the business right up until the point that it's more profitable to compete against them (order gathering, drop-shipping, etc.). Beyond that it's everyone for themselves. Assume that if there is money to be made the services have no problem competing with their member shops.

It then stands to reason that if there was money to be made in filling orders the wire services would have their own fulfillment centers in every decent-sized city or - at the very least - the largest cities.

But the wire services don't get into local filling. I believe the only logical conclusion is that they know there is no profit in it. It's far more profitable to collect substantial monthly fees from florists who will pay dearly for the chance to fill any order at what for many is a loss.

I have seen a few shops that can squeeze out a little profit from almost any order. Typically these are run by very shrewd business-minded operators who are essentially running flower factories. They buy in volume at low prices. They keep all costs down and treat it like a production facility.

There is absolutely nothing wrong with that! But it's not the kind of shop most florists want to own or work in. Most florists I have seen want to enjoy their work and have the pleasure of designing beautiful product. There is nothing wrong with this either! It's not a case of either/or. People go into business because they want control over their work situation and environment to some extent.

I also know the arguments about the less tangible/ancillary benefits of filling incoming orders - cycling product, spreading the word, using excess capacity, etc. But those benefits would apply to a wire service fulfillment center too.

I have never been able to bring myself to make a bet in a casino. As soon as you walk into a nice one you're surrounded by crazy opulence. For me it's like a flashing neon sign saying "you can't win here! All of this - the fountain, the fake Eiffel tower, the fake canal in the middle of the desert - was paid for by people who didn't realize that the deck was stacked against them".

Sometimes I feel the same way about incoming wires. A rep is always quick to tell a disgruntled shop about all the orders they have received from their service. If those orders were so great the wire service would have figured out a way to fill them themselves and keep the profit they keep telling you you're making.

Just my opinion!

The reason florists don't fill for themselves is because they do not have the know how or the money backing to do the advertising and the marketing to get the customers back from the big guys..We let this happen and I am sure if the florists of the 70's and 80's that wanted WS orders understood what kind of monster they were going to create they would not have demanded the incoming volume, but they did and now many florists are slaves to it...The reality is that many a small shop could not survive without these orders whether anyone believes it or not it is true...I know about all the evidence that companies have done about not making any money, but there are many scenarios where it works..I am one that I bought my flower shop with a gift of a 25,000 dollar loan with leeway on payments and nothing more to run on and have survived 3 years by my WS strategy...teleflora pays for my website and POS and 800 pays my rent...My other orders pay my pertinent bills...is it the most sound plan no, but I am living my dream of owning a flower shop and making my way everyday and getting noticed by locals...Would I rather have all my own customers, yeah!!! But the last two weeks if I didn't have wire ins I would have had nothing, so the 100 or so bucks that I made last week will contribute to where the locals did not...


I hear alot of people say, just take the money you spend on the ws and put it into your marketing....This does not work because once the WS goes away so do thge orders that pay for the service and it is null and void, You have no more money than you did when you started. All you do have is more time to sit and think about if you had money what you would do to make your shop better...but no more money that you did have before...and someone else in your city is filling all of the orders that you used to and getting the small amount of profit and making their volume better for profiting...

I have no doubts that the WS model will someday be defunct...florists are getting smarter, consumers are getting smarter...but until all florists stop filling they will exist, and most of us are not willing to just give those orders to a competitor to get their name out insteqad of ours or get better buying status or many of the other benefits...

 

[debirush]

I agree. This is my first post so forgive me if anything weird shows up...I just joined a new wire service called ClearRoot.com. The service is for true florists only - no order gatherers. There are no monthly fees. You receive 20% on outgoing wires and receive 72% on incoming. There are no special containers or products or seasonal specials. It is all automated and has been easy to use so far. The only limitation is membership, but they are slowly filling in across the country. Right now I check with them to see if they have a florist that can fill an order before I send it through the other wire service. I'm giving notice to the other wire service and will be finished with them by the end of February. If ClearRoot.com doesn't have a florist that can fill my order then I will track one down and place the order with a credit card.

I wish I had done this sooner. I have been sending out approximately 3.5 orders for every one I receive from the wire service. If I had been using ClearRoot instead, I would have averaged an extra $500 per month in additional income over the last six months. I'm guessing I will see at least an extra $5000 in my bottom line.

 

[duanermb]

Successful Warehouse Model in Canada

I can't remember the exact line from that Dragon's Den piece, but one of the VC guys hit the nail on the head about controlling order volume and then putting the screws to local florists.

Moving to a warehouse and then waiting for orders to be fed from someone else would be a very risky move right now, IMO.

The Dragons den piece had a bit of a blurred line between the WS platform and the warehouse platform. I think it was a confusing discussion that really didn't tell us what he was going to do. Become a national brand WS or become a warehouse order filler.

Bloomex in Canada is already successfully promoting the warehouse model as both an order filler and a wholesaler.

http://bloomex.ca/
http://bloomex.ca/florist/winnipeg/index.html
http://flowerswholesale.ca/

Check out the prices on Gerbera daisies on the wholesale site. And there is no walk-in retail store front at any of their location. Only a cheap (and I mean cheap and low rent) warehouse distributor location.

Why does this work? Because they have a national presence and are filling the orders for themselves. They don't rely on orders from somewhere else.

 

[shannonlovesflowers]

I don't want to work in a warehouse. I'd rather check groceries and make more money doing it.

I am a floral designer for a few reasons. and getting rich aint one of 'em.

#1 I like pretty things.
#2 I like the art and mechanics about it.
#3 I like to go home before 6pm.
#4 I don't like to work on Sunday.
#5 I like smelling like flowers all the time.
#6 I like to be creative
#6 I like working in a pleasent atmosphere.
blah blah blah

If this industry was all warehouses, I would have never gotten into it.

A warehouse operation would only benefit the owner

I will not work in a warehouse. I'll clean peoples houses at $20/hour before I do that.

 

[Bigted]

This is a great thread. I don't believe that a fulfillment center concept works in the long run unless you are filling your own orders, like proflowers. To make one of these babies work you need lots of orders. The only way you will get them is to rely on just a few sources. That means your entire business model depends on these companies being loyal to you--and that ain't gonna happen. As many have said here, you will be squeezed until you say "enough", then the orders will go somewhere else.

Incoming orders work fine when they are part of a nice mix along with outgoing orders and local orders. BUT, it's the local orders that really keep people coming to you. As a pure business model, filling only would be very difficult to sustain for any length of time.

 

[goldfish]

Joe, I think this will work if the two conditions are met.

1) What you are proposing is besically a manufacturing business. If so, you need some kind of manufacturing quota from the clients (FTD, TF, 1-800). You can then adjust your inventory level accordingly.

No factory can operate with a pile of inventories without knowing whether the orders actually come. Too much a risk, especially when the materials are perishable. Cathy and BigTed made the same points. To a large extent, the same is ture for purchasing WS containers.

2) OF must need a different branding than your "regular" shop. If we (Flowers insolita) decided to run OF operation, we would have to establish a different DBA and operate under that name.

 

[BOSS]

Filling orders as in a LFC, ONLY works if there is a contract in place guaranteeing a certain order volume. And remember *everything* is negotiable...

For instance a true LFC will only work in perhaps the top 20 markets across the US, maybe top 30...as they have the inherent volume necessary to make filling orders profitable. Another for instance, last I knew the Boston LFC was operating on a volume of $3-4million in orders direct from 800Flowers and other Bloomnet members, and was NOT allowed to have retail sites for the first two years. But was contracted to build 10 over the next 8 years at his expense.

You might think it easy to make money on that volume...and by what I have heard there is money to be made somewhere in the 7-8%/year to the operator after expenses range...not bad...but there is huge risk. Thats where the contracts come in.

Logistics is everything...

 

[kt4ye]

Another similar attempt were the 1800 fulfillment centers, but still not quite the same.

WERE?

I thought that this was still going on. We have (had?) one in Charlotte. The location is a kinda dilapidated warehouse/closed textile mill area.

The only thing odd is that I was told by an (ex?) employee there that a part of the deal with 1-800 was that they HAD TO establish a "real" flower shop (for walk-in traffic) within a year or two.

If that requirement is true, then that destroys the business model, since the rent would double, they would need additional staffing, they would have to advertise (none right now) etc. etc.

But Joe's suggested business model would be VERY VIABLE in any area that is big enough to support, say a dozen or more conventional florists.

The DANGER -- as pointed out by others -- is that if you are an OF and the source of orders (TFTD800) drops you (or DROPS) then you are SOL.

You need MULTIPLE sources of orders, and THAT may be easier said than done!

Bill

 

[bloomz]

Bill, according to popular opinion, the LFC's have or are being phased out in favor of the new program call the Premiere Program.

I don't know enough about it to really comment but I think it's spreading them around a bit, at a cost to florists wanting to join the program, and taking them back from the LFC's who are likely now thrown under the bus.

 

[LJVF]

WERE?

I thought that this was still going on. We have (had?) one in Charlotte. The location is a kinda dilapidated warehouse/closed textile mill area.

Bill, bloomz is right, the LFC's are closing down. 1800 is pushing the Premier program on it's members.

 

[alisonm1215]

It seems to me that if someone wanted to get into the manufacturing business, wouldn't make sense to get into something a little less parishable, and a little higher in demand than flowers?
Streamlined widgit assembly lines can be very profitable though. I wonder if I could outsource my flower mill overseas?

 

[Joe Mioux]

Allison, flower shops are a manufacturing business, just not very efficient in terms of traditional manufacturing processes.

joe

 

[alisonm1215]

Allison, flower shops are a manufacturing business, just not very efficient in terms of traditional manufacturing processes.

I would like to think that most shops are more than manufacturing houses. I think most florists provide more than simple "milled out" arrangements; they provide a full service agency. Not that manufacturers don't provide service, it is just usually pretty crappy service.

Is it a good idea to become more streamlined in the traditional processes? YES!

But the Utopian idea of milling out flowers for Big brother is kind of far fetched.
I think if the big 3 could make money doing it, they would. I also would be concerned (as others have mentioned) with the only having 3 clients.
Don't get me wrong, it is an interesting scenario you have put forth and it has a lot of merit and should be considered. We as florist need to have this vision put in front of us and shouldn't be so short-sighted to not see that this could be our future.

 

[bloomz]

Wonder if anyone has the numbers as to how many orders *they* (800TFTD, maybe PRO800TFTD) have vs orders *we* have annually.

I'm willing to guess they have well over half of them now.....and it's growing with every customer they take away from us via email, tv ads, newspaper ads paid for by sucker florists, their contest posters put up in FWOAC shops, or just florists not answering their phones at night (a huge treasure trove for them)

Cathy, you usually have or know where to find these kind of numbers?

 

[BOSS]

I'm willing to guess they have well over half of them now.....

I'm NOT....

Jon, you're talking about "wire orders" right? So maybe then yes, they probably do have the larger margin...

BUT, as my WO volume declines, my direct consumer sales are increasing, and like I've said before, the WO biz will completely go away generation by generation until there is little left in the next 10-15 years...

Better work quick...

Local sales is where it's at... I could really care less about WO's and WI's even less...

 

[bloomz]

I hope you're right but no I am talking about local orders taken from a local area and wired right back there like 800TFTD's goal is. So are those local orders or wire orders? I'd say they're all local, whether wired thru them or done directly with a local shop.

Remember - 800flowers is "your neighborhood florist" or that what it says in the phone book anyway.

You know the goal is to get them all, from your house - back to your house, and they are hot on fullfilling that goal.

 

[strippinrose]

bloomzie made mention of the something that struck me as good meat for a new thread.

In another thread he typed the following....


They (800TFTD) are getting more and more and more of the orders every freaking day, as we get less.

They're not growing the pie, just taking what used to be our slices.

I fear time may come when they have them all, and this is the way flowers will be bought.

A bit extreme perhaps, but it could happen and we'll all be working out of warehouses without retail fronts.

So at that point - I guess lining up for the orders begins to make sense.


why is this such a horrible scenario? think about it.

low rent - warehouse facility, no advertising or marketing, no effort to make a flower shop an inviting experience.

just a flower factory.... a OF (order filler).

the concept is based on simplicity. design (actually stick flowers in a container based on some recipe) and deliver.

the key to this successful business would be buying flowers really cheap and hiring a group of factory workers that could follow some rudimentary instructions.

IN FACT.... make it an assembly line baskets greened, vases prepped, one set of flowers stuck ... vase moves down the line to the next set of flowers to be inserted etc, until it is bowed, picked, carded, and wrapped for delivery.

this is would be a bit different than the dropped shipped flowers.

just tossing out a bone here.......

joe

joe where have you been , its already done that way.....

 

[Dorothy]

Hmmm...I'm still thinking about all this. Good food for thought.

I'm wondering how we, as real florists, can easily and relatively cheaply, educate online consumers that they are or are not actually on a real florist's website. I get this all the time: Customer calls our 800 number saying they're on our site but as soon as they tell me the $ amount I know they are not - usually they are on a US site, probably FTD, 800-flowers, or one of the many other OGs (Canadian or US) out there.

Two ideas:

1. What about making available a simple graphic (icon) that shows we are all part of the Real Florists Network with a built-in link to a flower forum such as this one on our websites? It's so cheap now to set up a website detailing the philosophy of this idea....
2. What about FlowerChat (or a new flower forum site...hmmm..Real Florists Network?) creating a consumer registration process whereby potential and existing customers can interact with Real Florists in the industry (this would legitimize the the Real Florists Network) which would help re-establish the personal one-on-one shopping experience, which I believe will become more important as baby boomers age and especially during these trying economic times.

One of the things I love most about being a florist (and former owner) is the experience of getting to know people and hearing their life's stories, whether it's their knowledge of flower care, plant care, and a myriad of other interesting social, human experiences. We all learn more from each other face-to-face, good and bad. Given that technology has diminished these interactions, why not revitalize it THROUGH technology?

Like I said, I'm still thinking about all this and these are my first thoughts....